In continuation to the previous articles on electronic component
sourcing guide, EE Herald is publishing this last article
of the series. The previous articles can be viewed at www.eeherald.com/section/sourcing-database/.
This below writing is about the sourcing team and its responsibilities
and priorities.
The parts lists for all the products are not received by
the procurement team at the same time as well they contain
wide range of components that needs different levels of
qualifications and lead times. So, the challenge exists
to create an efficient, well-built and cost-effective synergy
to satisfy the internal customers by suitably partnering
with the external suppliers so that product is developed
without hiccups and released as per the planned schedule.-
The success of the company, as said in the introductory
module, largely depends upon the success of the individual
functions or teams within the organisation such as product
development and design, sourcing and procurement, manufacturing
and supply chain, marketing and sales, etc. The product
development and design teams aim at designing a product
with rich features to enable competitive edge while the
marketing and sales promotes and makes the product reach
the end customers. Similarly, the sourcing team plays an
important role in selecting the proper suppliers, making
the components or raw materials available in time, always
hunting for cost-benefits and many more. So, in this module,
we shall go through few important aspects of the sourcing
team in addition to their importance in the growth of the
organisation.
More often, one may come across the situations as given
below.
1. Few samples in a lot of components procured failed in
the initial tests and imagine the situation if there isn't
a warranty or "return of goods" agreement signed
with the supplier.
2. You come to know that the supplier with whom you did
business in the recent past is involved in supplying counterfeits.
What actions would you take to protect your business?
3. What channels would you follow to procure hard-to-find
(critical) components? How do you plan your budget for such
situations?
4. The cheque was paid in the name of an individual who
represented the supplier and for your surprise the same
individual was no longer working with that supplier. How
would you respond now?
5. The supplier with whom you do business employs child
labour. How to handle, monitor, and follow the rules of
the land and the company?
6. In one or the other circumstances, one would have felt
that it would have been profitable and smoother if a different
supplier was considered than the present one due to one
or the other reasons and bottlenecks the supplier had created.
How many efforts were placed to evaluate and chose the most
convenient and preferable supplier to do the business with?
In all of these above examples, it is noticed that the primary
factor influencing the failure of the process or the product
is due to the lack or deficiency of the "Sourcing"
function. Hence, the sourcing cum procurement team is primarily
responsible for obtaining the physical components and other
raw materials required by the design and manufacturing teams
from the right supplier considering the quality, cost and
time parameters as well as they take care of other parameters
related with the suppliers such as EHS, regulations, agreements,
payment terms, etc.,
One may assume that the sourcing team has a very limited
role and confined to procuring task alone. But, the fact
is that they are responsible for a wide variety of important
tasks. The sourcing team is the resource (materials, components,
services) provider and hence their job is critical because
their expertise can control the cost of the raw materials.
One wrong step here can shoot up the overall product development
cost.
Important responsibilities and activities of the sourcing
team are given below in no specific order.
1. Supplier selection, evaluation and strategic partnership:
Plays a vital role in the selection of suppliers by considering
various factors such as quality, affordability, brand, competitive
pricings, superior technology offerings, accessibility,
EHS (Environment, Health and Safety), conformity to regulations,
non-disclosure agreements, lead-times, service, customer-support,
and many more. Sourcing team bridges the external suppliers
or providers with the organisation. In addition, they identify,
evaluate and approve the multiple suppliers to form the
preferred and approved suppliers list. Periodic audits are
also conducted as part of the strategic partnership to ensure
mutual growth. Any non-conformances in terms of hazards,
deficiencies, poor quality, delivery delays, violating regulations
and agreements, etc., are handled by the sourcing team with
the help of other supportive functions. A strong and healthy
supplier relationship eliminates redundant and waste efforts
thereby promote cost-controlled superior product development.
2. Procurement of raw materials and components: Most of
the requirements posed by all the departments inside the
organisation are procured by the sourcing team with the
help of related departments. The main objective of the sourcing
team is to purchase the exact raw materials or components
as per the given requirements within the given timeframe.
Requesting the quotations, creating the purchase orders,
participation in the bidding process, entering in to the
contracts, etc., are all the responsibilities of the sourcing
team. Quality, lead-time and cost are the major factors
that are stressed much while sourcing the materials and
components. One should not ignore the facts that customer
service, shipments, finance terms and conditions, and warranty
liabilities are also taken care as part of the assignment.
The sourcing expertise helps the organisation in reducing
the overall procurement costs enormously.
3. Sourcing parts database maintenance, document and inventory
control: Naturally, the team who purchases the components
and materials have better control on the latest parts list
or the parts database. The sourcing database mostly contains
the part numbers, manufacturer details and their contacts,
pricings, purchase orders and their transactional details,
sourcing personnel's details, currency and mode of payments,
alternate suppliers list for each component, periodic stock
details, annual usage and demand, etc., In addition, the
team also supports the supply chain by following the company's
document control procedures. The ERP, if available, is updated
for every transaction made in the inventory.
4. Testing, inspection and screening of purchased items:
The purchased components are verified for their quality
and defects. Sourcing team, as per the prior agreements,
is responsible to return the defects or poor quality items
and make the supplier liable. In many scenarios (critical,
custom or high cost components), the sourcing team receives
the samples from the suppliers for thorough testing and
then receives the components in bulk. Hence, the sourcing
team coordinates with the design teams in performing the
testing activities. Testing and inspection are conducted
to meet the Purchase Order requirements and can vary from
verifying few samples to the entire lot. Agency critical
components which require additional tests and screenings
are thoroughly verified. One should remember that testing
and inspection prepares the components for assembly or installation
after gaining enough confidence on the procured components.
5. Cost control and plan expenditures: The sourcing team
in successful organisations control the procurement costs
by minimizing wasteful expenditures and have systematic-well
developed procedures in place. Formal approvals are insisted
for every Rupee spent in the organisation so as to control
the product development cost. Also, the sourcing team avoids
unwanted or untimely investment of raw materials or components.
The team works closely with the finance and product development
teams as well as provide them important metrics for planning
annual budgets. A Rupee saved is equal to a Rupee earned….!
6. Other priorities:
a. Mitigate risks posed by obsolete components by proactively
monitoring the life cycle status of the components in the
active bill-of-materials (BoMs).
b. Major threat is caused due to the counterfeit components
presence in the inventory. Always procure components from
reliable sources and have well-written agreements with suppliers
in place to protect the business and reputation.
c. Logistics maintenance and inventory storages are planned
strategically based on the factory / plant location as well
as the region from where most of the critical and bulk raw
materials are supplied from. This is meet economical expenditures
on logistics as well as to ensure timely availability of
the materials for production.
d. Prepare suitable plans for proper disposal of unused
components thereby only active inventory is maintained.
Author:
S Jaya Kumar, Consultant, Component Supply Chain Management
Conatct
him at:
Below are other sourcing guide articles:
Part1:Smart
component sourcing is about green, clean, rugged, and the
$:The basics of
modern component buying methodologies are explained in these
series of articles.
Part2:
Counterfeit components: Methods to protect against fake
parts: Save reputation,
severe loss of time and money by not buying fake parts
Part3:
Green Component Sourcing through environment conscious part
selection:: Selecting
electronic components causing no/least harmful to environment
Part4:
Electronics component supplier and device selection guide:
Evaluation and selection of semiconductor IC chips and other
parts and their suppliers
Part
5: The principles and process of electronic component selection:
Component Selection; "an art" for SMART and cost-effective
designs
