The wide array of myths surrounding strategic sourcing can be a bit mystifying at times, especially since many of them seem to be clearly outdated. While having the best strategic sourcing software is obviously helpful and a good step in the right direction, eliminating common myths is perhaps more beneficial. Even with the best possible tools at your disposable, it’s essential that you leverage them effectively. Eliminating any confusion caused by industry myths is a great place to begin establishing a better and smarter supply chain. Every supply chain manager should erase these myths from their way of thinking, so that they can be more effective and productive.

1. Contract Manufacturers

It seems pretty easy to simply allow your contract manufacturers to take over strategic sourcing management. The most common argument is that they already have an established expertise is global sourcing. Why not let them take the reigns? Unfortunately, this is an easy mistake to make.

Handing control to your contract manufacturer means you lose your independence. Additionally, you eliminate your control, and destroy any transparency. You’ll also be hampering your cost savings and losing the opportunity to build relationships. There’s a lot you could learn from working directly with supply partners. A contract manufacturer’s first duty is to optimize the supply chain for their own benefit. At best, you’ll always come in second place. That simply isn’t good enough.

2. E-Auctions

Many people think starting bidding wars online is a good way to lower cost and optimize supplier selection. This isn’t true, but it is a good way to sour relationships with your suppliers. A bidding war inevitably eats into a supplier’s profit margin. Around 70% or more of costs are already designed into a part. Instead, consider the total cost of ownership and focus on cost reduction in your supply chain strategy. A more effective way to lower cost and bolster quality is to partner with the supplier during the early stages of design.

3. Dual Sourcing

Many people think everything needs to be dual sourced. All too often volume production discounts and economies of scale are sacrificed thanks toa focus on dual sourcing. The number of sources can’t be determined arbitrarily. It has to be analyzed and determined on a case-by-case basis. Whether you dual source or consolidate cannot be based solely on a strict policy. View it through a strategic lens. You should never be operating on autopilot.

4. Cost Reductions

Attempting to negotiate annual cost reductions in advance is a good way to ensure that a competitive price isn’t offered initially. Instead, cost reductions will likely be built into the current price. If a supplier does develop ways to save on costs, they’re likely to avoid sharing any associated savings. Unfortunately, bonuses are typically built into cost reductions, which is common for sourcing managers. You’ll be in a much better position if you discover early on that the cost could have been $6 from the very beginning instead of negotiating your way down to $6 from $12.

5. One-Sided Supply Agreements

Common wisdom is that every supply agreement should be as one-sided as possible and favor your company at the expense of the supplier. This is a great way to harm your relationships before they can be developed, but it won’t necessarily grant you the best contracts. It’s not worth the legal fees or the ill will that will surely be earned along the way. For product sourcing software, contact CBX Software at 1-858-264-1133.