CGN Edge Blog

The Changing Face of Sourcing

May 24, 2018 Posted by: CGN Team
  2010 2014 2018 AND BEYOND
Methods Low Cost Sourcing Total Cost of Ownership Dynamic Sourcing
Drivers Material Cost Reduction Landed Cost Quicker Response to Market
Benefits Instant Cost Reduction E2E Reduction Agile: Adapt to Change

Sourcing trends have transformed over the years. Back in 2009-2010, when the market was facing a heavy downturn, companies were forced to find innovative methods to reduce cost. This was a survival technique that established stability, primarily when sales were at a historical low. Methods used were primarily focused on identifying Low Cost Country Sourcing options to gain instant material cost benefits, by leveraging suppliers in China and other Asian countries. At that time, this proved to be a successful strategy that brought quicker benefits and stability. Researchers estimate ~$20 billion in material cost savings during that period in the manufacturing industry.

From 2010 to 2014 CGN along with other companies, began realizing that the total cost savings significantly reduced, or eliminated due to longer supply chains. This led to organizations putting emphasis on providing a holistic view to cost analysis in decision making. As an outcome, Total Cost of Ownership was a methodology chosen by major organizations to evaluate all aspects of sourcing. The idea behind TCO was focused on looking at all critical elements from Order to Delivery that covers key cost drivers, understanding market dynamics and capturing commodity pricing fluctuations into a holistic cost view.

In today’s digitally driven world, customer response time has become paramount. With the advent of IoT, Machine learning and emphasis on Advanced Analytics, organizations are shifting towards a more Agile Sourcing Method. This provides a platform to leverage common types of commodities, but more importantly establishing long term relationships with strategic suppliers. Agile sourcing provides decision makers an opportunity to be nimble and reactive to market changes. The key is to ensure products and services are provided to customers faster than competition for the right price at right time. This is a transformative approach that helps organizations accelerate their presence in the market thus amplifying savings.

While trends change due to market conditions and external factors, the foundational 7 step Strategic Sourcing process remains the same. We have been working with numerous clients in the heavy equipment and automotive industries helping them formulate the ideal sourcing strategies and execute projects to realize bottom line benefits. CGN's Industrial Transformation Group has helped clients achieve over $1.5B in realized savings and handled challenges across various timelines providing Value Chain efficiencies.

7-Step Strategic Sourcing Process