Don't use a fire extinguisher to source!!

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Supply interruption.FireExtinguisher

It is a phrase that can send an executive into a panic.  Supply interruption can force a company to make a budget crippling and profit killing decisions.  If direct materials are involved, let me give you some advice;

Don't panic.

I know.  Don't panic.  It seems so simple, but you would not believe how many people really handle a direct materials emergency badly.  Supply management professionals see a direct materials emergency as an excuse to throw cost containment to the winds.  Panic creates short term and long term problems.

Short Term:

It is often completely unnecessary.  Why?  Getting access to suppliers with IMMEDIATELY available capacity is not the difficult prospect it was 10 years ago.  Ten years ago, if something unforeseen took place then a sourcing professional's only recourse would be to call over to their regular supplier and ask for a part urgently.  Often times the current supplier couldn't meet the emergent time-line.  Other situations would have the buying company incurring a change fee if the supplier would have to take a job off their machines to run the quick turnaround job.  In the cases the supplier couldn't or wouldn't help, the buyer ended up flipping through some big paper catalog, hoping to find a supplier close by that could meet his time-line at a reasonable or really ANY price, with limited and often no success.

Now, tools exist that give you instant access to suppliers with open capacity.  The best part?  It is completely unnecessary to build a list and make phone call after phone call to try and find a supplier that will fit your needs.  The ability to tap into the open marketplace and have suppliers with immediately available capacity get in touch with you is a brilliant and efficient reversal to what was a wholly inefficient process.  Unfettered access to a free and unencumbered market almost guarantees cost containment because of the competitive nature of this type of e-sourcing engagement.

Long Term:

In our hypothetical scenario our legacy sourcing agent has created a dangerous precedent with his emergency scramble for a source.  When a premium is paid to a supplier in an emergency there is the potential to have a long term effect on the bottom line.  The next time the emergent component is purchased, the last supplier used and the last price paid often become the new baseline cost.  This is another incredible inefficiency cured by instant access to open markets.  Don't get burned by past mistakes.  It's unnecessary.

David Landsman

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