7 Ways to Transform Sourcing in the High-Tech Industry

What are the key priorities of business leaders today?

Building resiliency, diversifying the supply base and mitigating supply chain risks while lowering costs at the same time.

Amid the prevailing economic uncertainty, businesses across industries have reassessed their priorities and strategic goals. They have also taken steps to cut down costs and protect thinning margins.

Technology leaders, for instance, have scaled back operations, reduced headcounts and pared down line items to deal with downturns.

But why do most leaders continue to react to an event instead of preparing beforehand?

How can they build agile operations and a larger ecosystem that can anticipate events and act proactively?

At the outset, they need to rethink their sourcing processes.

This is especially true for the high-tech sector where leaders invest heavily in infrastructure, research and development and talent acquisition. This leads to overspending as resources are often underused and overprovisioned.

How to Mitigate Costs and Risks in High-Tech Industry

Up to 94% of respondents in a survey of more than 1000 decision-makers in the high-tech industry said their organizations had notable, avoidable expenses, according to a new GEP bulletin.

Amid flattening top lines, high-tech procurement and supply chain professionals have an opportunity to drive positive change, the bulletin says.

They can improve bottom lines, enhance operational efficiency and build greater resiliency by practicing conscious spending and making diversified buying decisions.

Here are seven ways they can succeed in these endeavors:

1. Undertake Comprehensive Vendor Evaluation:

Vendors can make or break your business. So it is vital to thoroughly evaluate them before selection. Compare different vendors not merely based on pricing models but also scalability, support and maintenance costs, sustainability performance and long-term value. This can ensure that you partner with a like-minded vendor who understands your long-term business objectives.

2. Determine the Total Cost of Ownership:

Instead of merely looking at the upfront costs, leaders need to evaluate the total cost of ownership to make informed decisions for the long term. They should consider the complete life cycle costs of software and services, including implementation, training, integration as well as support and maintenance.

3. Adopt Cloud-Based Solutions:

Transitioning from on-premises systems to cloud-based solutions and software-as-a-service (SaaS) models can provide flexibility and scalability and reduce infrastructure costs. Businesses can also opt for a subscription-based model to align costs with usage.

4. Consider Outsourcing and Nearshoring:

Evaluate the pros and cons of outsourcing professional services, manufacturing and research and development. If you have been sourcing materials from suppliers located on a different continent, consider shortening the supply chain to lower risks as well as lead times.

Many U.S.-based electronics manufacturers, for example, are exploring sourcing options in Mexico and Canada. Not only does the nearshoring strategy lower lead times and supply risks, but it also allows a company to make quick adjustments to changing market conditions and demand patterns.

5. Relook Contracts:

Scrutinize existing contracts with vendors to check if there is any scope for negotiation. Maybe you can leverage your brand value and purchasing power to secure a better deal. Determine the feasibility of getting volume discounts and favorable pricing terms and conditions. Also check if vendors are complying with agreed-upon pricing and contract terms.

6. Consolidate and Rationalize:

Review software and services portfolios regularly to identify redundancies and eliminate underutilized applications. This can also help you streamline operations, reduce licensing fees and simplify vendor management.

7. Explore open-source alternatives:

For certain functionalities, you may consider open-source software and free alternatives. This can help achieve cost savings and customization. It is vital to assess associated risks such as security vulnerabilities and support limitations while making such a choice.

Also Read: How to Solve High-Tech Supply Chain Challenges

In addition to the above strategies, you should engage in continuous monitoring by regularly tracking software and services usage. Leverage analytics and monitoring tools in this process to identify inefficiencies.

Also keep an eye on prevailing market trends, pricing models and competitive offerings. Industry research and benchmarking can help compare different vendors and make suitable adjustments.

To learn more strategies to mitigate costs and risks in the high-tech sector, read the GEP bulletin.