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Why are SCM Professionals Rooting for Agile Supply Chain Practices over Lean Practices?

Companies have focused their procurement practices around lean supply chain for many decades. In today’s competitive business scenario, where the consumer is highly demanding and the environmental factors largely volatile, following lean supply chain practices just isn’t enough. The shifting focus from cost reduction to increasing consumer satisfaction has made the modern supply chain increasingly complex. Today, digitization, augmented reality, IoT, and artificial intelligence are transforming how a supply chain functions and companies that are unable to keep up with the pace are losing out on lucrative opportunities. As a result, companies are considering agile supply chain, which is highly flexible and able to adapt quickly to changing conditions. Here are some of the reasons why supply chain professionals should consider an agile supply chain practices:SE_Demo2

Ability to Respond to Change
Adopting agile supply chain practices enables the company to handle the market volatility, changes in the economy, changes in technology and equipment, and changes in other variables in a better way. The organizations can rapidly adjust to changing market conditions by helping the manufacturers to produce the correct amount of goods on a daily basis, rather than relying on monthly or quarterly forecasts.

Mass Customization
There has been a drastic shift in consumer preferences from the time of Henry Ford, where mass-produced, low-cost products were preferred, to the present time where you can find your name on a bottle of Coke. In order to implement customization on an economically feasible scale, companies have to adopt agile supply chain practices to respond to changing customer preferences quickly.

Ability to Operate with Low Inventory
Procurement professionals are well aware of maintaining high levels of inventory; not only is there a risk of stock obsolescence and spoilage, it also freezes the company’s much-needed capital base. One industry where the dangers of keeping high inventory is imminent is in the fashion industry, where the summer collection gets outdated by the spring itself, forcing the company to sell the inventory at heavy discount. Zara, by adopting agile supply chain practices, has been able to maintain low inventory and replenish the stock fortnightly.

Agile supply chain practices can significantly improve performance in industries compared to lean supply chain where the market is volatile and unpredictable, the customer demand is ever-changing, or if there is a high level of innovation.

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Strategic Sourcing Solution Helps an Oil Field Equipment Supplier to Identify the Best Cost Sourcing Locations

Category Overview

The demand for oil field equipment is expected to be driven by the rising refining activities and oil extraction coupled with its growing demand across the globe and increasing regional consumption. Additionally, the ongoing effort to discover new oil fields across various untapped regions is promoting the use of different oil field equipment across the globe.

However, according to SpendEdge’s strategic sourcing experts, it has been noted that oil field services in various countries are provided on a contract basis, often with fixed-price contracts. Moreover, unexpected hikes in equipment or material prices, unforeseen logistical or technical challenges, can result in cost overruns for oil field equipment companies. As a result of such challenges, many oil field equipment companies have started adopting for strategic sourcing studies to identify the best cost sourcing locations.

Moreover, the strategic sourcing solutions offered by SpendEdge, help oil field equipment companies devise sourcing best practices.

The Procurement Pain Point and Insights Offered

A leading oil field equipment company wanted to identify the low-cost countries (LCC) and best-cost countries (BCC) locations for its sourcing activities. Additionally, the client also wanted to assess the sourcing suitability across the LCC and BCC locations. They also wanted to gain insights into the cost drivers and risk elements across the supply chain. Furthermore, the client wanted to gain a deeper understanding about their peer company benchmarking by conducting a local supplier base analysis.request free proposal

To cater to the business requirements of the client, the strategic sourcing experts at SpendEdge carried out a comprehensive research methodology, which included primary and secondary research coupled with qualitative and quantitative data collection methodologies.

During the course of this strategic sourcing engagement, the oil field equipment client was given insights about the LCC and BCC locations to carry out their sourcing activities. Additionally, the client was able to assess the suitability of the LCC and BCC locations and gain insights on the cost drivers and risk elements. Furthermore, the client was able to gain a deeper understanding about peer company benchmarking through SpendEdge’s local supplier base analysis.

Key questions answered in this strategic sourcing engagement include

oil field equipmentBusiness Outcome

The strategic sourcing engagement helped the oil field equipment client identify the best cost sourcing locations. Additionally, the client was able to create and implement processes and tools to identify and leverage opportunities for superior sourcing across the supply chain.

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E-Sourcing: An Essential Component in Devising a Good Sourcing Strategy

E-sourcing is simply the digitization of the sourcing process which involves consolidating proposals, quotes, and e-tenders from various suppliers. Traditional sourcing processes are time-consuming and tedious and are unable to handle a large volume of information. As a result, sourcing of goods and services is carried out with limited available information and is based on the relationship with the supplier. However, the advent of modern technology has changed this trend as organizations have now realized the cost saving potential of a good sourcing strategy.

