Creating resilient and agile supply chains requires a platform that enables enterprises to leverage economies of scale when working with suppliers and contract manufacturers, while minimizing risk, disruptions and shortages. A buy-sell solution can increase supply chain resiliency while improving working capital and productivity.
In many cases, across multiple industries, supplier management is a complex task. A typical business has thousands of suppliers, and the relationships between them are challenging to manage. There are big advantages to adopting a buy-sell model that allows you to manage supply replenishment and inventory so that inventory carrying costs are low, while avoiding the risk of running out of stock.
With a buy-sell model, an enterprise offloads its burdensome procurement complexity to an outsourced expert. Under that alliance, the third party takes on a lot of the burden of sourcing and procurement and even provides financing, so that inventory is not carried by the enterprise, reducing supply chain risk.
Here’s how companies can benefit from a buy-sell solution:
Reduce inventory cost and risk.
Everyone wants inventory on hand in the event of a disruption, but they also prefer the economics of just-in-time, which prevents locking up capital for extended periods. A buy-hold-sell business partner can buy inventory on behalf of an enterprise, then hold it, only sending it to manufacturing sites as needed. When the partners keep the inventory in the same region as the manufacturing facilities, they benefit from short lead times, rather than trying to manage just-in-time from the other side of the world. A good example is the case of a manufacturer of computer servers. The company needs to keep a good stock of CPUs and hard drives on hand, but the demand for servers is going to fluctuate. It might need to create a specific configuration one day, then switch to a different one the next day. Instead of keeping enough inventory of different CPUs and hard drives or other components on site, it can partner with a third party that keeps inventory on its own books until just before it’s used, thereby lowering risk and reducing inventory carrying costs while still operating under a just-in-time model. Additionally, the third party’s expert capabilities, such as order collaboration, forecast collaboration and inventory management, ensure that the supply chain is optimized while controlling costs.
Consolidate your supply base to simplify procurement.
It’s unlikely to be among a business’s core competencies to deal with thousands of suppliers. It takes a lot of time that could be better used expanding into new markets or developing new or improved products. Why not give this task to a business that specializes in supplier management? A single, third-party managed service company is in turn working with those thousands of suppliers, and simply charges a service fee. A finely tuned supplier portfolio helps reduce the number of supplier interactions while ensuring an uninterrupted supply. Outsourcing procurement not only allows the business to concentrate on core functions, but it also brings in a level of expertise to reduce the number of suppliers for greater efficiency. A third-party procurement service will act as a single supplier who is working with the customer’s eventual suppliers but can greatly reduce the number of suppliers needed. The business is still able to work with this curated group of suppliers on the design specs and other requirements that it needs. There’s no cessation of collaboration at the strategic level, but at the operational level, the manufacturer doesn’t need to be working with so many suppliers.
Leverage benefits of scale.
The buy-sell strategy allows the enterprise to leverage its size to buy in bulk, without carrying a significant inventory. In a situation where the enterprise outsources manufacturing, for example, suppliers will most likely be buying raw materials from tier-three suppliers. But if the enterprise deals directly with the tier-three suppliers, it can use its muscle as a larger organization to negotiate a better deal and have them drop-ship components or raw materials to the contract manufacturers. It’s a classic case of leveraging economy of scale and acquiring better negotiation power.
Reduce the balance sheet.
The buy-sell model offers opportunities to save money and reduce tying up capital. A leading multinational high-tech company wanted to reduce its inventory costs and ease cash flow, but without the inventory risk associated with just-in-time . supply chain resiliency had to remain paramount, and demand fill rates had to be maintained. The company transitioned to an inventory model where they buy the inventory just in time, but maintain optimal inventory with a finance partner to address just-in-case situations such as sudden demand fluctuations. The technology company offloaded more than $1 billion in monthly inventory value from its books, freeing up significant cash and achieving an $80-$100 million annual value.
Improve resiliency and agility.
All of the advantages of the buy-sell model noted above combine to provide companies with strong, resilient and agile supply chain capabilities. State-of-the-art technology can be leveraged to offload complex operations, improve operational efficiency, mitigate risk, tighten collaboration, and move towards a higher maturity.
How GEP Facilitates a Buy-Sell Model for Maximum Procurement Efficiency and Increased Supply Chain Resiliency
GEP offers end-to-end supply chain planning, visibility, collaboration and execution on a single platform.
Managing relationships with suppliers needs to be highly efficient. GEP takes that off your hands by utilizing its vast operational platform. When you consolidate your supply chain and procurement activities, you reduce operational complexity, plain and simple.
GEP also offers the benefit of advanced technology. Its highly collaborative supply chain management platform is powered by GEP NEXXE, a unified AI-powered supply chain software. This cutting-edge technology allows the company to take an innovative approach in collaborating with suppliers, including forecasting, capacity controls, risk management, quality management and cost. Usually, cost is estimated by looking in the rearview mirror, but the GEP system calculates cost by looking at future trends in the market. GEP is currently monitoring 75,000 indexes, staying on top of the market in real time.
With GEP, customers achieve a crucial and necessary balance of lean efficiency with resiliency and agility.
In addition, GEP’s consulting services look at customers’ unique business needs and figure out how to improve their efficiency across the board.
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