Purchasing Strategy

Industries and companies where the Purchasing function is a core competency have for the most part internalised all of the tools, techniques, policies, procedures and practices necessary for being best-in-breed.

However, as the global supplier landscape evolves, they nevertheless occasionally need to address such issues as:

• At what level of aggregation should I source my componentry? Should I buy individual components and assemble them myself? If so where? Or, should I winnow down my supplier base and confide my purchasing to a series of “systems integrators” who themselves buy components, assemble and test them?
• What is the logical location for my outsourced services provision (IT, functional outsourcer) - from the viewpoint of infrastructure, quality of workforce, and cultural fit?
• Should I provide specifications to my suppliers as outputs, e.g. overall dimensions, power delivered, reliability (MTBF), power efficiency, power consumption? Or, should I specify inputs (component dimensions and materials, drawings, etc.)? What is the factor which determines which route I should follow?
• What incentive mechanisms should I put into place such that my outsourced services provider is optimally incentivated? Target price plus bonus/malus? Gain/share? Fixed time with “RPI-X” indexation?
• How often should I re-tender a given category or commodity? What determines the frequency?
• Should I have a predisposition towards an “offshoring” sourcing strategy in India or China? Or, are there equally attractive “nearshoring” opportunities in, for example, Mexico, Romania or Morocco? 

In these instances, Triton Associates acts more in a traditional “consulting” role, gathering data, modelling costs and presenting conclusions. However, in parallel we often like to “pressure-test” hypothetical strategies by tendering them to a panel of vendors – this provides much useful data (such as unit labor costs and productivity) which is otherwise difficult or impossible to obtain, and much fresher and more accurate than traditional published sources, such as benchmarks.