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Webinar Notes: 2014 Trends and Predictions for Direct Materials Sourcing

Webinar Notes: 2014 Trends and Predictions for Direct Materials Sourcing

This week’s webinar notes are from a December 11th event on direct materials sourcing presented by Directworks. The event replay and slides are available on demand here.

In the event, the Directworks team presented a list of 14 trends and predictions for the coming year as well as an overview (the 15th trend) of the economic conditions that manufacturers will be operating in. I started to notice a common theme that connected many of the trends – one that will certainly affect the teams responsible for direct materials sourcing – and that is the reliance on the internal capabilities of the company to maximize performance.

The most direct evidence on this point was the fact that companies have been advised not to expect the 5-6% post recessionary ‘bump’ in growth that has been seen in the past. Growth is expected to be slow and steady at 2-3% through the end of 2016, not ideal conditions for manufacturing. This does not, however, relieve companies of investor expectations for performance. It simply means that companies will have to outperform the market by protecting their bottom line rather than seeing externally driven growth in the top line. Because quality can not be allowed to lapse, the emphasis is likely to be on internal efficiencies rather than cost cutting.

Other examples of the need to ‘look within’ for competitive advantage in the new year include:

Improved internal collaboration – Talk of breaking down functional silos is not new, but talk is not enough. Performance metrics need to be aligned across the entire organization so that no function is inadvertently motivated to succeed at the expense of another, or of performance overall. Better management of inventory – including the minimization or elimination of ‘safety stock’ – will be critical and will require synchronized planning efforts from sourcing, logistics, engineering and manufacturing/operations.

Analytics – Big data is taking over the business world, but only the ability to makes sense of all that data can create a competitive advantage. While analytics has been the domain of a few in the past, getting the right information directly to the right user will allow for more contextual analysis, especially if average users are able to access data themselves. The need for increased access to data throughout the organization will be driven by greater scrutiny on the logic and data behind all fact-based decisions.

Increased 3D printing capacity – While this technology has been ramping up for some time, it has not been as scalable as required to change business decisions. As capacity increases, ‘print’ is added to the old make or buy decision. While 3D printed parts are still priced using a component cost structure, the labor component is minimal. This allows companies to consider bringing the production of certain parts back in house, ultimately leading to the point where they can carry almost no inventory, running only what is needed for each day’s production.

Not all of the expected trends were focused on a company’s internal capabilities. No list would be complete without consideration of supplier collaboration, technology, and changing regulatory requirements. The combination of trends that do emphasize internal solutions are empowering, as they are focused on the strategic potential of the teams that own the work. Which brings me to my favorite prediction: a greater emphasis on simplicity.

As the external conditions companies face become increasingly complex, teams with a well-laid plan or vision for the future will establish direction through simplification. Programs need to meet the demands and expectations of stakeholders, ultimately being rolled out through useable solutions that have the right functionality without trying to have ALL functionality. The shortest path to success is through standardization and adoption: increasing both in unison to meet the challenges that lay ahead.

Do you have your own 2014 predictions to share? Join the discussion by commenting here or Twitter: @BuyersMeetPoint.


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