Global trade wars, business model disruptions, increasing freight rates, geographic labor rate shifts and supply chain digitalization are just some of the challenges and opportunities being hurled at global sourcing leaders today.
These challenges and opportunities are also very good catalysts for conducting regular assessments of your global sourcing practices and establishing a program of continual reviews to eke out more profit... category-by-category. Building this type of assessment / review regimen yields two benefits: 1) it helps you to improve global sourcing and supply chain performance; and 2) it builds a foundation for sourcing agility and protection in the face of rapidly shifting geopolitical forces and resulting changes in cost structures.
We are seeing different approaches to mitigate against the dynamic threats of global trade turmoil. For example, some retailers have simply chosen to increase imports and inventories ahead of inevitable tariff increases. So far, however, there does not appear to be a major shift to source products from onshore manufacturers.
Those retailers who have a unified sourcing platform, such as a product lifecycle management system, have the foundation for analysis of sourcing options to optimize and change with agility.
It is impossible to generalize and recommend global sourcing leading practices for all retailers and consumer brands because there are differences between practices for apparel versus those for electronics, food and other categories. Category-based leading practice assessments help with cost optimization. Here are a few examples of common practice areas that are often assessed:
- Calendars - The backbone of operations. Sourcing agility cannot be achieved or questioned without clear cross-functional alignment on key milestones, roles, responsibilities and impact of changes on planning.
- Costing - Building and analyzing accurate landed cost estimates is essential for rapid 'what-if' analyses that enable optimized sourcing decisions across all categories. Then, after receipt of products at the DC, the actual landed costs must be quickly and effortlessly compared to original estimated landed costs for any necessary tweaks to the supplier base and continual performance improvement.
- Vendor Selection, Management & Collaboration - From the acquisition and validation of vendor and factory data, through vendor assessment, RFQ, selection, factory inspections, QA/QC and scorecards. The status and performance of every vendor needs to be objective and current to support effective negotiations and sourcing decision-making.
- Order Management - Purchase order processes vary greatly by retailer, due partly to different levels of integration (systems and processes) with merchandising, finance and enterprise ERP platforms. Issuing a PO is a key inflection point in the sourcing process and should be a progressive process without duplicate entry of data from product concept to PO release. Changes will occur along the way, but must be managed and controlled, so that an accurate current status of orders approved and on-hand can support changes and timing of sourcing decisions.
- Logistics & Tracking - Changing suppliers or sourcing origin countries can impact longer-term logistics commitments with carriers and 3PLs, such as ocean transportation contracts. The ability to quickly assess the financial and temporal effects of logistics is one of the most obvious considerations for retailers when considering different sourcing options. Having near-real-time visibility of product shipments is also key.
Building a global sourcing assessment and review program can help protect the cost and profit value delivered by your global sourcing function as you prepare for what appears to be a world of stormy trade agreements ahead.
The challenges and opportunities we see for global sourcing can be a catalyst for improvements but are also dire threats for those choosing procrastination over action. Contact Cleaca Consulting LLC today to explore an assessment for your global sourcing function.