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Time for indirect sourcing

Time for indirect sourcing

Many of the traditional sector has operated for decades with the frameworks of management and business models created by past director-generations. Changes of past decades and unstable economic development of the era has made the automotive sector unstable and challenging for business management point of view.

Automotive sector has been under the pressure and changes for a long time. The first clear signs of a change made in 2008 by the financial crisis. This was the trigger for the began for the time period and the introduction of the “rear view mirror management”. I mean that this was the start point which determined the future of the automobile sector organizations and their actions for adaptation of organizations redundancies in the past years of decade. Overall market of the business cycles has brought a similar action adaptation of resources whip movement in the industry.

For the all automotive organizations the unstable situation of the car sales market has been the same. The market situation has led to a stronger campaign and the sales price competitive to maintain automotive market share. Low margins and for example the flow of trade to multi-national leasing organization has forced the automobile sector organizations to examine their cost structure and service models around the product.

Misunderstood sourcing

Sourcing is still quite poorly known and identified science area in Finland. As specially in the model of development to improve profitability of the business. The concept of sourcing has been related very often close to purchasing activity and to simple expense reduction. Although today’s sourcing (procurement) is a broad discipline that covers a whole management of whole supply chain. Efficient and profitable construction sourcing is tough and long-term hard work and know-how. The development of sourcing activities requires a fairly broad range of expertise and in-depth knowledge of business and industry.

In most cases, indirect sourcing has not attached into the firm business, so the developing cost savings potential is great. Almost without exception, the sourcing of goods and services has been cared for in organizations buyers who are handled purchasing tasks along with the tasks of daily activities. Practical experience has shown that even a strong structured organizations of direct sourcing has not been identified the potential of indirect sourcing properly.

Total Cost Ownership of procurement

Strongly sales oriented organizations executives understand best the language of the sales. So it is best that sourcing specialists speak the same language and terms of sales. It is easy to show the better purchase prices and conditions of products and services and the discounts of them. More challenging is to show the invisible side of the operations and processes development and strategic competitive advantage. It is the easiest way to calculate the estimated savings from the released working time resource. Operational work time savings has achieved by improvement in quality, reduction in errors and a rise in productivity and the liberalization of capital costs.

Winds of change

These days we are talking lot of about trends. The world of procurement outsourcing (PSP- Procurement Service Provider) is one of the recent trends. Organizations has focused on their core competencies and because of that outsourced activities, such as HR, IT and even procurement. In Europe most outsourcing procurement actives has been the warehousing and logistics operations and the to some cases indirect sourcing.

Here in Finland procurements have not been yet fully identified in the role of profitable factor or in a strategic action. The situation can perhaps best be detected by a simple question:

• How many automotive management team of the organization or government have a modern procurement trained management team member?

Would it be time for sourcing take control direction of future?


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