Quality is an essential aspect of any organization's success. It is attained through meticulous design, careful planning, and meticulous execution throughout the product development process, with contributions from every individual within the organization. This principle holds true even for the procurement process and the sourcing strategy employed by an organization, as it significantly impacts the quality of the materials supplied by suppliers.
The sourcing strategy should be initiated before selecting suppliers to provide materials or parts for the manufacturing line. The procurement department should take the lead in steering the sourcing strategy, involving a cross-functional team comprising members from quality, process, engineering, development, and finance. The procurement lead within the organization must establish a robust supplier sourcing strategy, encompassing a step-by-step approach from understanding the business requirements to analyzing market segments, selecting suppliers, and monitoring their performance.
Before finalizing a supplier, it is crucial for a company to review its internal material requests and gather relevant information, including:
📑Categorization of the desired products (mechanical, electrical, etc.).
💲Total expenditure in the market for the materials, spend analysis for the specific product category, identification of competitors, and potential suppliers.
🎯Specification requirements for the materials in question.
Considering these points provides an overview of the supplier market, aiding in the establishment of future partnerships with suppliers. It is vital to understand one's own organization before seeking to understand potential suppliers.
The subsequent step involves conducting a supply market analysis to identify the key players in the market and comprehend the overall economics, business dynamics, and industry trends influencing the market and supplier profiling.
Once the key players are identified, a sourcing strategy can be developed, encompassing various aspects such as supplier development programs for product and process improvement, and the allocation of volume based on the total cost of ownership. Total cost of ownership goes beyond the direct material cost and incorporates the potential costs associated with poor quality, such as servicing and customer dissatisfaction. Unfortunately, many organizations fail to grasp this concept and merely award business to the supplier with the lowest price.
After formulating the sourcing strategy, the organization moves on to supplier selection. While various factors, including the supplier's financial status, technology roadmap, and cost efficiency, should be considered during supplier selection, this article focuses primarily on assessing supplier quality, as it directly impacts the overall quality of the parts.
The significance of the sourcing strategy lies in its ability to determine an organization's capacity to source the highest quality parts from the market at the best total cost of ownership. A well-crafted sourcing strategy serves as an example of quality planning, highlighting the procurement department's impact on ensuring quality. In the absence of a sound sourcing strategy or when poor sourcing decisions are made, managing supplier quality downstream becomes an immensely challenging task.
By recognizing the importance of a comprehensive sourcing strategy, organizations can enhance their ability to source high-quality parts while considering the overall cost implications. Sourcing strategy serves as a critical link between procurement and quality, ensuring a seamless flow of quality throughout the supply chain.
