Sourcing involves finding quality goods and services from credible dealers and negotiating contracts involving terms of payment and methods of delivery. It may seem uncomplicated, but it is quite a complicated process. Intense market research and quality testing are vital in establishing the goods and services’ standard to be procured. The digital migration has shifted the markets online, and accessibility to them has been enhanced. Clients can source from different parts of the world, and a popular trend has been sourcing from China. China has emerged as a popular product source for retail chain buyers while providing a supply zone for manufacturers.
This year has been highly volatile with seismic shifts that are reshaping the markets. This immediate redefining of the markets has led to the emergence of sourcing trends explored in this article.
- Crafting Better Supplier Relationships
In the initial planning stages, sourcing professionals increasingly involve suppliers in decision making. A robust relationship with the supplier gives buyers improved visibility and transparency, reduces sourcing risks, and solidifies fidelity between buyers and suppliers.
Methods of building better relationships include clear communication between management and staff, using updated technology and analytics, and having better trained employees. The role of technology here cannot be overemphasized. It can be used to monitor and analyze supplier compliance by approving suppliers that are consistent in delivering high quality, yet reasonably priced goods in the agreed time frame. Technology can also provide a way of converting supplier spend data into a predictive matrix that enhances decision making.
- A Digital Strategy.
Technology has revolutionized the marketplace. The world of sourcing has seen tremendous progress over the past couple of years. We have seen the adoption of various cognitive technologies such as Artificial Intelligence, Robotic Process Automation, Big Data Analytics, and Machine Learning. These tools have been empowered with sharper decision-making skills that dissect with keen market visibility. By taking advantage of digital data developments, sourcing professionals can collect and analyze supplier’s past performance data and award contracts on a value-driven basis rather than lowest cost.
Clients that have embraced the digital strategy have seen a drastic change in service delivery that will be realized even in the next 3-5 years. Companies need to invest in relevant digital strategies for sourcing aligned with the organization’s goals to reap the most benefits.
- Risk Management.
As earlier stated, this year has been marred with an unexpected turn of events, from fluctuating oil prices to Brexit and trade wars that led to the US imposing tariff sanctions on China. These uncertainties call for risk management to be crucial in sourcing involving customers, suppliers, and third parties such as insurance companies. This may include using innovation and technology solutions to cut costs. Organizations should also deal with internal risks that arise due to a lack of transparency. They should be extra careful about ethics and compliance with the objectives and vision to reduce exposure to unexpected developments that could be financially detrimental.
- Sustainability And Environmental Conservation.
Clients have increasingly become aware of product’s and manufacturers’ impact on the environment and are under pressure to move away from cost management to sourcing products with more social value. As a result, they have developed a propensity towards brands that are conscious of making cleaner and greener products. This is a shift from a linear economy of consumption and disposition to a circular economy where continuous use is the centrality. In response, more retailers and manufacturers are setting targets based on scientific climate change impacts.
Although this has been a massive challenge for numerous factories, it could simultaneously be an opportunity to distinguish themselves across other value chains.
- Prioritizing Value Creation Over Price Management.
Cloud based data management and artificial intelligence have fundamentally transformed the sourcing process. A new era has been ushered in, moving away from paper-based sourcing toward digital transformation and has created the effect of releasing human members from low-value tasks, maximizing cost reductions throughout supply chains via improvements in precision, speed, and efficiency.
This modern sourcing trend is more about optimizing and connecting all business units to minimize waste and expense while maximizing value. Buyers now negotiate with suppliers on matters other than cost, such as strategic decisions at initial stages and ensuring suppliers have visibility of all sourcing steps. This makes suppliers feel empowered and promotes healthy competition between them.
- Cost Management.
This sourcing strategy may have been overtaken by others, such as sustainability and social value of the product, but it still remains the primary goal of sourcing. The buyers typically negotiate lower unit pricing for high volume purchases. The cost of buying is thus reduced and ensures the clients make a profit from the rather contrasted buying and selling price. This keeps the retail prices competitive.
The suppliers benefit by having a consistent outlet for their goods, making cash flow dependable, and allows easier planning—a stable relationship based on loyalty results between the buyer and the supplier.
- Greater Integration.
Trends have accelerated the integration of supply chains in terms of new product management, demand and supply management, and shorter product life cycles. The suppliers’ numbers could be pruned down to a smaller list of reliable and consistent ones. Buyers can then quickly negotiate for better products and expect delivery from credible sources. This also fosters a healthy relationship between the buyers and suppliers and healthy competition between suppliers. A smaller sourcing pool translates to less data, which is relevant and more manageable.
In conclusion, clients have developed an inclination towards technology and have embraced its numerous benefits towards streamlining the sourcing process. Buyers are also looking beyond saving on costs and are more value-driven towards products that promote sustainability and social value. Thanks to digitization, purchasing is being relieved and has become more transparent to reposition itself as value creation’s centrality.