Insource v. Outsource… Domestic v. Global… Direct Source v. Work Through an Integrator… High Minimums or Commit to a Stocking Plan? These are the questions that continually challenge a one-person do-it-all to the most sophisticated purchasing & sourcing teams. What’s the right solution for my company?
If you’ve waded through the murky pools of the above questions and have come to the conclusion that global sourcing is right for your company, the next question is how to identify the right partner to ensure you accomplish your goals. Whether those goals are tied to cost decreases, reduction of supply chain lead-time, reduction of on hand inventory or supplier rationalization, choosing the correct manufacturing company is critical. Below we’ll walk you through the steps to ensure your success:
Develop a Plan
Lay it all out. Define your goals based on…well, your goals. If it’s cost savings, create a tracking mechanism and detail out the parts or products that would be major contributors to goal achievement (i.e. low hanging fruit). If efficiency or integrity of supply chain is important, identify that problem, supplier, or problem internal process and the parts/products associated with that. If increasing working capital (think inventory reduction) is your goal, define how much and look at what parts/products are the biggest contributors to your on-hand dollars.
Review Current Contracts
If you have supply contracts with any supplier, it’s really important that you honor the terms of those contracts. If supplier performance is the issue, even decent contracts will give you an out to make a sourcing change. However, before you try to move a piece of business from a top performing supplier under contract, it’s best to fully understand the ramifications contractually. If your organization doesn’t use supplier contracts or long-term supplier agreements, you’re in the clear outside of any other commitments that you’ve made!
Get Quality Assurance and Engineering Buy-In
Nothing is worse for a sourcing professional than to implement a project of this nature, only to have your internal red-tape ground it. It is critically important that the other departments in your company that have a direct bearing on the success or failure of your project be fully committed. Walk them through your goals and project steps and ensure they are motivated as well. If they won’t listen to you, ensure management gets full buy-in.
As you go through your global sourcing journey, there are specific geographic areas that have become hotspots for certain manufacturing methods. Take some time to define what manufacturing method/process you need (casting, stamping, fabrication, injection molding, etc.). Hop on the internet and spend some time researching. If you are lucky enough to have boots on the ground in strategic global areas, that’s even better. Those individuals should be able to help you locate the manufacturing pockets that you need. In addition, those individuals will be better suited to help you find those gem suppliers that you’re looking for. Or, if you’ve decided to use an integrator, they will have the knowledge on where to go.
While sourcing platforms like alibaba and madeinchina are avenues that many people use to find suppliers, we feel the chances of long-term success using these platforms is very low. It’s always advisable to have boots on the ground or use someone else who has boots on the ground, no matter where in the world you’ve decided to source.
Get Pricing and Make a Decision
You’ve identified your list of potential suppliers, you’ve sent them your RFQ and you now have a log of quotes. How do you choose, as lowest cost isn’t always the final cost?
Schedule an Audit:
- If you have your own team, get them in to audit the facility.
- If you don’t have a team, contract with inspection companies that have facility audit capabilities.
- If you’re using an integrator, ensure you understand their vendor qualification process (if it’s not a vendor they already use).
- Remember to request your own site visit of the manufacturing facility after review of their audit.
- Be sure to review minimum order quantities, sample and production lead-times, payment terms and all other commercial items. Do these items meet your goals?
- If you’re using an integrator, review their quote as well for the same items.
- Lastly, gain an understanding of who they do business with now, get some names, and make some reference calls. You need to find out if they do what they say they’re going to do.
Once all of this checks out, you’re on your way. Ensure you go through the proper first-articles process (First time pass is always the goal and upfront elbow grease is the best way to ensure this). Schedule a meeting with your quality team/engineering team and walk through the parts with your supplier or integrator to ensure they understand everything you do with the part/product. Where are your past issues? What are the characteristics that are critical to functionality? What are the packaging requirements? What are the first article submission requirements, etc? These questions will go a long way to ensuring your success.
Maintaining Good Relationships with Suppliers
Finally, the most important aspect to global sourcing success is developing and maintaining excellent relationships with your supply base. This means having tough conversations when you need to, but not abusing them year over year with demands for cost-downs or reduction of business. They are your partners, and they help ensure your success. Suppliers treated with integrity and respect will usually bend over backwards to help you any way they can.
Component Sourcing International provides supply chain solutions for unique manufacturing challenges by lowering your costs and improving your productivity. We give you both the peace of mind and confidence to know that your finished products will be of the utmost quality and at the best pricing the world has to offer. To learn more about how CSI can act as your Global Sourcing Integrator, contact us today.
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