SIG University Certified Sourcing Professional (CSP) program graduate Andy Jacobs shares how important it is to understand spend analysis by assessing your suppliers and stakeholders.
I have been with the Border States for five years and in my current role for just over two. In that time, I have been involved in dozens of sourcing reviews. CSP training with SIG has filled in many gaps in what I thought the process was. But where I think I can make the most immediate impact is in Assessing the Environment.
In the Industry I work in, many of my coworkers, supervisors, and company leaders have been within our Industry for more than 25 years. In that time, they have learned a lot about the Industry, including what our suppliers can make. This problem is that when a sourcing review is started, far too many assumptions about the environment are made. Rather than properly assessing the market, we too frequently assume we understand our supplier’s positions and capabilities. By properly setting the environment, we can ensure we manage each category dynamically and effectively.
Today we are pretty good at current spend analysis; we can break it down by various categories and subcategories, drill down to each of our branches and geographic regions and tie our purchases directly to the sales to our end users. This usually is a great launching point for what we need from any new supplier. It allows us to ensure we can continue to meet current needs, which can lead us through our wish list discussion.
Typically, after discussion internally, we quickly move to which suppliers we should look at. In this step, we overlook critical things like an RFI and usually jump straight to an RFP. While in some cases, this may not be a severe miss, in others, we certainly end up disappointed in our results. Without formal RFI’s, it makes it difficult to understand each vendor process fully. This usually has us relying on internal or anecdotal information rather than having a complete picture of the supplier.
The total cost of ownership evaluation may be the most critical and misunderstood process we complete in a review. Over the last 12 months, we have explored this concept extensively. We considered the total landed cost in some of my earliest sourcing reviews, which we defined as the first cost of the product, plus the freight to get to us, and less any payment discounts or rebates. In our early days of this, we felt we had much success, but this, of course, brought us down the path we are on today, which is a complete total cost of ownership.
In our current process, we work to factor in the first cost, freight/delivery cost, holding/carrying cost, process cost, and discounts/rebates. Because we are a distributor, we are also focused on how well and quickly we can re-sell the products we stock. We also consider how much margin we make between suppliers within the same category. This has undoubtedly required much explaining as no single group sees all of these factors. Our team is very transparent and shares as many details as possible, allowing us to get buy-in from all departments affected by our decisions.
My company has much room for improvement in building the team. We, too frequently, will ask one person to start sourcing review. This often stems from immediate customers or branch needs. Typically, that person has no legal support or team to rely on, which can lead to a lengthy process that yields subpar results. If we can help build a cross-functional team, we can make better and faster decisions.
I am very thankful for my education from SIG and look forward to leading my next Sourcing Review.
The Certified Sourcing Professional (CSP) Program is a 10-week course that focuses on the hard and soft skills of sourcing, including strategic sourcing and outsourcing methodologies, as well as best practices in negotiations.
Andy Jacobs, Category Analyst, Border States Electric
Andy Jacobs is a Category Analyst at Border States Electric. Andy’s core responsibilities are for high voltage wire and cable, steel pipe and fittings, and cable tray and raceway products. Andy is the go-to person for anything related to his categories and frequently finds himself leading and supporting customer proposals, pricing negotiations, sourcing reviews, and category alignment. Andy is a father and husband in Minnesota. In his free time, he enjoys golfing, spending time at the lake, and enjoying Minnesota outdoors.
SIG University Certified Sourcing Professional (CSP) program graduate Andy Jacobs shares how important it is to understand spend analysis by assessing your suppliers and stakeholders.
The Certified Sourcing Professional (CSP) Program is a 10-week course that focuses on the hard and soft skills of sourcing, including strategic sourcing and outsourcing methodologies, as well as best practices in negotiations.
Andy Jacobs is a Category Analyst at Border States Electric. Andy’s core responsibilities are for high voltage wire and cable, steel pipe and fittings, and cable tray and raceway products. Andy is the go-to person for anything related to his categories and frequently finds himself leading and supporting customer proposals, pricing negotiations, sourcing reviews, and category alignment. Andy is a father and husband in Minnesota. In his free time, he enjoys golfing, spending time at the lake, and enjoying Minnesota outdoors.