"Go and buy the materials."That is often the command from other departments to strategic sourcing and procurement (SS&P) groups. Often later in the product lifecycle, SS&P is brought in to help acquire the goods and services needed to enter the market or worse, sought to reduce costs while the product meets it's maturity in the market and consumer demand for it has decreased.
Sure, SS&P is happy to help it's stakeholders find the most competitive prices for the needed products and services. However, this reactive approach can limit SS&P's impact. In reality, when collaborated earlier in the product lifecycle SS&P can optimize cost targets and even deliver a better view of the market landscape. This added value SS&P provides when consulted earlier in the product lifecycle is the topic of Source One's latest whitepaper, Strategic Sourcing Throughout the Product Lifecycle.
As one of the main contributors to the piece, Source One Consultant and Direct Materials sourcing expert, Martin Przeworski elaborates on the concepts behind the white paper and his sourcing experiences that led to the white paper development in a Q&A podcast session. Przeworski shares how his background in engineering and previous experiences as an applications engineer allow him to take a unique approach to supporting clients when sourcing raw materials for their products. With his efforts to bridge the gap between engineering and procurement teams, a common ground is developed that allows for more efficient processes and additional savings.
Read the full interview below to find out how Przeworski works to bridge the gap between engineering and procurement teams and find a common ground that allows for more efficient processes and additional savings.
Can you start off by giving us a little more background on what you do at Source One and what it is that inspired the whitepaper?
Przeworski: My education is in science and engineering with 5 years working in the industry as an applications engineer before making the transition to procurement consulting and joining Source One, where I've helped clients with strategic sourcing in the directs and indirects areas for the past 3 years. I believe my experience gives me a first hand insight into the daily pain points and bottle necks encountered by engineers and the pressures management faces to stay competitive within the market. I've worked hard to bridge the gaps between engineering, management, sales and marketing on technical projects to dissipate miscommunication and misconceptions and help everyone find common ground in order to make progress and achieve savings.
You mentioned that there's opportunity for better results when strategic sourcing teams are engaged earlier in the process. When is the sourcing team usually involved in the product lifecycle?
Przeworski: Strategic sourcing is usually involved as a somewhat 'necessary evil' during the manufacturing phase, or growth and maturity stages of the product's lifecycle to reduce costs as production volumes increase. In the classic analogy - if we can save 10 cents on a capacitor, we can save $10,000 on the production run of 100k units. Strategic Sourcing may also get involved to help reduce the overall costs of an established product by partnering with a contract manufacturer and opening-up the company's time for New Product Introduction (NPI) and development work. Some companies even progress to the point of taking the burden of manufacturing off their shoulders completely and recast the business as a design house.
But Strategic Sourcing and Procurement can achieve even greater savings by expanding on existing component opportunities to include the Engineering team's insights into critical and non-critical component selection, and leveraging DFM services provided by fabricators to reduce component count and increase production efficiencies in order to more than double original projections in most cases.
We often see that as procurement professionals - that for many organizations procurement groups are a 'necessary evil' that they're not initially inclined to engage. How have you approached strategic sourcing for clients?
When it comes to meeting cost targets, it absolutely makes sense that sourcing would be involved prior to the manufacturing phase, but can the sourcing team actually help during the Ideation Phase?
Przeworski: Yes, during the Ideation Phase the product is conceived, and where many costs are built into the product before it even exists in physical form. When establishing the Market Need, a thorough understanding of the competitive landscape and market pricing can provide key guidance for product placement and feasible manufacturing cost targets. This is the value Strategic Sourcing and Procurement can bring - enabling manufacturers to understand the market for material/functional design considerations, evaluate their current contract engineering relationships and determine the best approach to balance costs with technical considerations.
And, when should suppliers be involved in the PLC?
Przeworski: The production phase is an ideal time to gather input from key suppliers. In this phase, the product's construction and components parts are established, typically by engineering with little to no input from Strategic Sourcing and Procurement.But during this phase, Strategic Sourcing and Procurement should be engaged to begin supplier identification, identify opportunities to localize designs to low cost regions, and guide the Engineering teams through the off-the-shelf (OTS) commercial offerings to ensure a cost-competitive and sustainable initial design. By utilizing the experiences and insights of manufacturers who have already successfully addressed these changes with similar customers (and are more than willing to share their knowledge to expand their business opportunities), SS&P can take the heavy burden of 'getting everything right' off the engineering team.
To hear the entire conversation, check out Source One's YouTube channel. For more information on how Strategic Sourcing and Procurement groups can deliver at each stage in the product lifecycle, check out Source One's most recent whitepaper: Strategic Sourcing Throughout the Product Lifecycle: Balancing Competitive Costs with Innovation and Speed to Market.