It's fun to think in easy terms and do easy things, which is why the majority of our conversations on sourcing involve commodities and common services -- things that are easy to find from multiple manufacturers or suppliers, with pricing negotiations and robustness of the supply chain assisted by the multiple options. But what about those categories that are unsourceable -- the products that don't have a variety of sources, or are so unique there's not a whole lot of them anyway. What then?
For starters, if you're looking for information on sourcing the black market, look elsewhere. There will be no talk of procuring fake Rolexes or real AK-47s. The gray/grey market is gone as well -- given the questionable legal status of those goods. So, what's left are:
- Capital Expenditures
- Specialty or Custom-Made Products
- Cartel Markets
Source One's Kyle Evans already covered the sourcing of this market for an article published on ThomasNet's IMT Procurement Journal. As a quick summary, he cautions that firmly identifying and reporting savings on a CapEx project will remain difficult, but that the sourcing process can be used effectively starting with a needs analysis and the insight of your in-house subject matter experts. With the knowledge they provide and a comprehensive idea of what your organization really needs, the solutions may open up and more than one product may be used.
We recently completed a project for a manufacturer that used many chemicals in its production process. Some were commodities while others were custom blends made especially for them. We were able to source the commodity chemicals very easily and identify savings. The custom blends were more difficult, due to manufacturing differences between suppliers. While we were still able to source the products, establishing a baseline with which to negotiate, cost savings had to be tempered against the losses from downtime due to testing. Often times, the downtime was more costly than the identified savings, and the opportunity was not pursued .
When dealing with a product that is available from only one region or through a single suppliers -- commonly, agricultural products -- we have found sourcing success by bringing the entire supply chain into focus. With a view of every step, from the farmer's harvest to the product's arrival at the loading dock, savings opportunities are easier to spot -- say, when there are three different importers, or any time there is a diversity in a step.
What are some other difficult-to-source areas, and how did you find success?