{"id":8388,"date":"2024-08-03T09:34:03","date_gmt":"2024-08-03T09:34:03","guid":{"rendered":"https:\/\/merlinsourcing.com\/?p=8388"},"modified":"2024-10-09T04:30:45","modified_gmt":"2024-10-09T04:30:45","slug":"why-do-you-need-a-direct-material-sourcing-solution","status":"publish","type":"post","link":"https:\/\/merlinsourcing.com\/de\/blog\/why-do-you-need-a-direct-material-sourcing-solution\/","title":{"rendered":"Why do you Need a Direct Material Sourcing Solution?"},"content":{"rendered":"<div data-elementor-type=\"wp-post\" data-elementor-id=\"8388\" class=\"elementor elementor-8388\" data-elementor-settings=\"[]\">\n\t\t\t\t\t\t\t<div class=\"elementor-section-wrap\">\n\t\t\t\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-2dc3e0d1 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"2dc3e0d1\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-widget-wrap elementor-element-populated elementor-element elementor-element-1be07c7c\" data-id=\"1be07c7c\" data-element_type=\"column\">\n\t\t\t\t\t\t\t\t\t\t<div class=\"elementor-element elementor-element-2e92ad7c elementor-widget elementor-widget-text-editor\" data-id=\"2e92ad7c\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t<!-- wp:yoast-seo\/breadcrumbs \/-->\n\n<!-- wp:yoast-seo\/table-of-contents -->\n<div class=\"wp-block-yoast-seo-table-of-contents yoast-table-of-contents\">\n<p>Couple of decades ago, every company was very dependent on floppy disks to store and transfer data. Now, floppy disks are extinct. Kids in school these days aren\u2019t even aware of such a technology. Something, which seemed so vital, was quickly replaced and forgotten. That\u2019s the ultimate threat faced by a legacy technology &#8211; to be replaced. ERP is a legacy technology that is very much vital to the functioning of a business. Moving from legacy technology and adopting an emerging technology can be daunting for companies, but it is very much a necessity. ERP is necessary to manage a company\u2019s business processes like supply chain management or financial management. But is it enough to provide the edge?<\/p>\n<\/div>\n<!-- \/wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>In my previous blog, I had discussed how the supply chain is becoming complex and rapidly evolving with changing consumer needs. ERP systems can handle the breadth\u00a0of\u00a0business\u00a0processes,\u00a0but do they offer depth? In a world where everything is completely customized and catering\u00a0to the customer\u2019s taste, can companies afford not to possess\u00a0products\u00a0that offer deep functional capability\u00a0for their operations? Procurement software would provide the required in-depth functionality to the sourcing process and produce optimal results.\u00a0With\u00a0maturing\u00a0technology, now\u00a0software\u00a0products are\u00a0well-defined to\u00a0fit\u00a0the needs\u00a0each industry. Direct\u00a0procurement organizations\u00a0cannot\u00a0meet their complex strategic procurement needs using just their ERP system,\u00a0which can handle only transactional procurement. They need to\u00a0look for a\u00a0Direct Sourcing\u00a0software that would meet their requirements and make the procurement process much more efficient.\u00a0In this blog, let\u2019s see how a Direct\u00a0Materials Procurement\u00a0Solution can make the direct spend management more efficient and contribute to long-term business value using Strategic Sourcing.\u00a0<\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:heading -->\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_61 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" >Inhaltsverzeichnis<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #000000;color:#000000\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewbox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #000000;color:#000000\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewbox=\"0 0 24 24\" version=\"1.2\" baseprofile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/merlinsourcing.com\/de\/blog\/why-do-you-need-a-direct-material-sourcing-solution\/#The_Outside-in_Strategy\" title=\"The\u00a0Outside-in\u00a0Strategy\u00a0\">The\u00a0Outside-in\u00a0Strategy\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/merlinsourcing.com\/de\/blog\/why-do-you-need-a-direct-material-sourcing-solution\/#What_exactly_is_a_Direct_Sourcing_Solution\" title=\"What\u00a0exactly\u00a0is\u00a0a\u00a0Direct Sourcing\u00a0Solution?\u00a0\">What\u00a0exactly\u00a0is\u00a0a\u00a0Direct Sourcing\u00a0Solution?