Many organisations work their budget on the fiscal year so savings will be a key area of discussion at the beginning of the year. Whilst negotiation, rationalisation, standardisation and building relationships can all help to reduce costs, there is something that is often overlooked: Early Supplier Involvement Early supplier involvement (ESI) is a great way [Read More] The post The Importance of Early Supplier Involvement appeared first on Oxford College of Procurement and Supply.
Many organisations work their budget on the fiscal year so savings will be a key area of discussion at the beginning of the year. Whilst negotiation, rationalisation, standardisation and building relationships can all help to reduce costs, there is something that is often overlooked:
Early Supplier Involvement
Early supplier involvement (ESI) is a great way to reduce costs of both new and existing specifications that are sourced. ESI is where we, as procurement professionals, engage collaboratively with our chosen strategic supplier to review or develop the specification. The supplier of the product or service will have a good insight into its components, raw materials etc. and is often best placed to guide us on where savings could be achieved. Collaborating with the supplier through ESI allows the buying organisation to understand their sourcing strategies and production timelines. This partnership also uncovers opportunities for economies of scale. ESI is not just taking ideas from the supplier, but also sharing good practice from a procurement perspective. By thoroughly understanding the supplier’s processes, we can help them improve and buy smarter. This also enables supply chain optimisation and ensures strong ESG activity.
There are four main types of Early Supplier Involvement
As the supplier’s responsibility increases, so does our reliance on them, making it crucial to carefully plan the style of ESI. Giving a supplier full control over designing a specification for a monopolised product is risky, as it may hinder the buyer’s ability to switch suppliers in the future.
The main advantages and disadvantages of engaging in Early Supplier Involvement
Main Benefit
One of the main benefits, as per the table above, is that ESI supports decreased product costs for businesses. Sourcing teams offer insights into material costs, supplier capabilities, and potential disruptions. Suppliers contribute by introducing new engineering ideas, innovative solutions, and fresh concepts. This combination often shortens time to market, ensuring new or updated items are available ahead of the competition.
Mitigating Risks
One of the primary benefits of ESI is the ability to identify and mitigate risks early in the product development cycle.
Sourcing teams deeply understand the supplier landscape and identify risks like geopolitical instability, material shortages, and logistical challenges. By collaborating with the suppliers the sourcing team can share that knowledge, allowing engineering teams to design accordingly to raw material availability.
Practical Steps For ESI
- Establish cross-functional teams
- Draw up terms of agreement (who owns the IPR)
- Implement Collaborative Tools
- Foster a culture of collaboration and communication
- Engage suppliers throughout the product development process
- Align objectives, goals and metrics
Managed well, with the right suppliers, Early Supplier Involvement works incredibly well and allows you to see some of the benefits outlined in this blog. However, enter into the process cautiously, having completed your due-diligence and ensure you have the terms of agreement set up to protect all parties.
Are you interested in developing your procurement expertise? Explore our CIPS courses today and gain insights into effective supplier management strategies. Take the next step towards mastering procurement dynamics and elevating your organisation’s supply chain effectiveness. Contact us to learn more and enrol today!
The post The Importance of Early Supplier Involvement appeared first on Oxford College of Procurement and Supply.
