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Using Technology to speed up the Sourcing & New Product Introduction Process

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  1. 1. Using Technology to speed up the Sourcing & New Product Introduction Process<br />Roger Blumberg – Vice President, Business Development<br />rblumberg@mfg.com<br />
  2. 2. Safe Harbor Statement<br />2<br />Our discussion may include predictions, estimates or other information that<br />might be considered forward-looking. While these forward-looking<br />statements represent our current judgment on what the future holds, they<br />are subject to risks and uncertainties that could cause actual results to<br />differ materially. You are cautioned not to place undue reliance on these<br />forward-looking statements, which reflect our opinions only as of the date of<br />this presentation. Please keep in mind that we are not obligating ourselves<br />to revise or publicly release the results of any revision to these forward looking statements in light of new information or future events. Throughout<br />today’s discussion, we will attempt to present some important factors<br />relating to our business that may affect our predictions. You should also<br />review our most recent Form 10-K and Form 10-Q for a more complete<br />discussion of these factors and other risks, particularly under the heading<br />“Risk Factors.”<br />
  3. 3. Release of Harm Statements<br />Statements made today may not reflect the opinion of TAG Manufacturing Society, Georgia Tech, MFG.com as well as the speaker (me).<br />3<br />
  4. 4. MFG.com – The Facts<br /><ul><li>Founded in 2000
  5. 5. Global Company headquarteredin Atlanta, with operations in Shanghai and Paris
  6. 6. Marketplace available in 7 languages, over 50 currencies
  7. 7. Serves over 300 manufacturing categories
  8. 8. Over 200,000 members in 50 countries
  9. 9. Suppliers pay an annual subscription to participate in the quoting and collaborative process with buyers</li></ul>“One of the 15 companies that will change the world”<br />-CNNMoney.com<br />4<br />
  10. 10. Technology has vastly changed how business is conducted <br />5<br />How we Network<br />How we Communicate<br />How we stay connected<br />How we do comparisons<br />How we place orders<br />
  11. 11. Intelligent Matching is an example of technology creating tremendous efficiency gains<br />6<br />Help in finding the right partner: Socially <br />Help in finding the right partner: Professionally <br />If only the dating websites allowed for references and recommendations from previous boyfriends/girlfriends……..<br />
  12. 12. Supplier discovery is a critical component to any sourcing strategy you deploy <br />Sample<br />Approve Category Strategy<br />Executive Approval of Business Case<br />1.<br />4.<br />Analyze CategorySpend<br />5.<br />6.<br />7.<br />ExecuteStrategy<br /><ul><li>Collect and refine data by supplier, BU, pricing, quantity</li></ul>DevelopTransitionand ChangeManagementPlans<br />Monitor /ManageSuppliers<br /><ul><li>Conduct negotiations (RFP, auction, face to face)
  13. 13. Establish criteria and evaluate suppliers
  14. 14. Determine savings, investments, risks
  15. 15. Develop recommendation</li></ul>2.<br />DevelopSourcingStrategy<br />DetermineBusiness Req’s<br /><ul><li>Collect specifications, service level requirements and volume forecasts
  16. 16. Develop process to monitor savings and compliance
  17. 17. Develop plan to transition to new suppliers
  18. 18. Develop implementation plan for demand management opportunities
  19. 19. Develop change management plan</li></ul>3.<br />Assess SupplyMarkets<br /><ul><li>Collect supplier data
  20. 20. Develop supplier list
  21. 21. Supply market economics
  22. 22. Cost drivers
  23. 23. Segmentpurchases
  24. 24. Determine bargaining position
  25. 25. Develop negotiation technique approach</li></li></ul><li>Information on current suppliers is primarily found inside the organization…<br />Individual Rolodex<br />Accounts Payable Files<br />Mailing Lists<br />Purchasing Files <br />Personal Relationships<br />Internal RFI<br />
  26. 26. Current and Past Suppliers<br />Supplier Catalogs<br />Competitors’ Suppliers<br />Search the Internet<br />Supply Markets<br />Supplier Directory<br />Searches for new Suppliers vary greatly based on bandwidth and sourcing competency<br />Complete research is key to a successful strategic sourcing campaign!<br />