\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/merlinsourcing.com\/de\/blog\/why-do-you-need-a-direct-material-sourcing-solution\/#Four_Pillars_of_Direct_Sourcing_Solution\" title=\"Four\u00a0Pillars of\u00a0Direct Sourcing\u00a0Solution\u00a0\">Four\u00a0Pillars of\u00a0Direct Sourcing\u00a0Solution\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/merlinsourcing.com\/de\/blog\/why-do-you-need-a-direct-material-sourcing-solution\/#The_Need_For_A_Direct_Procurement_Solution\" title=\"The Need\u00a0For\u00a0A Direct Procurement Solution\">The Need\u00a0For\u00a0A Direct Procurement Solution<\/a><\/li><\/ul><\/nav><\/div>\n<h2 id=\"h-the-outside-in-strategy\"><span class=\"ez-toc-section\" id=\"The_Outside-in_Strategy\"><\/span><strong>The\u00a0Outside-in\u00a0Strategy<\/strong>\u00a0<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<!-- \/wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Amazon\u2019s vision to be &#8216;the earth&#8217;s most customer-centric\u2019 clearly shows the power held by customers. Amazon had taken several steps towards this vision, like item-level\u00a0collaborative filtering that improves their product recommendations. One of their recent moves is to transport goods to the nearest warehouse as soon as the customers had added them to their cart. The shipping time reduces, motivating the customers to buy the product at once. The instant ability of Amazon to track the data and immediately convert it into action makes them a\u00a0master of supply chain management.\u00a0\u00a0<\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Companies are shaping their business model according to the customer\u00a0needs. This outside-in strategy is hard to implement with\u00a0a\u00a0relatively\u00a0rigid technology like\u00a0ERP. Forecasting and predicting trends based on historical data has\u00a0become\u00a0a bottleneck\u00a0in the fast-paced market. Concurrent changes\u00a0have to\u00a0be immediately tracked and responded to. Companies must find alternative and innovative ways to stay agile and efficient. Procurement solutions would allow companies to adapt to the new normal.\u00a0Cloud technology simplifying data handling across the company followed by AI\/ML\u00a0that would allow automation and\u00a0data-driven\u00a0decision making in the procurement process. Procurement software\u00a0products\u00a0have the flexibility and capability to handle the needs of the complex\u00a0sourcing\u00a0supply chains\u00a0of today.\u00a0<\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:heading -->\n<h2 id=\"h-what-exactly-is-a-direct-sourcing-solution\"><span class=\"ez-toc-section\" id=\"What_exactly_is_a_Direct_Sourcing_Solution\"><\/span><strong>What\u00a0exactly\u00a0is\u00a0a\u00a0Direct Sourcing\u00a0Solution?<\/strong>\u00a0<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<!-- \/wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Direct procurement might sound simple,\u00a0as\u00a0it\u00a0is the\u00a0sourcing of\u00a0materials that ultimately flow to customers\u00a0as\u00a0components\u00a0of the end products.\u00a0However,\u00a0it\u00a0is an extremely complex domain\u00a0and\u00a0there is a\u00a0lot at stake\u00a0for the\u00a0organisation\u00a0in terms of the quality,\u00a0cost\u00a0and timeliness of the final product.\u00a0Direct procurement\u00a0helps in\u00a0sustaining\u00a0the inbound supply chain of the organization by managing supplier relationship,\u00a0sourcing\u00a0and\u00a0cost\u00a0optimization. A\u00a0Direct Sourcing\u00a0software\u00a0solution\u00a0should satisfy the traditional procurement objectives such as\u00a0continuity of supply, spend analysis and purchase orders. It must also\u00a0integrate\u00a0forecasting\u00a0for order quantities\u00a0that can account for\u00a0ongoing\u00a0changes in the market. It should possess the technology and information sources that would accommodate the variations in third-party relationships, processes and data integration, and risk associated with the complex market.\u00a0<\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:heading -->\n<h2 id=\"h-four-pillars-of-direct-sourcing-solution\"><span class=\"ez-toc-section\" id=\"Four_Pillars_of_Direct_Sourcing_Solution\"><\/span><strong>Four\u00a0Pillars of\u00a0Direct Sourcing\u00a0Solution<\/strong>\u00a0<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<!-- \/wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Risk is innately present in today\u2019s supply chain. If an organization is facing\u00a0no risk related losses,\u00a0then\u00a0possibly\u00a0they\u00a0must\u00a0have an under-optimized\u00a0and poorly managed\u00a0supply chain\u00a0to even be considered competitive.\u00a0Building and defending a competitive edge in supply chain requires for the company to be constantly optimizing it with the latest technologies available.