After reading a publication titled Procurement Redefined presented by TWS Partners, it enforced everything we at CSI Group see happening with some of our key customers. We have some thoughts on how this process needs to be addressed by both the manufacturer and supplier to make this the most effective process possible.
What is the Concept of Procurement Redefined?
Today with a truly global economy, the concept of in-house production is decreasing. In some industries, for example, it constitutes less than 30% of output. This creates a more complex demand on the supply chain. Companies are relying more on their suppliers to provide them with value added solutions and innovations. They are requiring solutions for manufacturing, engineering, product creation, and logistics.
With procured goods and services accounting for two-thirds of a company’s cost structure, it is apparent that the role of a firm’s procurement department has changed dramatically over the past several years.
Procurement has become a strategic function as it has to insure the company remains cost competitive and still innovates. It has to focus on building strong relationships with its’ key suppliers and continue to strengthen the firm’s capabilities to remain competitive in a fast moving environment. The companies who fail to capitalize on working in conjunction with their supply base will ultimately begin to lose ground to their competitors that recognize the value of a collaborative partnership concept.
At CSI Group, we are fully aware of what it takes to build a collaborative partnership with key customers. Our model is built to supply multiple technologies and value added services that can help our customers reduce costs and react quickly to their customers’ demands.
We become involved with a customer’s needs at the beginning of the sales process. This is mandatory as the requirements for both manufacturer and supplier change. As a team, we must have a true understanding and a commitment to what is necessary to make a success of the program.
Some examples of early involvement with our strategic customers to build programs that add value to their ongoing pursuit of remaining highly competitive in their markets are;
A customer in the commercial sector came to us with a requirement consisting of multiple components in very large quantities that needed to be supplied in a compressed time frame of several weeks. If our customer could not meet these requirements, they would lose this opportunity to competition. Our customer communicated with us early in the bid process and together we worked out a plan to support them. Within our group, we had multiple partners producing the same parts to meet the high quantities of parts involved. We had as many as 12 machines in multiple facilities manufacturing components for one assembly. In the end, we met our commitments and our customer captured this business and retains it year after year.
New Product Launch
An aerospace customer asked us to manage the entire Bill-of-Materials [BOM] on a unit they are building for market introduction. Seeing this was a new design, our customer initiated early discussion between their sourcing and engineering teams and our engineering group.
Once the design was finalized, the system contained over 100 components on the BOM. Multiple partners within CSI Group could manufacture over 70 of these components and we would procure the balance of the items from their approved supplier list. All of the components, both manufactured and procured in 4 weeks.
As mentioned earlier, the key to this changing dynamic of the manufacturer / supplier relationship is commitment, communication, and understanding what is required from both entities. This is accomplished by the manufacturer involving the supplier during or before the initial bidding process.
A successful partnership which benefits both the manufacturer and supplier is based on “shared risk” and a commitment to succeed.
By: Ed D’Entremont (CSI Group Sales & Marketing Director)
(508) 986-2300 x 202 ; email@example.com
Posted August 1, 2017