Procurement and Strategic Sourcing Case Studies
Procurement and Strategic Sourcing Help Desk
Today’s Procurement teams have a lot on their plates. Though the function was once dismissed as purely tactical, Procurement now occupies a valuable strategic position within leading organizations. At their most advanced, Procurement departments perform multi-functional duties and drive change across the entire enterprise.
- Inconsistent demand for Procurement’s support impacts the department’s ability to anticipate its sourcing workload and allocate resources properly.
- The candidate-driven market for Procurement talent makes recruiting and retaining supply chain talent more challenging than ever.
- The Procurement Technology landscape is constantly evolving. Many organizations grow overwhelmed and invest in mismatched Procurement tools.
- Procurement has to market itself as a worthy strategic adviser to effectively guide purchasing decisions. Oftentimes, this means struggling against misconceptions.
Procurement often requires supplemental support to gain control over supply base, improve its sourcing operations, and promote business growth. Traditional Procurement support models rarely offer the flexible services and subject matter expertise that make for effective spend management.
- Procurement teams often turn to third-parties in the form of Business Process Outsourcing. BPO providers, however, lack the innate industry knowledge and supplier relationships that make for effective sourcing.
- Organizations might also look to hire new Procurement talent to meet sudden changes in their responsibilities. Even hiring a full supply management team, however, is unlikely to provide the necessary skills and category expertise.
- Investing in supplemental market intelligence is another common approach to answering Procurement’s challenges. While this is generally less costly than hiring new Procurement talent, data alone doesn’t bring the organization any closer to realizing its spend optimization goals.
Source One recognizes that Procurement teams are often overworked and understaffed. They also recognize that typical approaches often exacerbate Procurement’s concerns.
That’s why we introduced our on-demand Procurement Help Desk model to provide flexible, scalable support. Our experts embed themselves within a client’s internal Procurement team, assesses their needs, and develops a customized retainer model to provide spend optimization services.
For less than the price of a single supply chain hire, the Procurement Help Desk provides an arsenal of support.
The Procurement Help Desk:
Source One describes the Procurement Help Desk support model and details a successful Help Desk engagement in their whitepaper, “Enabling the Business with On-Demand Supply Chain Support.” Check it out to learn more about what flexible, scalable Procurement services can mean for your organization and its cost reduction goals.
Source One's Sourcing and Procurement Help Desk enables business with flexible, scalable supply chain support. Check out this case study.
Source One’s engagement with a Medical Device Manufacturer is a case study in the effectiveness of our Procurement Help Desk service offering.
A North American Medical Device Manufacturer found themselves struggling to manage a global supply base while managing a mostly tactical Procurement function.
Procurement’s Pain Points:
- The organization’s Strategic Sourcing efforts were initiated and managed by R&D and Marketing.
- With 90% of manufacturing operations located in China, Procurement contended with poor visibility into a diluted supply base.
- After opening a manufacturing facility in Mexico, the client still experienced gaps in their ability to identify supplier and build sustainable supply chain.
The Medical Device Manufacturer hoped that nearshoring manufacturing operations to Mexico would solve many of their supply chain concerns but quickly realized Procurement would require additional support. At first, they hoped a single supply chain hire might provide the necessary assistance. Identifying a resource who could navigate multiple spend categories, commodity groups, and geographies proved fruitless.
They approached Source One for help developing a more effective approach to supply management. Their Procurement team required a dynamic supply chain support model that could provide subject matter expertise across a range of spend categories, an understanding of nearshoring best practices, and market intelligence to guide numerous direct materials sourcing initiatives. Source One suggested they leverage our Procurement Help Desk – retainer model of Procurement and Sourcing support giving the client access to resources where and how they’re needed. Within the first year alone, Source One conducted over 15 different initiatives across six commodity groups in multiple geographies.
Direct Materials Strategic Sourcing:
- The Procurement Help desk team provided for better communication between the client’s Procurement department and other internal stakeholders.
- Flexed support from The Procurement Help Desk enabled the client to tackle numerous sourcing initiatives at once and delegate Procurement resources as necessary.
- The Procurement Help Desk enabled the client to source direct materials including corrugated packaging designs, customized gel pack inserts, radio frequency welding services, over-molding services for custom plastics, and contract manufacturing services in both Mexico and the EU.
