Events over the past 12 months have put a spotlight on the fragility of global supply chains and the risks of shortages. Whether it is disruption of supply and volatile prices, the problem effects companies large and small. The idea of strategic sourcing, where you analyse your supply chain in detail to maximise value and reduce risk, has grown rapidly. For SMEs and micro business that rely on a small number of critical suppliers, the effects can be significant.
HMC recently partnered with Steven Brownlee, an experienced procurement manager, to deliver a workshop on strategic sourcing in collaboration with Waterford Local Enterprise.
The presentation provided local companies with a framework which will allow them to take more control of the process, better control of costs and reduce the potential risks of events such as Brexit. Below is a brief summary of the 5 key steps to successful SME sourcing:
Step 1 BOM Analysis – use your Bill of Materials to identify the cost drivers and then populate them into your supplier positioning model. The key is to find suppliers that are critical to your business and where the risk of non-delivery is high
Step 2 Customer Positioning – it is vital to fully understand how the supplier views you as a customer. Are you important to them? Do they see you as a customer they want to develop?
Step 3 Risk Analysis – determining which suppliers pose the largest risk to your business, both in terms of the impact and the likelihood of occurring. You can then group your supplies in terms of potential risk and create an appropriate strategy
Step 4 Develop sourcing strategy – for each supplier:
- Identify the threat
- Prevent from occurring
- Response if it does occur
- Recovery plan to ensure it doesn’t happen again
Step 5 Build supplier relationships – as mentioned above, it is important that the supplier sees you as strategic to their business. Whether by increasing you spend by buying a wider range of components from the supplier or convincing him that you will grow into a key customer, it is worth taking the time to really know your supplier
In a manufacturing company, between 50-65% of revenue goes back out to pay for goods and services. It pays to make sure you have the best suppliers and prices. For more information on how to help your clients become more competitive or to organise a supply chain webinar, please contact John.Haran@hmcglobal.co.uk or call on +44 7590308439