Integrated Procurement Services

In most manufacturing companies especially Medium & Large Sized Companies Sourcing of Direct & Indirect Products and Vendor Management is a very complex and critical exercise and consumes quality time from the Sourcing Professionals.

Sourcing activity is comprised towards Direct and Indirect Materials – Direct Sourcing is mostly the products that go into the Product – mostly these are Items in the Bill of Materials. Indirect Sourcing is towards production Support and Office Support – ex machine consumables, Capex Item, Spares, Office Supplies, IT Supplies, MRO products – Maintenance & Repair & operations, Other Support Tools, Items used in various teams like Quality, Shipping, Testing, Facilities etc.

In all cases Direct Materials contribution is very high and needs regular monitoring and strategy like Inventory Reduction, Vendor Harmonization, Cost Negotiations, Availability, Lead times, Safety Stock etc. The Indirect Materials contribute to a lesser percentage of the overall Cost picture but due to the spread of the items there are way too many items and too many vendors to be followed and managed. This is an area of Opportunity where companies to needs to outsource and focus their best efforts of the big-ticket Items.

Hence In order to reduce and simplify the Sourcing Team workload few companies have adopted a Strategy of using a Single Vendor who will be an extended Sourcing Arm for the company and they will assist in Vendor selection, Quotation, Order Management, Vendor Management, Material Follow-up, Inventory Replenishment etc. This is mainly done for the Indirect products which are non-standard purchases, One-Off purchases, Imports of Spares & Accessories and low value/high volume products. In a nutshell all the time-consuming Indirect Sourcing aspects which contributes to a lesser percentage of the overall Cost is Outsourced to a Third-Party Integrator.

By taking this approach Sourcing organizations are able to focus on the regular, frequent suppliers of Direct & Indirect Commodities who contribute to a high percentage of the Purchases done and there-by build efficiencies in better management of Direct Material Sourcing, Total costs, Lead Time, Inventory Levels etc.

As the Cost pressure continues to increase, this is one area where many companies should adopt – in adding a partner who will handle all the smaller ticket items at a much lesser cost and this helps the company improve its operations efficiency. The below picture is a good representation of the whole concept of Integrated Procurement Services.     

Benefits of Integrated Procurement Services