Top Challenges in Strategic Sourcing and How to Combat Them
A Q&A with Patrick Smith from ProNova
The ultimate goal of those involved in sourcing and procurement is to procure components for the best value possible. Individuals with sourcing and procurement all face similar challenges on a daily basis, and it is always helpful to troubleshoot and hold discussions of best practices with peers in the industry. I interviewed Patrick Smith, Director of Supply Chain Management at ProNova, for his insights into combating some of the most common challenges in the strategic sourcing and direct procurement industry.
Pricing Pressures/ Competitive Pricing
To savvy customers, price is not the principal driver of decisions anymore, value and uptime are more important. Saving cost at the expense of medical equipment uptime is not providing value. The newer concept of the Best Value developed by Dean T. Kashiwagi, Ph.D., PE is one of the best tools utilized to address this, especially in complex and schedule sensitive procurements.
There are two main tools we utilize, for non-local more simple procurements, we’ve found the tool ThomasNet Supplier Discovery useful. For local specialized supplier identification, we’ve leveraged our local chambers of commerce, proximity to the University of Tennessee, Regional Engine (consortium of local suppliers) and relationships at the National Lab to help us identify best-fit partners. As far as validation goes, we developed our own supplier qualification and monitoring system based on best practices that we’ve observed over time.
Dual sourcing is a challenge for our industry. The product is technically advanced and very low volume so another source does not exist. To combat this concern, we take a risk-based approach and either partner more closely with the sole or single provider, insource the product or we develop the capability in another one of our high performing suppliers. We’ve taken all three of the approaches in our latest product development.
Risk management/ mitigation
This is a challenge and is usually a hidden problem often overlooked. Two key tools we use are:
- Good old fashioned boots on the ground, based on risk and criticality we invest time at our suppliers’ facility auditing their processes but also getting to know them beyond contracts to develop the kind of open relationship where they want to tell us what is going on and what they are concerned with. We also learn by the act of walking around, talking to their employees and of course asking for objective evidence. This allows us a special peek inside and we can better predict a problem before it occurs. This is another reason we strive for as much local sourcing as possible.
- Advanced warning from software. We’re utilizing a product called SmartWatch from LexisNexis which provides a wide variety of information to help us determine if risks exist. The information in scope for these advance alerts include: financial, geopolitical, legal, environmental, technological, news, regulatory, natural disaster, and weather, etc…
Luckily this is not a problem for our company, other than commercial products sourced from Asia and the potential for counterfeits. We combat this issue with rigorous incoming inspections, quality agreements with the supplier and, of course, safety stock where appropriate.
Patrick Smith is a speaker at Q1 Productions’ Medical Device Strategic Sourcing & Direct Procurement Conference on April 23-24, in Arlington, VA. Register to hear his presentation on leveraging strategic supplier’s capabilities to reduce cost, risk, complexity, and transactions. With Live Polling, 11 industry case studies and new perspectives beyond the industry, the goal of the Medical Device Strategic Sourcing & Direct Procurement Conference is to leave the audience with knowledge and insights they can bring back to their organization and implement immediately.