Resource Origin:  Accenture

“The manufacturing industry continues to feel the strain of a saturated westernmarket and competition from emerging markets, particularly those in Asia. Asa result, tier-one suppliers have adopted new procurement strategies such assupplier collaboration, in an effort to cut costs. Tier-two suppliers are followingsuit and discovering that optimized and transformed procurement organizationscan help them beat the competition.This report examines current challenges low-tech parts from best-cost countries, In some cases, a supplier should considerin Direct Material Sourcing, including having them assembled in the region they acquiring a raw materials company inincreasing technological complexity, a are purchased. And they manage a base order to secure the supply. By doing so,strain on raw materials, and the need for of suppliers of complex parts from the supplier has the opportunity to gainbetter procurement risk management. developed countries. Suppliers of complex a vital advantage for some commodities,It outlines procurement best practices in parts should meet requirements regarding particularly the rare earth compoundsgeneral and for specific categories of flexibility, and they are usually asked to that are vital for the electronics industry.goods, and the paper covers procurement contribute ideas for design andrisk management strategies. Primarily functionality.focused on the automotive sector, these Procurement Riskfindings and insights are applicable in Managementother industries that involve industrial Information Sharing in theequipment. Supply Chain Procurement risk management processes are a must-have for suppliers to achieveAccenture’s experience with Direct As the number of players in the supply higher procurement performance. To beMaterial Sourcing shows that suppliers chain increases, so does its complexity. successful in the market it is critical forat all levels should collaborate more to Often suppliers are scattered across a buyers to anticipate and rapidly react toreap the benefits of a global supply chain, multitude of countries. High-performing, changes, while simultaneously investingand they should take a varied approach tier-one suppliers manage the complex in relationships with those suppliersto sourcing different categories of parts. supply chain with information sharing – that offer the lowest price and show the both upstream and downstream. The best potential. Suppliers should activelyFor instance, they could differentiate ability of suppliers to share information manage their own suppliers, developbetween suppliers of high-tech and along the supply chain will remain a non-exploitive close collaboration withlow-tech parts and implement separate main differentiator for procurement them and build on common values. Byprocesses for procuring goods that excellence. doing so, tier-one suppliers have the bestcontain different raw materials. In opportunity to reduce supply risks to theaddition, suppliers can potentially benefit benefit of both parties and achieve anfrom sharing certain information in the Efficient Raw Material optimal cost-benefit ratio. In addition,supply chain, ensuring the supply of Management the quality and price of the end productraw materials and conducting effective are likely to improve since trusted tier-procurement risk management. Efficient raw material management two suppliers will be involved in choosing strongly contributes to the market the raw material mixture, and the supply share a supplier holds. Larger tier-two chain will be stronger, giving suppliers aDifferentiating Between suppliers are recommended to negotiate key competitive edge.Suppliers of High-Tech and long term pricing contracts and thus secure a raw material supply for the longLow-Tech Parts term, balancing the cost of doing so withHigh-performing tier-one companies availability requirements. For suppliers indifferentiate among their suppliers based best-cost countries, that process may beon the technological complexity of the easier, due to their proximity to minesparts provided: These companies source and raw material processing facilities…”                    

http://www.slideshare.net/andygreen/accenture-effective-direct-material-sourcing

Contributors: Accenture
Categories: SIG U Resource, Whitepaper
SRC Type: Sourcing, Sourcing Management, Spend Management, Strategy