Automotive and aviation

Direct spend and strategic sourcing

---

Direct purchases in the industry is crucial, and they must be carefully managed, from product design and throughout series life. Several specificities come up regularly in direct industrial purchasing management projects:

Supply chain organization

A production line generally uses many products purchased from third-party companies or from other companies in the group. Semi-finished products can even be multi-sourced from external or intragroup suppliers.

The supply choices, as well as the monitoring of purchasing prices and operating margins require a precise study of the value chain of each product family.

Tier 2 and LOA negotiations

Tier 2 negotiations generally appear as soon as an industry calls on subcontracting to assemble semi-finished products using standard components that are available on the market. A first level of negotiation takes place with direct suppliers, who take care of the upper part of the assembly, while another negotiation involves components suppliers who will suppy the assemblers (which involves agreements called Letters of Authorization, or LOA).

The most common case is that of electronics, which can be found in many industries (in telecommunications of course, but also in the automotive industry, household appliances, etc.): large manufacturers negotiate electronic components en masse for all the subcontractors who assemble the electronic modules.

Managing these complex negotiation processes requires a powerful tool capable of combining a great deal of information in real time to cross and analyze the offers of rank 1 and 2 suppliers.

Innovation management

Staying competitive in a constantly evolving ecosystem requires innovation, and innovation is not only found in your R&D centers ... Purchasing indeed plays a dual role in industrial innovation:

• They leverage the suppliers' own innovations
• They constantly assess new suppliers (who for certain categories appear every day!), sometimes suggested by other partner actors (customers or suppliers).

This innovation management requires close collaboration with suppliers and with internal R&D units. Innovation and responsiveness requires sometimes that new components be assessed while a request for quote is already running.

Management of price conditions in ERP

Negotiating excellent conditions is good, applying them is better! Many industries have realized that the application of the negotiated conditions by their production chains sometimes intervened several weeks behind the date agreed with the suppliers: in the best case, time is wasted in making up invoicing with the supplier, in the worst case it is a lot of money lost. Setting up an automatic interface between sourcing tools and the ERPs, as we did at Sagemcom with SAP, guarantees that the conditions are applied by the MRP module on the agreed date, and without risk of error. The implementation of such an application pays for itself in a few months!

MRO supply management

Bringing together the needs generated by the MRO in an e-procurement tool helps accelerating decision-making, guaranteeing better application of cataloged conditions, and even occasionally launching micro negotiations to obtain the best prices.