\u00a0A typical direct\u00a0procurement\u00a0software\u00a0should have transparency, integration,\u00a0collaboration\u00a0and information\u00a0that can generate more value to the company.\u00a0\u00a0<\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p id=\"h-transparency\"><strong>Transparenz:\u00a0<\/strong><\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Companies\u00a0require a sourcing solution that would provide end-to-end insights into\u00a0the processes. State-of-art analytics that offer real-time understanding of the sourcing processes is required. It would assess the information collected from suppliers and companies for the optimization of product lifecycle.\u00a0The\u00a0software\u00a0should be able to track the data collected and\u00a0perform analytics on PPV\u00a0(Purchase Price Variance), BOM\u00a0(Bill of Material)\u00a0and supplier\u00a0information\u00a0to formulate and update their\u00a0strategic sourcing process<\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p id=\"h-collaboration\"><strong>Zusammenarbeit:<\/strong><\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Superior supplier management is\u00a0absolutely necessary\u00a0for\u00a0an\u00a0organization to succeed in optimizing\u00a0Direct Sourcing. The solution should have an interface that would allow the several suppliers to reach the companies with one information effort. It includes compliance\u00a0monitoring of the supplier partners and strong contract management. Companies must have strong relationship with key suppliers throughout the product lifecycle to minimize risk\u00a0and optimize value.\u00a0<\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p id=\"h-integration\"><strong>Integration:<\/strong><\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>In\u00a0Direct Sourcing, there needs to be a tight interaction between the suppliers and the companies. Any change whether in the demand planning or engineering design of the product or quality of supply needs to\u00a0be\u00a0instantaneously communicated\u00a0to\u00a0them. It should also have connectivity to\u00a0other\u00a0\u00a0software\u00a0used by the company including Product Lifecycle Management (PLM), ERP, MRP\u00a0etc.,\u00a0to support other business processes.\u00a0It would help in seamless transference of information between the\u00a0systems, avoiding errors or delays, and\u00a0accelerate time to market.<\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p id=\"h-information\"><strong>Information:<\/strong><\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Adequate information such\u00a0as\u00a0cost breakdown of the raw materials, supplier\u2019s product categories, supply\u00a0quantity, Part Cost Breakdown, Volume Pricing\u00a0and\u00a0PPV\u00a0is of extreme importance\u00a0to a\u00a0Direct Sourcing\u00a0software.\u00a0A solution which can consolidate demand\u00a0across various products across the organization\u00a0enables buyers\u00a0to have better bargaining power and strategize their sourcing process.\u00a0It also includes the most valuable data of the organization which is the direct spend.\u00a0Apart from having the in-depth and wide information collected from suppliers, other systems\u00a0and market,\u00a0a\u00a0Direct Sourcing\u00a0solution\u00a0should also have the facility to accommodate any change in\u00a0the information\u00a0immediately\u00a0in real-time.\u00a0<\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:image {\"id\":8395,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"536\" class=\"wp-image-8395\" src=\"https:\/\/merlinsourcing.com\/wp-content\/uploads\/2021\/03\/Infographic-4-pillars-of-direct-sourcing-1024x536.png\" alt=\"Pillars of Direct sourcing solution \" srcset=\"https:\/\/merlinsourcing.com\/wp-content\/uploads\/2021\/03\/Infographic-4-pillars-of-direct-sourcing-1024x536.png 1024w, https:\/\/merlinsourcing.com\/wp-content\/uploads\/2021\/03\/Infographic-4-pillars-of-direct-sourcing-300x157.png 300w, https:\/\/merlinsourcing.com\/wp-content\/uploads\/2021\/03\/Infographic-4-pillars-of-direct-sourcing-768x402.png 768w, https:\/\/merlinsourcing.com\/wp-content\/uploads\/2021\/03\/Infographic-4-pillars-of-direct-sourcing-16x8.png 16w, https:\/\/merlinsourcing.com\/wp-content\/uploads\/2021\/03\/Infographic-4-pillars-of-direct-sourcing.png 1200w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n<!-- \/wp:image -->\n\n<!-- wp:heading -->\n<h2 id=\"h-the-need-for-a-direct-procurement-solution\"><span class=\"ez-toc-section\" id=\"The_Need_For_A_Direct_Procurement_Solution\"><\/span><strong>The Need\u00a0For\u00a0A Direct Procurement Solution<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<!