Beyond Single-Source: The Benefits of Multi-Sourcing and the Power of SAP
Many organizations are making a strategic shift away from single-source environment for key materials and for good reason. When there is sufficient volume to be shared, multi-sourcing is a strong tool to have in the toolkit because knowing that there are options inherently places us in a better place to negotiate. And the recognition that there is volume on the table provides sources with incentives to strive for excellence. However, multiple sources can also mean multiple headaches due to the complexity of efficiently executing the sourcing strategy that you’ve worked so hard to build.
Just for a moment, let’s ask ourselves: what if we could use the same material number representing the component (or finished good), regardless of source? If that were the case, couldn’t we simplify supply assurance planning by dealing with net totals as well as a consolidated view of consumption history as sourcing shifts and changes? Might it not be easier to provide material to production and move it through material staging and the warehouse by managing one inventory instead of several?
The answer, of course, is “yes we could—and yes it would.” Yet most of us never consider the possibilities because we are unsure of how we can use SAP to take full advantage of its procurement sourcing capabilities, particularly in combination with batch characteristics/batch management and shelf-life.
The great news is that SAP can and does thrive in managing multi-source environments. Unfortunately, when we don’t have the information necessary to successfully deploy these tools, we find ourselves impeded in the ability to scale. It limits what we, as supply chain strategists, can devise to best support our business—and that is not good business!
When organizations aren’t sure how to use the strategic sourcing tools in SAP, a common practice is to manage and track these splits and spends in Excel. Organizations then manually award each proposal for replenishment to whichever supplier is next or they will create blanket orders and manually release with reference. The problem: techniques such as this are incompatible with Material Requirements Planning (MRP) or any subsequent automation and they create more challenges than they solve as soon as we even think about the opportunity to sale.
SAP: Your All-in-One Toolkit for Efficient Multi-Sourcing Execution
It is puzzling, then, why too many of us put in a lot of effort and heavy lifting while allowing SAP to sit idle.The fact is, SAP is at your disposal precisely for that reason—to do the hard work. It is not simply another tool in the toolkit; rather, it is THE toolkit, an entire system equipped to combine internal production with external procurement. Through SAP, it is entirely possible to diversify source portfolios, reduce lead times, and control costs.
Especially important, SAP can arm us for negotiation or performance conversations. Also, it is capable of developing price conditions consistent with our new matrix pricing schedule—including pricing and rebates—incorporating the right value condition automatically. Once we put the right rules in place, SAP becomes a game changer for being able to efficiently to execute our sourcing strategy—creating scalability, agility and empowerment.
As seamless supply chain execution becomes more and more of a strategic imperative, our understanding of the strategic sourcing tools in SAP should never limit the way that we approach our supply base. The rewards are many: reduced master data maintenance and manual requirements management as sources change, procurement proposals based on fair share rules, strong visibility by batch and remaining shelf life via SAP standard reports and transactions, realistic scheduling and FLOW.
Once we master the SAP tools, we can spend our time maximizing our spend rather than trying to figure out how to manage it. That’s a good thing up and down the supply chain, and ultimately, for our suppliers and our customers. Learn more about Multi-Source Management by downloading our white paper, "A Winning Strategy Game Managing Strategic Source Diversification with SAP".