The Procurement Help Desk provided for more than category sourcing. It empowered the Medical Device Manufacturer to optimize operations, implement new suppliers, and assess alternative materials to reduce costs.
Logistics and Supply Chain Optimization:
- With the Procurement Help Desk’s support, the client established a new supply chain in China and developed sustainable process for on-boarding new vendors.
- The Help Desk team also conducted an “automation project’ to reveal opportunities to replace human operators. The project involved evaluating equipment costs, levels of automaton, cycle times, and line configurations to develop an optimal supply chain automation strategy.
After successfully transitioning operations to Mexico, the client sought the Procurement Help Desk’s help in determining their next move by comparing the benefits of leveraging a contract manufacturer versus establishing a facility in Europe.
Strategic Support and Risk Mitigation
- The Procurement Help Desk team assessed the costs of contract manufacturing services in low-cost countries including Poland, Estonia, and Lithuania. We determined that this was not a cost-effective option.
- Source one’s experts conducted a thorough evaluation of competing products to determine the viability of developing new product lines.
- The Procurement Help Desk team benchmarked the cost of a competing product by reverse engineering it and conducting sourcing engagements for its various components.
- Leveraging a Total Cost of Ownership comparison, Source One helped Procurement redefine their make vs. buy strategy.
Before consulting the Procurement Help Desk, the Medical Device Manufacturer maintained 95% of its supply base in China. Wary of global unrest and trade restrictions, they established a new supply base in Mexico and sought Source One’s support in building out their Mexican supply chain. Nearshoring without a pre-vetted supply base had been a risky move, but the Procurement Help Desk worked to mitigate these risks and provide for a smooth transition.
Nearshoring & Global Sourcing
- The Procurement Help Desk team assessed the Mexican supply base to begin establishing relationships. We quickly discovered that many suppliers were still sourcing from China and marking up their prices.
- In Mexico, support from the Procurement Help Desk expedited the product sampling process, revealed low-cost alternatives, and served the client’s automation goals.
- Our Help Desk consultants also worked to optimize the Medical Device Manufacturers remaining Chinese supply chain. This involved addressing risk factors including intellectual property theft.
- The Procurement Help Desk supported product sampling across China to help identify alternate suppliers for textiles and other commodities.
- Leveraging the Procurement Help Desk, the client identified Chinese direct material suppliers capable of shipping to Mexico. Source One’s team conducted site visits and audits to verify their dependability and establish relationships.
- The Procurement Help Desk team also supported the client’s supplier identification efforts across both Eastern Europe and the Middle East.
Source One’s Procurement Help Desk support model enabled the Medical Device Manufacturer to establish more sustainable, efficient, and cost-effective operations across its supply base. Thanks to our cost reduction and value generation efforts, the engagement effectively paid for itself.
- The Medical Device Manufacturer’s Procurement team increased their ROI by one and a half times.
- Procurement enhanced its supply chain visibility and optimized its processes paving the way for continuous improvements.
- Throughout the engagement, the Medical Device Manufacturer realized hard dollar savings ranging from 11-75%.
- Exploring 16 new markets, the Medical Device Manufacturer gained access to a supplier database including over 300 dependable vendors.
In addition to tangible cost reduction and process improvement, the engagement culminated in a knowledge transfer that will serve the organization’s Procurement team well into the future.
- Regionalization efforts – including assessing raw material availability, labor regulations, transportation, cultural barriers, and ease of infrastructure access – should precede facility development.
- When evaluating and establishing a supply chain, Procurement teams should focus on both capacity and scalability.
- Where possible, Procurement should purchase raw materials directly from the source. Intermediaries tend to mark up the prices of these commodities.
- Sending kits to in-house facilities can reduce Procurement’s reliance on contract manufacturers. This, in turn, will allow for higher quality control and reduce costs associated with labor and shipping.
Read more about this engagement in our Procurement Help Desk whitepaper, “Enabling the Business with On-Demand Supply Chain Support.” Want to leverage the Procurement Help Desk to support your business goals? Reach out to the spend optimization specialists today.
Call the Procurement Help Desk