  27. 27. Cost Estimator Vs. e-Sourcing<br />Cost Estimator Tool<br />e-Sourcing Tool<br /><ul><li>Real Time Response
  28. 28. Identify parts with greatest cost savings
  29. 29. Examine re-design opportunities to maximize cost savings
  30. 30. Evaluate lower cost manufacturing and sourcing alternatives
  31. 31. Slower but more fact based (committed) pricing
  32. 32. Gives potential suppliers the opportunity to make design recommendation
  33. 33. Gives you an opportunity to see how large of a supply market you have before starting production</li></ul>10<br />Cost Estimator tools reside in Engineering, e-Sourcing tools are in Strategic Sourcing and Supply Markets straddle both organizations<br />
  34. 34. Examples by Category<br />Cost Estimator<br />E-Sourcing<br />11<br />Supply Markets<br />Note: Not an exhaustive list <br />
  35. 35. A Quick Case Study<br />A Medical Device Manufacture was constantly missing their on-time Shipments<br />Goal<br />
  36. 36. Background<br />Predictable Sales Forecast/Demand (+/- 10%)<br />Mature Product Line with updates every 2 to 3 years<br />Currently not meeting the commitment date to customers<br />Results in customer dissatisfaction<br />Results in lack of trust<br />Potentially losing sales<br />Consumes resources – Customer support & others<br />Money<br />Time<br />Reactive culture<br />Lacking internal trust<br />Disruptions in production schedule & flow<br />
  37. 37. List of Potential Causes <br />
  38. 38. Project Key Findings<br /><ul><li>Engineering spent 1/3 of their time doing sourcing related work including supplier meetings & visits
  39. 39. Average Engineer made 2x Salary of Sourcing
  40. 40. Suppliers called on Engineering, not sourcing
  41. 41. Sourcing team was not embedded in the engineering department
  42. 42. Majority of the stock outages due to sole source relationships established by the Engineering department
  43. 43. Engineering did not negotiate with supplier or consider the impact of sole sourcing
  44. 44. Sourcing did not question the supplier assigned to the part and did not look for alternative solutions</li></ul>15<br />
  45. 45. What I have learned in Multiple Sourcing Engagements<br /><ul><li>Most companies still have engineers source for prototypes & first run
  46. 46. Most engineers have little training on sourcing best practices
  47. 47. Many engineers actually like to source?
  48. 48. Companies on e-sourcing tools have contained engineering sourcing
  49. 49. Forward thinking Companies are now embedding both sourcing and e-sourcing in Engineering </li></ul>16<br />
  50. 50. Who is using MFG.com?<br /><ul><li>Engineers
  51. 51. Product Development
  52. 52. Sourcing
  53. 53. Inventors
  54. 54. Students
  55. 55. Companies without an IPO who want to source in low cost countries
  56. 56. Any company looking for a hard to source item</li></ul>17<br />
  57. 57. A Quick MFG.com Case Study<br />18<br /><ul><li>Very large mining and aluminum producer
  58. 58. Significant turnover in the sourcing team
  59. 59. No deep knowledge of this particular category (Charge Bucket)
  60. 60. Last known supplier of the product is no longer in business
  61. 61. Only documentation they have is a drawing of the item
  62. 62. Needed to find a source in under a week
  63. 63. Interested in global sourcing if the transportation costs made sense</li></li></ul><li>They rapidly found suppliers who could handle their requirements <br />19<br />
  64. 64. Detailed supplier profiles reduced their research efforts<br />20<br />
  65. 65. All Certifications were validated within the MFG.com platform<br />21<br />
  66. 66. Supplier references were readily available<br />22<br />
  67. 67. Intellectual property was protected<br />23<br />Electronic Signatures Captured<br />
  68. 68. Quote volume was significant but not over burdensome<br />24<br />
  69. 69. They easily evaluated quotes<br />25<br />
  70. 70. Example of Interesting projects we Assisted with this year<br />26<br />
  71. 71. Conclusion <br /><ul><li>Asking Engineers to Source is very common but is not adding value in the product development process
  72. 72. Consider either embedding Sourcing in Engineering or educating Engineering on Sourcing
  73. 73. Consider Marketplaces and Cost Estimator tools as an alternative to doing nothing or instead of e-sourcing
  74. 74. Keep an eye out for the trend in which supplier marketplaces and e-sourcing convene</li></ul>27<br />