-- \/wp:heading -->\n\n<!-- wp:paragraph -->\n<p>Supplier\u2019s ability to deliver goods on time with proper compliance, adhering to the stated business processes and expectations, drives the company\u2019s performance in\u00a0Direct Sourcing. When a company\u2019s\u00a0Direct\u00a0Sourcing isn\u2019t efficient, it would create a ripple effect affecting the entire supply chain with increasing amplitude in every next step. Direct\u00a0Sourcing requires a more focused\u00a0approach\u00a0compared to\u00a0in Direct\u00a0Sourcing.\u00a0.\u00a0<a href=\"https:\/\/merlinsourcing.com\/de\/blog\/strategic-sourcing-best-practices-for-medical-equipment-manufacturers\/\" target=\"_blank\" rel=\"noreferrer noopener\">Medical\u00a0device\u00a0manufacturing<\/a>\u00a0companies\u00a0experienced\u00a0a\u00a0huge\u00a0spike in demand due to COVID. Hospitals and medical device companies re-engineered the ventilator&#8217;s design, allowing one ventilator to tend to multiple patients. Even with this innovation, companies struggled to meet the demand. They\u00a0weren\u2019t able to\u00a0integrate the new design in their\u00a0Direct\u00a0Sourcing processes easily. In the Indian Automotive Industry, there was a sudden\u00a0shift\u00a0to adopt\u00a0BS\u00a0VI norms, forcing companies to alter the entire engine design of the vehicles. OEMs struggled to collaborate with the limited suppliers who were producing the required components to satisfy Bharat\u00a0Stage\u00a0VI\u00a0emission\u00a0norms.\u00a0<\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Several disruptive events\u00a0increasing over the years\u00a0have made the supply chain vulnerable.\u00a0These could be non-economic shocks\u00a0such\u00a0as climatic catastrophes or economic shocks such as Brexit that impact on the supply chain cost and\u00a0performance.\u00a0Moreover, companies are in constant process of\u00a0revamping their product design to\u00a0satisfy the changing consumer\u2019s needs.\u00a0In addition to this, companies are facing\u00a0intense competition\u00a0in their respective industries.\u00a0Organizations\u00a0have to\u00a0become more agile and\u00a0make their supply chain resilient\u00a0to survive and be competitive. Companies\u00a0have to\u00a0bring\u00a0this\u00a0change\u00a0from the point of source for the supply chain\u00a0&#8211;\u00a0Procurement.\u00a0A\u00a0Direct Sourcing\u00a0software would secure\u00a0a\u00a0company\u2019s position in the industry and\u00a0give them a competitive edge. It would help in streamlining the business processes\u00a0even in a volatile market\u00a0and\u00a0capture the value in supply chain.\u00a0\u00a0<\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p><a href=\"https:\/\/merlinsourcing.com\/de\/\" target=\"_blank\" rel=\"noreferrer noopener\">MeRLIN<\/a>\u00a0is a\u00a0Strategic\u00a0Sourcing software\u00a0product\u00a0that has unique and excellent\u00a0<a href=\"https:\/\/merlinsourcing.com\/de\/direct-sourcing-merlin-sourcing\/\" target=\"_blank\" rel=\"noreferrer noopener\">Direktbeschaffung<\/a>\u00a0features. PLM interface, Engineering\u00a0Change\u00a0Management, BOM\u00a0Management and Catalog\u00a0Management with advanced analytics\u00a0makes it an ideal\u00a0Direct Sourcing\u00a0software that would transform the procurement process. Its ability to seamlessly integrate with ERPs and\u00a0enhance\u00a0collaboration\u00a0with suppliers\u00a0providing in-depth visibility\u00a0across the sourcing process would satisfy the procurement team\u2019s objectives\u00a0and help\u00a0them keep in pace with\u00a0evolving\u00a0market\u00a0conditions.<\/p>\n<!-- \/wp:paragraph -->\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>","protected":false},"excerpt":{"rendered":"<p>Optimize your procurement process by exploring the fundamental pillars and strategies for an efficient direct sourcing solution.<\/p>","protected":false},"author":12,"featured_media":38768,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[20],"tags":[],"class_list":["post-8388","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-procurement-and-sourcing","entry"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v24.4 (Yoast SEO v21.7) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Why do you Need a Direct Material Sourcing Solution?<\/title>\n<meta name=\"description\" content=\"Direct Materials Procurement Solution can make the direct spend management more efficient and contribute to long-term business value using Strategic Sourcing.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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