In regard to the direct procurement process, enterprises prioritize the acquisition of materials based on consumer demand. Weighing the pros and cons of outsourcing to experts with thorough knowledge of product sourcing is a good strategy for enterprises to implement.
Considering all factors
Aside from charting the availability of particular goods, companies must contract entities that consider the worth of global currencies. Failing to acknowledge monetary value could result in detrimental disruption down the supply line. Important questions to ask include:
- How does inflation in one country affect the pricing of finished items in another?
- When should a nation's public trading environment come into play?
- If a company's original supplier's markup increases, which organizations can provide the same products at a lower rate?
An example of influence
For instance, the rise of the British pound may cause some enterprises sourcing from the nation to reevaluate their options. According to The Belfast Telegraph, the Confederation of British Industry asserted that although demand for British goods has risen - bolstered by robust mechanical engineering, electronics and automotive industries - the country's exports may decline as the pound increases.
"Growth is broad-based, with the recovery spreading its roots, and firms have high hopes for the coming quarter," noted CBI, as quoted by the source. "However, the recent rise in sterling could(sic) impact on the resilient export orders we've seen lately."
Why would strategic sourcing professionals consider taking their business outside of the United Kingdom? To keep the prices for consumer commodities low so they can adequately contend with competitors.
With national monetary rates in mind, it's important to acknowledge the benefit of merging demand forecasting with spend analysis. SupplyChainBrain referenced the success of CLIF Bar, a consumer packaged goods company that wanted to better address seasonal fluctuations.
The organization knew it had a problem when it failed to meet inventory needs during the back-to-school shopping period, causing it to lose sales at a crucial time. As a result, the enterprise created a cross-functional department comprised of representatives from finance, marketing analysis, benchmarking, sales and operations.
By combining multiple elements of the business process, the company was able to identify work procedures that would allow it to develop the most accurate forecasts. Synchronizing the sales process with procurement enabled CLIF Bar to stay ahead of the curve, obtaining necessary goods as they were needed in anticipation of spikes in demand.