Factory Sourcing Program Overview
Factory Sourcing and management is one of the most critical aspects of any contract manufacturing program. It is the lifeline of any product business. In this age of global supply chains, you have access to unprecedented opportunities; however, the path is teeming with pitfalls. It’s extremely difficult to find the ideal factory that you can trust to make your product at the price, quality, and scale you need and to make it sustainably.
As organizations encounter growing pressure to manage costs, improve quality, and hold to predictable delivery schedules, there are many black holes that you can put lots of time and energy into with little or no result. Our strategic factory sourcing and management process is ongoing and intended to discover, prioritize, improve, and constantly re-evaluate all of our suppliers’ activities for increased operational excellence.
Core Factory Network
At Source, we do the heavy lifting, and you reap the benefits. Sourcing is in our name and part of our culture. But we do it differently. When looking for new factory sources, most supply professionals start with the product and seek out suppliers who are making the same product as they want to make. We do the exact opposite. We seek out compatible manufacturing capabilities but from factories making different products. This allows us to identify qualified factories with the ability to make the product efficiently but who are not interested in competing with our customers in the same product lines. This factory sourcing strategy has proven exceptionally successful for us, and we have built a vast network of hundreds of low-cost, highly qualified, dedicated factories, many of which do not even have their own marketing departments or speak English or other foreign languages.
We call this network our Core Factory Network. When we receive a new product sourcing request for an item, we first look to our Core Factory Network and reward these long-time partners with whom we have created long-term, stable relationships. If, however, we don’t have a specific capability that a customer needs in our Core Factory Network, we use the same process to identify new factories to use. Most factories come to us by referrals and are not ones that others can find easily online or at trade shows.
We Create Partnerships for Your Success
Transparency and control are critical in your offshore supply management programs. With Source International operating as your supply management partner, you have complete transparency of the process, along with all of the benefits of having a dedicated staff to look out for your interests. You’ll get the access you need without the headaches of travel, time zone differences, and language barriers. We are your boots-on-the-ground, a team of qualified and trained bilingual staff to act in your interests and your interests only. In addition, the Source International SIS web portal offers you 24/7, real-time access to quotes, orders, quality, logistics, and all other details of your global product manufacturing operations from anywhere in the world.
Factory Audits – Qualifying and Ongoing
To ensure that we are always working with audited and compliant factory partners, we established a Factory Audit Program, which consists of the following types of audits:
- Quality Management System Audit (QMS): To assess the strength and consistency of the QMS.
- Social Compliance Audits (SCA): To assess the extent of social compliance programs, both governmental and voluntary.
- Security Audits (CTPAT): To assess a facility’s level of security.
- Environmental Audits: To assess compliance with environmental protection laws, mandates, and voluntary standards.
- Other Audits: As mandated by our customers and by their customers for brand protection and compliance.
We follow a thorough process of qualifying our new factory resources with on-site audits, remote audits, and documentation certification. Our language skills and knowledge of local business customs and norms guide our efforts. We audit ethical concerns, working conditions, and environmental compliance standards for improved transparency and sustainability.
Factory Score Cards
Another important management technique is our Factory Score Cards, which benchmark and measure factory performance against a set of pre-determined Key Performance Indicators (KPIs), such as on-time shipping, price stability, quality defects, returns, and others. We work with our customers to establish specific KPIs that are most important to them based on “SMART” principles. This provides measurable supplier performance metrics data that can lead to better supply management decisions, and we advocate awarding new orders based on performance.
Benchmarking Manufacturing Cost Drivers
One important element of our strategic sourcing program is our benchmarking program that tracks the variables that drive the cost of manufacturing in the local area. Source International does extensive research and publishes a quarterly Asia Manufacturing Cost Drive Report, which tracks the cost trends in manufacturing. These include such variables as:
- Raw Material Base Cost
- Cost of Labor
- Machine Time Costs
- Overhead Costs
- Exchange Rate
- Transportation Costs
- Key Indexes
- Any Other variable That Drives Cost
We always use a “Zero-Based” costing system to build all costs up from a zero base. With the availability of information through the internet and the many Asia sourcing platforms, many Asia factories will use a “market-based” costing program whereby they are familiar with the costs that are commonly used and price their products accordingly to maximize their revenues, often without regard to their actual costs through their open direct marketing departments. By contrast, we use a zero-based cost system, whereby costs are built up by adding material costs, labor costs, overhead costs, current exchange rate and other factors of manufacturing to ensure the factory cost is both reasonable and sustainable and not “market-based.”
By benchmarking factory quotation breakdowns by the date that they are issued and using our benchmarking cost driver trends when there is a request for a price increase or an opportunity for a price reduction, we have the data to support a rational supply management decision for both our customers and the factories. There is no more guessing or smoke and mirrors. We use facts and the old adjudge, “Trust but verify”!
Why Use Source for Your Factory Sourcing?
Our Factory Sourcing and Manufacturing programs deliver a fully transparent supply chain network of fully vetted and approved suppliers. And, in our cloud-based online portal you will be able to monitor the progress of your project and important documents from anywhere in the world, in real-time, 24/7.
We help organizations leverage their supply chain efforts to enhance their operational excellence and effectively process an ever-increasing data stream.
By building long-term relationships with world-class accredited and certified factories, we can offer you a wide range of manufacturing capabilities in our factory sourcing program and source virtually anything under one umbrella. Our management programs follow industry best practices to achieve our sourcing objectives using an information-based methodology for understanding the best overall strategic suppliers across a wide range of industries. And we monitor the progress and quality of your project on-site as necessary. This helps our customers improve sustainability, withstand competition, and ultimately improve their bottom-line results significantly to extend the most competitive pricing to their clients. The objective is to look beyond delivery time and daily price challenges with a complex process of strategic sourcing and business collaboration that helps you understand and control your supply chain more fully.