East West Manufacturing Blog

Seeking a Competitive Advantage Through Strategic Sourcing

Written by Patty Rasmussen | December 01, 2016

Have you ever considered how many crises could eliminated simply by bringing the concept of ‘strategic sourcing’ to bear on your manufacturing/production process?

If you’ve never heard the term, strategic sourcing is defined as “a systematic and fact‐based approach for optimizing an organization’s supply base and improving the overall value proposition.” It's basically smart shopping all along the supply chain from design for manufacturing/assembly (DFM/A) to manufacturing to logistics solutions.

Adam Shayevitz is the president of Strategic Sourcing Dynamics. His company specializes in assisting technology companies – from startups to Fortune 500s – with setting up and optimizing supply bases. Adam focuses primarily on accelerating product realization, lowering costs and improving quality through early phase DFM/A. With more than 30 years in the field, Adam writes frequently on these subjects on his LinkedIn page and we’ve asked permission to excerpt from his post, “Five Sourcing Sins Deadly to New Product Development,” paying particular attention to Sin #3,“Fad-shoring AKA Dumb-shoring.”

He writes:

“The cheapest labor does not automatically equal the true lowest cost source. When measured against the Total Cost of Ownership (TCO) standard Low Cost Countries (LCC) may not live up to their reputation. Add up indirect costs such as IP protection, shipping, tariffs, lead times, lack of real time technical support, and you might be surprised at the result. This is the age of JIT [just in time], short product life-cycles and the necessity to respond quickly to customer trends. Tasks made more challenging by cultural, language, time zone, and physical distances. 

'Competitive advantage' is shifting towards regional and local manufacturing, importing components as needed from countries offering a 'comparative advantage.' Effective strategic sourcing will increasingly become an act of globally cherry picking suppliers based on TCO, instead of a limited focus on specific regions. Rapid advances in automation are reducing the impact of labor cost differentials among nations.

We’ve all heard about Insourcing, Outsourcing, Offshoring, Onshoring, Reshoring and Nearshoring. Dogmatic approaches, peanut buttered around in a one size fits all manner, will always lead to Dumb-Shoring.

We couldn't agree more with Adam's take on the sometimes confusing multitude of sourcing/shoring options. We have long insisted that what our founders call 'right-shoring' is the best way to go, and it's a decision best made after a host of key indicators have been checked off the list. But a competent contract manufacturer, one that understands the enitre design and production process can be both an essential advisor in strategic sourcing and a key partner to help you reach your product development goals. 

Interested in learning more? Click on the link below to learn what to look for in that perfect supply chain partner!