Executive Briefings

Complexity in the Supply Chain, And the Opportunities Therein

When did the supply chain become so complex? Just looking at the typical procurement department, for example, we see that the straightforward RFP, with cost as the deciding factor, is reaching near-extinction.

The global economy's major shift from plant-based sourcing to global corporate-wide sourcing, starting in the 1990s, has created a new demand for expressive bidding, in which a more comprehensive conversation takes place between buyer and supplier. Today, bid collection often requires a new level of flexibility, complex cost models and robust bid analysis. Similarly, the spends we're considering involve event sizes and scale heretofore unprecedented. The complications of a weak economy and its resulting supply chain risks create additional challenges.  Supply chain professionals who will win in this race must navigate this increasing complexity, while keeping mindful of their strategic goals.

Broaden the Supply Chain? In This Economy?

Companies want to maximize revenue and decrease costs. Supply chain is critical to these general strategies because it can decrease risk while also decreasing costs. Buyers must strike a balance between broadening the supply base in some cases, contracting the supply base in others, and achieving the best value.

Many believe that reducing the supply base is a quick way to limit overhead costs, but often the savings realized by an expansion can cancel out the overhead concerns. Suppliers can and should be more creative in meeting the needs of procurement teams, and once buyers and suppliers have a window into the creative thinking that can make the difference between a good supply chain and a great one, they can usually find places for improvement. Some sectors of the supplier community are not as creative as others - these sectors may represent an area where a strategy toward fewer suppliers makes the most sense. In this way, buyers can reward suppliers that are presenting innovative ways to meet the procurement teams' needs, whether through creative cost-savings measures on the manufacturing side, conditional offers or innovations in risk management.  The buyer must be careful to keep the supplier base diversified, however, to minimize risk.

Companies may need to expand their supply base in response to growth, risk management measures or a variety of new corporate policies. It's important to be able to track the costs of such changes. For example, a stakeholder may express preference to award suppliers in a certain region of the country that would result in significant cost increases -transparency into such changes is useful in weighing the stakeholder's concern against the associated costs. Allocating a percentage of business to disadvantaged business enterprises (DBEs), providing incumbents advantage over new suppliers, and limiting the total number of suppliers that supply to a region or a specific location are common considerations when a buyer seeks to expand the supply base.

Whether expanding or reducing, measuring the costs of each potential change is crucial. When using technologies to address the complexity, most companies look for quick return on investment. With an immediate success story to point to, procurement teams find they can convince internal leadership that technology is worth the effort.

Measuring, While Collaborating

Supply chain technology has come a long way. On the procurement and sourcing side, for example, it was only recently that the buyer would simply write the rules and then solicit offers from suppliers. This approach worked but had a major flaw in that it ignored suppliers' alternative capabilities - or left suppliers unable to bid because of constraints that couldn't be communicated. Today expressive bidding and analytics have allowed for a more robust and collaborative RFP process, one that can produce answers in minutes - sometimes seconds - regarding not just buy-side business rules but also those from the supply side, such as conditional offers, alternative item specifications and discount schedules. These supplier-driven scenarios can give buyers a window into significant cost and risk reductions, while allowing suppliers to compete on their strengths.

Some buyers find that using a complementary advanced sourcing analytics solution in conjunction with their general procurement or enterprise resource planning suite is an ideal solution for managing and getting more value out of increasing complex spend management. By leveraging bid analysis in an e-sourcing solution possessing expressive bidding capabilities, procurement teams are realizing faster, better decision making. (As an example, one customer using an e-sourcing product with expressing bidding recently recognized a two-fold cost savings and nearly two weeks of time saved in gathering and analyzing bids.)

What may be most interesting about the changes today is that the technology used for the increasing complexity is equally effective for a non-complex spend - and with increased adoption it's become more accessible. Usually available as a web-based or Software as a Service (SaaS) solution, e-sourcing products with expressive bidding can be used by procurement teams to get more value out of the most complex to even the simplest of spend categories.

