Global procurement consultants

Global procurement consultants are effectively experienced middlemen who facilitate relationships between buyers and suppliers across the globe. They act for the buyer in sourcing a wide range of goods and services from raw materials to finished products, a large portion of which is sourced from low cost countries and emerging markets in Asia. These consultants are normally acting as agents or brokers and work from an extensive database of reliable international suppliers with excellent performance records. There are many unreliable and fly-by-night suppliers out there and a third-party specialist can assist with avoiding the pitfalls.

Their service offerings

Some of the best known consultants work on major relief and emergency projects in the development sector of the economy as well as in normal commercial trade. International aid organizations such as the United Nations, World Bank and The Red Cross use their services to source and distribute commodities and services at the best price under wildly varying conditions with tight deadlines. Consultants or agents locate the most economical sources at the most competitive prices, internationally or locally, saving anything up to 50% or even more on the total acquisition price.

Their work process

Most global procurement consultants specialize by industry sector and have areas of expertise such as mining, health, textiles, agriculture, water supply and education. They achieve their success mostly by:

• Developing precise specifications and pre-qualifying suppliers
• Managing bids and contracts to ensure fairness and to limit risk
• Developing systems and processes that ensure accountability, transparency and value for money

Services may include sourcing specified products at the best price through to managing the whole end-to-end process as a turnkey project. Some consultancies project manage the supply chain from inspection of factories, quality assurance of the product, logistics, shipping, and management of all paperwork and negotiation of payment terms. They make their profit through leveraging group spend and buying in bulk.

Using a procurement consultant

Many business owners and NGOs don't even know where to begin with global sourcing because it is complicated and time consuming. Buying the know-how can save the buyer costs and management time, and time is money. A consultant’s track record is a good indicator of the service you can expect. If they have been sourcing and trading globally for known clients for more than three years and can provide references from satisfied customers, you can be reasonably confident that they can perform the services you need but take the references.

As the world of international trade opens up the global procurement consultants will provide additional services that will provide buyers with cost savings and efficiencies and therefore a competitive edge for their business.

Lean Supply Chain

A lean supply chain is, by definition, an efficient supply chain. The supply chain process is streamlined to systematically reduce and eliminate waste or non-value adding activities. All activities that contribute to delivering goods or services to the customer should create value otherwise they are wasteful. Waste can be found in each step of the supply chain process, in time and in inventory.

Lean principles are well established in manufacturing but the same principles can be applied throughout the supply chain in the wholesale, retail and distribution industries.

What to do to become more “lean”

The best supply chains are demand driven, i.e. the customer defines how much inventory there should be in the system, not the supplier who can cause a company to hold excess inventory. Leveraging existing technology can assist with making a leaner supply chain but other elements such as management commitment, visibility of information and understanding supplier risks can also deliver efficiencies.

Contributors to a lean supply chain

• Understand your whole supply chain. First analyze and map the total process, both inbound and outbound. Be aware of the complexity and inter-dependencies with multiple suppliers, distribution centers and the end customer.

• Top management commitment. Continuous improvement requires ongoing support from senior sponsors who need to visibly demonstrate their support, offer continued skills training and provide the means to track accomplishments.

• Technology is only an enabler. Incorporating new and updated technology is part of process improvement but it is only an enabler. ERP systems or other specialist software may make a difference but know that technology cannot overcome process flaws.

• Visibility. Widespread visibility and integration of data throughout the supply chain will deliver the best results. Information blind spots can be areas of waste.

• Know the risks. External events can have a devastating effect on the supply chain, some of these are avoidable. Analyze and mitigate internal and external risks both because it makes business sense and is a legal requirement.

• People and organizational culture. People are the key to success and can make or break any planned changes. Involve your employees, suppliers and service providers in designing improvements and include change management in your lean program requirements.

• Supplier relationship management. Cost savings are always attainable in the sourcing process. Collaboration with suppliers on continuous improvement can deliver savings in raw materials, fabrication and logistics. Formalized measurement of supplier performance will deliver benefits.

Companies are going to continue to squeeze supply chains. The tendency may be to reduce flexibility to save costs during the process of achieving a lean supply chain but finding the right balance between flexibility and efficiency is the challenge.

Supply Chain Management Trends

Supply Chain Management (SCM) is a dynamic entity that is constantly evolving due to advances in technology, competitive behaviour and consumer demands.

