Winning a motorsports endurance race is the result of careful planning, teamwork, and execution requiring a large upfront investment in time and resources. Developing a localized supply base aboard is similar to preparing for a race in that it takes supply base building steps of planning, qualifying, and establishing that untimely create an international world class supply base that can support a new plant. Well thought out steps for planning a sourcing trip, qualifying potential supply partners onsite, and establishing rapport with supply partners can result in a smooth transition for companies expanding into new growth markets.
Companies that spend the needed time and resources upfront to thoroughly execute supply base building steps of planning, qualifying, and establishing develop lower risk supply bases that position companies for smooth production launches and long term stable supply.
Accelerating globalization is pushing many companies to establish localized manufacturing operations within end customer markets. The desire to mitigate inbound transportation costs, currency exchange risk, and supply disruption risk results in companies developing localized supply bases. International sourcing in dynamic markets such as Brazil, India, and China can be challenging for procurement teams with limited current spend within these countries. Time and resources to identify, qualify, and engage, entirely new supply bases outside a company’s domestic market can be daunting to accomplish. Many Western firms focus too heavily on the technical tactics of supplier qualification via company overviews and plant audits. Desires to quickly develop supply bases to support company expansion must be tampered with well planned and executed sourcing trips to effectively establish a supply base in a new region.
Key Considerations for Establishing a Supply Base Abroad
Supply base building abroad is the application of the supplier management process within procurement leveraged internationally and tailored to cultural and business norms. The planning and establishing steps are tailored for the unique international sourcing requirements in various regions. Planning an international sourcing trip requires complex team collaboration on many tasks which has resulted in many companies finding success leveraging supply management systems (SMS) to project manage these complex initiatives. SMS tools today are allowing supply chain professionals to automate the pre-qualification of suppliers ahead of sourcing trips to free up time to focus on establishing better relationships with potential supply partners. Establishing relationships with potential supply partners is the most important goal of a sourcing trip so it is critical to spend as much time as possible on this step. Below are supply base building steps of planning, qualifying, and establishing for your next sourcing trip which will aid your efforts in developing supply bases abroad.
- Step 1) Planning upfront ensures supply base building goals are attained
Develop a detailed timeline and attain project funding, staffing, and support. Costs vary depending on country and commodity count but accounting for third party services, translators, in country travel, supplier entertainment meals, and gifts ensures through budgeting. Schedule supplier meetings at a central location, if company facilities are unavailable rent office space. Confirm your meetings, agendas, and attendees with each supplier via email one week in advance of trip departure. In our experience, one week of centrally located supplier meetings followed by one week of focused supplier plant audits, with an allotted two days of buffer, optimizes in country time. International supply base development takes dedicated time, ensure leadership allows you the necessary time to properly execute your plan outside day to day responsibilities, if not, partner with a third party service resource to support the project.
- Step 2) Qualifying suppliers thoroughly onsite allows for swift transition to sourcing
Conduct most supplier qualification ahead of the sourcing trip, this step usually takes 2-3 weeks depending on supply base size. Attain information upfront via request for information forms (RFIs) and company overviews 1-2 weeks in advance to pre-qualify suppliers ahead of scheduling in person meetings and auditing plants. Rate suppliers based on RFI responses, it is important to develop a scoring system that will allow you and the home office team to communicate supplier ratings and rankings. New SMS software allows teams to collaborate with abroad team members on critical supplier analysis such as, capabilities, plant audits, and ratings saving valuable time. Outline daily agendas and include backup suppliers which can be inserted into available time slots. Plant audits usually take one day due to travel so it is critical that you plan accordingly to ensure efficient use of in country time.
- Step 3) Establishing rapport with supply partners builds lasting trust
A well planned sourcing trip should focus on establishing relationships with your prospective supply partners. Get to know potential supply partners, every culture is different but allow for time to have lunch or dinner with your hosts to get to know them on a personal level where possible. Introduce supply partner candidates to your extended team, designers, and engineers via video calls to further strengthen growing bonds between companies. Depending on program timing and overall strategy we recommend issuing RFQs and discussing commercial terms, especially price, in later follow-up meetings to focus first on establish rapport. Outline company program timelines, clear supply needs, supply partner expectations, and next steps to exude professionalism. Post trip, promptly follow-up by sending personal emails to each potential supply partner thanking them for their time, and mentioning something specific you discussed.
As with preparing for an endurance race, there are many critical steps a team must execute to effectively and efficiently develop a world class supply base abroad. Planning an international sourcing trip to establish a supply base abroad takes diligent planning and execution to ensure success. New cloud SMS software technologies are condensing the time needed to qualify suppliers pre, during, and post sourcing trip. Establishing relationships with supply partners takes time, however relationship building can start off on the right foot and be expedited with proper focus and effort. Our experience has demonstrated that diligently following supply base building steps of planning, qualifying, and establishing leads to expedited plant launches and improved supplier relationships in the short and long term.