Source: CombineNet


Keywords: Sourcing & Procurement Solutions, Supplier Relationship Management, Business Intelligence & Analytics, Collaboration & Integration, Technology, Business Strategy Alignment, Quality & Metrics, Supply Chain Analysis & Consulting, Global Supply Chain Management, Expressive Bidding, Supplier Base, Spend Management, Bid Analysis, E-Sourcing

The global economy's major shift from plant-based sourcing to global corporate-wide sourcing, starting in the 1990s, has created a new demand for expressive bidding, in which a more comprehensive conversation takes place between buyer and supplier. Today, bid collection often requires a new level of flexibility, complex cost models and robust bid analysis. Similarly, the spends we're considering involve event sizes and scale heretofore unprecedented. The complications of a weak economy and its resulting supply chain risks create additional challenges.  Supply chain professionals who will win in this race must navigate this increasing complexity, while keeping mindful of their strategic goals.

Broaden the Supply Chain? In This Economy?

Companies want to maximize revenue and decrease costs. Supply chain is critical to these general strategies because it can decrease risk while also decreasing costs. Buyers must strike a balance between broadening the supply base in some cases, contracting the supply base in others, and achieving the best value.

Many believe that reducing the supply base is a quick way to limit overhead costs, but often the savings realized by an expansion can cancel out the overhead concerns. Suppliers can and should be more creative in meeting the needs of procurement teams, and once buyers and suppliers have a window into the creative thinking that can make the difference between a good supply chain and a great one, they can usually find places for improvement. Some sectors of the supplier community are not as creative as others - these sectors may represent an area where a strategy toward fewer suppliers makes the most sense. In this way, buyers can reward suppliers that are presenting innovative ways to meet the procurement teams' needs, whether through creative cost-savings measures on the manufacturing side, conditional offers or innovations in risk management.  The buyer must be careful to keep the supplier base diversified, however, to minimize risk.

Companies may need to expand their supply base in response to growth, risk management measures or a variety of new corporate policies. It's important to be able to track the costs of such changes. For example, a stakeholder may express preference to award suppliers in a certain region of the country that would result in significant cost increases -transparency into such changes is useful in weighing the stakeholder's concern against the associated costs. Allocating a percentage of business to disadvantaged business enterprises (DBEs), providing incumbents advantage over new suppliers, and limiting the total number of suppliers that supply to a region or a specific location are common considerations when a buyer seeks to expand the supply base.

Whether expanding or reducing, measuring the costs of each potential change is crucial. When using technologies to address the complexity, most companies look for quick return on investment. With an immediate success story to point to, procurement teams find they can convince internal leadership that technology is worth the effort.

Measuring, While Collaborating

Supply chain technology has come a long way. On the procurement and sourcing side, for example, it was only recently that the buyer would simply write the rules and then solicit offers from suppliers. This approach worked but had a major flaw in that it ignored suppliers' alternative capabilities - or left suppliers unable to bid because of constraints that couldn't be communicated. Today expressive bidding and analytics have allowed for a more robust and collaborative RFP process, one that can produce answers in minutes - sometimes seconds - regarding not just buy-side business rules but also those from the supply side, such as conditional offers, alternative item specifications and discount schedules. These supplier-driven scenarios can give buyers a window into significant cost and risk reductions, while allowing suppliers to compete on their strengths.

Some buyers find that using a complementary advanced sourcing analytics solution in conjunction with their general procurement or enterprise resource planning suite is an ideal solution for managing and getting more value out of increasing complex spend management. By leveraging bid analysis in an e-sourcing solution possessing expressive bidding capabilities, procurement teams are realizing faster, better decision making. (As an example, one customer using an e-sourcing product with expressing bidding recently recognized a two-fold cost savings and nearly two weeks of time saved in gathering and analyzing bids.)

What may be most interesting about the changes today is that the technology used for the increasing complexity is equally effective for a non-complex spend - and with increased adoption it's become more accessible. Usually available as a web-based or Software as a Service (SaaS) solution, e-sourcing products with expressive bidding can be used by procurement teams to get more value out of the most complex to even the simplest of spend categories.

Source: CombineNet


Keywords: Sourcing & Procurement Solutions, Supplier Relationship Management, Business Intelligence & Analytics, Collaboration & Integration, Technology, Business Strategy Alignment, Quality & Metrics, Supply Chain Analysis & Consulting, Global Supply Chain Management, Expressive Bidding, Supplier Base, Spend Management, Bid Analysis, E-Sourcing