"Achieving Excellence in Global Sourcing"

Robert Trent and Robert Monczka

MIT Sloan Management Review

Fall 2005, pp. 24-32

The authors conducted site visits to 15 leading companies, and they surveyed 162 other primarily large North American-based multinationals. A set of seven different areas of best practice were identified:

• Executive Commitment to Global Sourcing
  • Cross-functional leaders participate on a global sourcing steering committee or council
  • A designated executive has the authority to translate a global vision into reality
  • Executive leaders work to gain support for global agreements and processes from cross-functional groups and buying locations
  • Global sourcing leaders make strategy presentations to the executive committee and to the board of directors
  • Executive leaders recruit qualified participants to join global sourcing project teams
• Rigorous and Well-defined Processes
  • A well-defined process is in place that requires participants to establish goals, meet milestones, and report progress to executives
  • An executive leader or steering committee, with input from participants, reviews and proposes process improvements
  • "'Lessons learned' sessions are conducted at the conclusion of each project, and findings are distributed to worldwide participants
  • Global agreements are continuously monitored, reviewed and reestablished as required
• Availability of Needed Resources
  • Executives make critical resources, such as budgets and qualified participants, available to support global initiatives
  • The process involves individuals who have the ability to take a global sourcing perspective rather than a local or regional perspective
  • Relevant information is accessible to project teams and participants
• Integration Through Information Technology
  • Data warehouses provide access to required data and information on a real-time basis
  • A companywide intranet provides access to global sourcing support documents, guidelines, templates, and progress updates
  • Contract repositories store global agreements and provide warning of expiring agreements
• Supportive Organizational Design
  • A formal executive steering committee or council oversees the global sourcing process, including the identification of global sourcing opportunities
  • Cross-functional project teams are responsible for the detailed analysis of global opportunities and the development of sourcing agreements
  • Organizational design includes the separation of strategic activities, such as global sourcing, and operational activities, such as the routine reordering of material
  • International purchasing offices support global sourcing requirements
  • Sourcing support personnel are located near technical and marketing personnel during new product development projects and are linked organizationally to the appropriate global sourcing team
• Structured Approaches to Communication
  • Project teams meet regularly, either face-to-face or electronically, to coordinate efforts
  • Strategy review and coordination sessions ensure understanding of global initiatives and buy-in for them
  • Project teams regularly report progress to executive leaders
  • Advanced communication and coordination tools are available, including videoconferencing and Web-based collaboration tools
  • Project information and updates are posted on a company intranet
• Methodologies for Measuring Savings
  • Finance representatives agree on methods of validating savings from global initiatives
  • Global sourcing participants meet regularly with executive leaders to review savings from existing agreements and expected savings from in-process activities
  • Measurement systems support the calculation of companywide savings from global agreements, the impact on corporate financial measures, the ROI for individual projects, and the impact on buying location performance indicators

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