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Sourcing: Collaborative Success

By: C. Richard Panico
Posted: December 5, 2006, from the December 2006 issue of GCI Magazine.

There are few business decisions faced by manufacturers that are as complex as the sourcing of finished products. These decisions typically affect all areas of the business, and can have a direct impact on the customer. Sensitivity to customer perceptions and developing a true understanding of the impact of the sourcing decision throughout the organization are critical considerations. Careful assembly and utilization of a multifunctional team is the only way to ensure appropriate incorporation of these considerations into the sourcing decisions, planning, implementation and ultimate measurement of success.

Making the Sourcing Decision

Organizations typically miss the boat by limiting the sourcing decisions to one or two of the key stakeholders, such as relegating the decision to the procurement department. While this approach may satisfactorily achieve a local objective or two, often the big picture is missed. Functions such as sales, marketing, procurement, finance and manufacturing must be included.

Manufacturing representation is especially important—most sourcing decisions aim to resolve issues inherent to the production process. Through inclusion of manufacturing in the decision-making process, the true benefits, costs and feasibility of sourcing can be completely rationalized and ultimately understood by all.

Developing a complete cost, benefit and feasibility review of sourcing alternatives in this manner facilitates a sound sourcing decision. At this point, buy-in and mutual agreement are at hand, the team has achieved step one and things look great … on paper, that is.

Planning and Execution

Effective planning allows translation of what has been previously analyzed and documented into a tangible, action-oriented guide to success. Good plans are developed through collaborative, upfront analysis and detailed programming of each aspect by using a technique called Work Breakdown Structure (WBS). WBS is an exhaustive, logically arranged depiction of all activities required to complete an initiative. For a sourcing project, these activities must include all aspects of the project—from sourcing selection through inventory planning, technology transfer and qualification to full-scale production. Here again, cross-functional representation in developing the WBS is critical from two perspectives: first, to ensure that the WBS is complete, and second, to ensure understanding and ownership of each task by those who will be accountable for implementation. Once the activities have been identified, they can be put into a comprehensive integrated project plan forming the baseline for implementation.