Plan…> Source ….> Make ….> Deliver … > Enable >

In 2007 a study was conducted by APICS* looking ahead to 2010 to understand the key issues facing supply chain managers in the coming years. They wanted to identify the key initiatives required to close the gap between 2007 capabilities and the demands of the new supply chains. What they identified as the main actions needed to close the gap by 2010 were spot on. High on the list were what we now call visibility of the supply chain, process optimization and talent management.

In 2007 supply chain managers recognized that their role has moved from being tactical to being strategic. They were already challenged by changes in their own firm’s strategic direction, by actions by competitors and shifts in buying patterns of their customers. The realization that supply chains of the future would be customer-driven rather than production driven was taking hold.

Challenges identified were:

• Supply chain disruptions and supply chain risk

• Leadership within the supply chain specifically the people skills and talents needed to manage future supply chains

• Managing the timely delivery of goods and services

• Managing product innovation by drawing on the capabilities of the supply chain

• Implementing appropriate technology to enable seamless exchange of information within the supply chain

Actions needed to close the gap

In their extensive discussions to narrow down and group the initiatives needed to close the gap these six actions were identified:

• Achieve strategic visibility/alignment and information integration

• Acquire exemplary supply chain talent and leaders

• Use supply chain optimization models (e.g., risk, cost)

• Manage through a process orientation with appropriate measures

• Focus on relationship building and trust both between and within companies

• Align and realign supply chain architecture and structure

As for the next steps, it was agreed at APICS that the academic institutions would work on developing the body of knowledge in SCM, in collaboration with business, focusing on these six issues.

So where are we now? The consensus seems to be that flexibility is the major driver for improving business performance in the supply chain. As globalization is accelerates, an effective strategy to improve global flexibility will be very important without losing sight of the critical concerns of product quality, safety and security. There is constant pressure in SCM today to reduce costs and maintain sustainable relationships with partners, suppliers and customers whilst maintaining the required flexibility.

* Supply Chain Management 2010 and Beyond Project, APICS Educational and Research Foundation, 2007

Cost reduction experts

Cost reduction experts can provide you with tools to understand and manage cost drivers throughout the supply chain :

Plan ----- Source ------ Make ------- Deliver --- Enable --- Sell

Cost reduction initiatives

Cost reduction can be much more than ad-hoc belt tightening. It can be a core competency, developed over time. Those experts in sustained cost reduction are contributing year over year to margin improvement through operational savings of 5 – 20% per annum.

A holistic view of your supply chain will assist in understanding the inter-dependencies and the impact of any proposed changes. Opportunities are to be found in capital and operating costs, labor and employment costs and strategic costs.

Capital and operating costs

Traditionally, these are the areas with the most potential for cost reduction. At each stage of the supply chain there are functions that are wide open for cost reduction and should always be pursued especially in tight economic periods. Here are some of them:

Source
• Source strategically to find the right partners
• Introduce supplier relationship management (SRM)
• Reduce material and labor cost
• Reduce packaging, delivery and transport costs

Make
• Reduce material usage and control waste through lean manufacturing
• Increase production throughput by streamlining the process
• Improve labor productivity using incentives
• Increase throughput using improved equipment and better controls

Warehousing
• Improve space utilization and reduce on-site and off-site storage
• Leverage best practices to eliminate unproductive activities
• Reduce energy and utility costs

Inventory
• Introduce better demand planning and forecasting
• Reduce stockholding (days of supply)
• Minimize non-performing inventory and action disposals
• Improve order fill rates and reduce stock-outs

Transportation
• Consolidate order deliveries
• Improve scheduling and routing, review and manage tariffs
• Reduce admin costs
• Tackle improvements in returns and reverse logistics

Performance metrics
• Review and confirm metrics to ensure they impact bottom line
• Measure the metrics and assess against objectives
• Take necessary corrective actions

Systems
• Identify obstacles such as lack of data visibility and accuracy, timeliness, completeness
• Configure systems to maximize full potential
• Integrate with other internal and supplier systems

Outsourcing
• Audit current service providers and develop improvement initiatives to shrink costs
• Identify other operations that will save money when outsourced and select and implement service providers

There is a tendency to cut employee costs without due consideration to tackling operational costs first. People can effect cost reductions up to 5 – 10 times their employee cost if directed properly.

A word of caution: long term competitive advantage can be lost if moves are made to cut costs in areas which impact on strategic initiatives that are designed to increase profits. Cost reduction experts will confirm that sustainability depends on ensuring the continuous flow of future business and limiting cost cutting in the wrong areas.