How much legwork are you doing in order to prepare for your sourcing projects?
Today’s post is from our SafeSourcing Archives
This blog series details the story or Ray and John. Ray and John are both procurement professionals who work for multi-billion dollar food manufacturers. Both Ray and John have corrugated containerboard contracts that are about to expire and with a predicted rise in the pulp market, both professionals are looking to renegotiate their contracts in order to lock in the hopefully current lower prices. Ray and John, however, took different paths in order to get this category sourced and, as expected, their results reflected their differing preparation time.
Over the course of this week we will be looking at five areas that Ray and John approached differently and how those decisions and time investment affected their final results. These areas are:
• Understanding the market
• Understanding the suppliers
• Understanding their own company
• Understanding their goals
• Understanding and interpreting the results
When Ray and John began reviewing the containerboard project each began with a similar set of information. They knew how much they were spending and the locations the containerboard was being shipped to. They had each received some feedback from the field relative to the quality and customer service of the incumbent vendors (of which each had multiple) and they had some part number information from the past invoices.
Ray jumped right in and began to reach out to the suppliers to coordinate meetings on renegotiating the upcoming contract pricing structure. Ray had seen in one of his trade journals that the pulp index was on the rise and knew enough to know that he wanted to lock in prices before those increases started taking effect. Outside of that information Ray really did not take any additional time in order to research the market in order to try and understand what experts were saying about the trend over the next few years and any changes that were happening with technology or safety that may affect his company.
John had already been keeping up with the market for the past year and had been speaking to professionals about their opinion of where the industry was headed. He had attended two online webinars and at the last industry trade show he made sure to make appointments with two different containerboard companies he had spoken with who were also going to be at the show. Through his efforts he had learned of a new technology that was coming that was going to drastically affect the costs of production of containerboard. While the technology was new it was a key point he would be discussing with his incumbents relative to their understanding of it and their plans to potentially implement it within their facilities.
John also found out that there were three leading experts that felt that the increases that were coming in early 2013 would hold there for a while and be the last ones expected for a while. This was great information because John now knew that when it came time to negotiate his new contracts that he would structure the language surrounding Index related price changes slightly differently because of that.
John’s process involved an intentional commitment to category education throughout the year and some additional time for research up front than Ray’s approach. As such John started his project fully prepared with an understanding of the status of the market before ever reaching out to a supplier.
Stay tuned the rest of the week as the story of Ray and John unfolds. You may be like Ray but desperately want to operate like John but without the staff or the time to dedicate at that level.
At SafeSourcing we understand Ray’s frustration and that is why our customer services team works with you to achieve great results while removing much of the work from your plate. For more information on how we can help you with your sourcing projects, please contact a SafeSourcing Customer Service Representative. We have an entire customer services team waiting to assist you today
We look forward to your comments.