Sourcing

Can procurement be a competitive advantage when launching new products?

Let’s face it, launching new products isn’t easy. In fact, it’s normal for companies to struggle moving new products through the value chain. If companies can turn product launches into a competitive advantage they will likely find their position in the marketplace improve.

Credit for product introduction frequently falls to Marketing and Engineering groups, but the unsung heroes working behind the scenes sit in the Procurement Office. In this article, we’ll review how buyers have a great deal of control over risk, bottom line, speed to market, as well as finding, developing, and partnering with innovative suppliers.

Risk Mitigation

There are numerous risks when it comes to supplier selection and in almost every instance buyers are faced with a complex matrix of tradeoffs which must be evaluated and weighed carefully. Identifying risks is a daunting task, and often the risks that aren’t identified are most critical. Risks, of course, can be different industry to industry as well as supplier to supplier and can include everything from the financial health to geographic and geopolitical factors. Because of this, it is key that the buyer understands the tradeoffs between risk and product cost, and which combination of these factors make the most sense for a specific part being sourced. The lowest cost offer without consideration of other factors is a risky proposition.

Gain Transparency and Enhance the Bottom Line

When a buyer understands the expected cost components to make a part they will have an advantage when negotiating to achieve the lowest cost from the most qualified supplier. The best way to collect detailed information from suppliers is by using standardized quote templates. Templates can be commodity specific or generic, but must make sense to the suppliers expected to use them. Quote templates can range from a relatively basic set of summary fields to a full cost breakdown depending on the industry and the maturity of the supply base. Once quote templates are collected they should be summarized by round in a side by side comparison for easy analysis and reference.

Introduce New Products Faster

Supplier selection can be a difficult and time-consuming process. To get a head start, buyers can start quoting by using incomplete requirements and drawings in an early stage quoting process. As requirements and prints become more stable the buyer will disseminate updates to quoting suppliers and subsequently receive rapid pricing updates. Over the course of multiple rounds of quoting, buyers should be able to identify key suppliers. An additional and equally effective strategy is for buyers to identify preferred suppliers for each part prior to publishing their first RFQ. This is a valuable routine to instill because it encourages planning and an understanding of the part requirements included in the RFQ and supplier capabilities. Individually or combined, these strategies should help shorten the supplier selection process.

Introduce Innovative Products

Buyers are uniquely positioned to learn about standards, processes, best practices, capabilities, and innovation (R&D) that suppliers possess. If this knowledge can be leveraged into successful products,

both the buying organization and supplier can realize a significant advantage in the marketplace. In today’s fast paced global market, OEMs are counting on their supply bases to provide innovation. This should compel buying organizations to work closely with and even include key suppliers in the product development phase. Once parts are in production, supplier development initiatives may shift to supplier quality and capability improvement and some suppliers may participate in Value Analysis/Value Engineering (VA/VE) initiatives.

Moving Forward

This article has provided a brief overview of ways that modern purchasing organizations can provide a competitive advantage for their company

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