Strategic Sourcing Services in India

The majority of the procurement teams in India use their contacts, business directories, or the replies received from B2B platforms in the search for potential suppliers, which, in effect, ignores the existence of new suppliers, regional specialists, and more technically advanced companies, which are not part of the procurement team's contact list. In this case, IMARC Engineering carries out its own supplier market mapping from the first-hand data collected by our teams through primary research conducted throughout the manufacturing centers of India, thus finding all the potential suppliers in a particular category, after which a screening based on technical, quality, and commercial parameters is carried out.

Sourcing decisions based solely on the unit cost almost always result in decisions that have a higher overall cost compared to options with higher unit costs since the costs related to quality failures, logistical costs, costs incurred from changing suppliers, costs of non-compliance with regulatory requirements, and inventory holding costs from unreliable suppliers cannot be incorporated into such unit cost comparisons. The total cost of ownership approach that IMARC Engineering uses in evaluating sourcing includes quantifying the various costs related to quality issues, logistics/lead times, risks of non-compliance, and risks involved in supply chain disruptions in addition to the unit costs, which provide a comprehensive commercial basis for sourcing decisions.

Procurement negotiations devoid of market intelligence are inherently at a disadvantage, lacking reliable benchmarks for competitive pricing, an understanding of the supplier's cost structures, and knowledge of other possible sources of supply, procurement managers will not be able to leverage their negotiating power or assess the true competitiveness of the supplier's pricing. IMARC Engineering offers its clients assistance with commercial negotiations, backed up by independent market price benchmarking, supplier cost structure assessments, and data on the concentration of the supply market. IMARC Engineering is actively involved in the negotiation process for major supply categories, establishing the terms of the transaction, such as the pricing formula, volumes, payment schedule, quality penalties, and renewal options.

In production linked incentives for various industries such as pharmaceuticals, food processing, specialty chemicals, and others, a minimum requirement of domestic value addition exists which directly impacts sourcing strategy, and those manufacturers who do not achieve the domestic localization benchmark will lose out on PLI incentive payments which may constitute a major portion of the cost of their products. IMARC Engineering implements PLI compliant sourcing strategies by identifying Indian suppliers of inputs currently sourced from overseas countries, evaluating the domestic alternatives based on technical feasibility relative to imported products, and ensuring that the switching process from foreign to domestic sources does not adversely affect the quality of their products.

GST input credit entitlement, GST registration of the supplier, HSN coding synchronization between documentation on the part of the buyer and supplier, and whether the GST law treats inter-state or intra-state supplies can influence the real landed cost of raw materials procured in ways not considered by earlier procurement systems prior to the advent of GST. IMARC Engineering considers the ramifications of GST when it comes to sourcing decisions by confirming the registration of the supplier and his/her compliance, ensuring that HSN codes have been synchronized so that input credits are claimed, assessing the GST difference in costs from various geographic sources of supply, and arranging the contract of supply to gain advantage from the GST rules.

Finding a competent supplier and negotiating commercial terms is the first step in establishing an effective supply relationship; however, the supply contract, which defines the quality, delivery, pricing, intellectual property, and termination terms, will determine whether the supply relationship will produce value during its lifecycle. IMARC Engineering can assist with supply contract development in regard to quality terms, service level agreement, price escalation clause with input costs, minimum order quantity and volume commitments, intellectual property rights, and supply continuity clauses in case of relationship termination. Supplier relationship management involves monitoring supplier performance according to the supply contract terms and addressing commercial and quality matters until resolution.