Implementation of an appropriate e-sourcing tool can help optimize productivity and lower annual spends in the following ways:

More Data Leads to Informed Decision Making

Data and information on supplier prices and offerings are easily recorded within the e-sourcing application, which also facilitatesGet more info digital quotations, catalogs, and e-tenders. A procurement manager is equipped with vast information to base his decision on as it enables him to invite multiple bids from different suppliers, analyze product and price offerings, and contract terms of multiple suppliers. The data collection process should start right from the spend analysis, which gives the procurement manager information on most important categories and best cost saving opportunities. This paves the way for e-sourcing project selection by evaluating top opportunities with regard to organization goals and Time to Value (TTV).

Cost Savings and Improved Efficiency

Access to a large number of suppliers, analysis of their offerings, and process digitization helps organizations maximize on cost-saving opportunities. It also speeds up the procurement process by reducing the time for the tender process, reducing the person hours required for sourcing and procurement activities, and eliminating lengthy paperwork.

Improvement in Supplier Relationship

E-sourcing provides transparency in transactions between buyers and sellers as suppliers can have a glance at all tender opportunities with all the details listed. The communication delay is eliminated as suppliers are fully aware of all the bids and tenders, which are directly processed through the portal. Since e-sourcing eliminates all geographical barriers, procurement managers can look forward to suppliers from much larger geographies.

Better Compliance and Risk Reduction

Digitization and systematic approach of e-sourcing eliminates lengthy paperwork for contract compliance adherence – facilitating internal audit. With the help of e-sourcing, procurement managers can create templates for sourcing activities, which ensures adherence to policies and conditions.

A purchasing manager is presented with a vast amount of data and information for his sourcing needs. It paves the way to devise a better sourcing strategy by helping the purchasing manager to decide on the appropriate RFx document.

To know more about e-sourcing and how it can help in effective procurement:

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Related Articles:

  1. Building A Strategic Partnership Between Procurement and Marketing
  2. Strategic Sourcing and Supply Market Intelligence – Best Friend’s In The Making?


Category Management Study – Cost Saving Strategies for Engineering Service Providers

SpendEdge offers category management solutions for a global engineering service provider that helps them understand the current market trends, drivers, top supplier profiles, challenges, and supplier engagement models.

Strategic approach

The engineering service sector offers a huge opportunity for fresh talents, and any firm with dynamic skills can make an entry into the marketplace. Gaining valuable insights on consumer demand trends, leading suppliers, and adopting best-in-class skills will have a significant impact on the product offerings and profitability of a company. Leading service providers are increasing their focus to tackle business challenges such as increasing complications related to resource allocation, increasing operational costs, declining profit margins, and growing needs for technological investments to stay competitive in the market. SpendEdge’s category management solutions offer insights on key parameters in selecting suppliers, procurement best practices, best practices for supplier relationship management, and engagement practices for buyers. The study also provides a comprehensive overview of the current category sourcing and procurement strategies.

The requirement for cost effective services and access to the best talent is one of the key focus areas of various suppliers in the global market. The bundling of services such as design planning, maintenance, support services, and consulting are an effective way of cost reduction and maintaining the quality of services. The introduction of software solutions such as CAD will help small and medium-sized industries acquire these services at a lower cost.

Sourcing services from low-cost countries

Many organizations in the industry are sourcing their services from countries with low labor costs to reduce their operating expenses. Varied tasks such as consulting and designing products are being outsourced to low-cost markets such as India to leverage the cost-effective technical expertise available in those countries. Accessing and acquiring services from different locations will enhance the service quality and competitiveness of these suppliers in the global market.

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Integration of IT and engineering services

The evolution of business models is propelling the demand for a combination of IT and engineering expertise. Service providers are offering integrated IT and engineering solutions to gain a competitive advantage. These integrated services enhance the productivity and quality of operations. Industries such as banking, automotive, healthcare, and transportation are driving the growth of such integrated services in the global market.

What solutions SpendEdge offer to businesses

The team of procurement experts at SpendEdge provide a category management solutions that provides an assessment of market trends and supplier engagement models, best-in-class industry benchmarks, and a gap assessment to identify the key areas of improvement. Some of the solutions offered are listed below:

  • Improve cost-saving effectiveness and develop robust strategies based on the best benchmarking standards in the industry
  • Offer category-specific insights on four major areas of product design, plant automation services, plant design and product engineering, and enterprise and management
  • Analyze the current sourcing and procurement trends in the market
  • Identify category market insights, market size and segmentation, supplier competencies, and cost saving opportunities through assessment of current spend practices and improvement areas
  • Provide successful implementation of category management strategy for the vital spend areas, amend category snapshots and supplier negotiations, and capitalize on supplier performance through implementation of supplier relationship management

Read our complete case study titled – Category Management Solutions Help a Global Engineering Service Provider Get a Detailed Understanding of the Category

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