Material sourcing

For any product to be manufactured, raw materials are required. The process of buying raw materials from a supplier is called sourcing.

The cost of raw material is directly proportional to the manufacturing cost of a product. A minor change could impact cost in a big way, thereby drastically affecting the profitability of a company. The quality of raw materials plays an important role in the quality of the finished product.

For SCM, sourcing is important. To arrive at the right decision, analytics is important. For a company which operates in different geographic areas, the situation becomes all the more complex. The same raw materials in different regions may be bought at different rates, and thus cause reduced profits and bring in a certain amount of unpredictability.

The consultant must help the SCM professionals in looking at the past trends and analyzing supplier performance. Understanding the past trends and analyzing the demands can help with better forecasting, and this helps the organization to negotiate better and get the optimum deals from the suppliers.

Analyzing supplier performance helps in sourcing the best raw materials from the right supplier, thus enabling the company to maintain standards. The contract management and payment terms, all can be looked at as parameters in a BI system.