Procurement Challenges in Hardware Manufacturing: Solutions and Strategies

Apr 9, 2023 | Procurement in manufacturing industries

Stawan photo


Apr 9, 20234 mins

The hardware manufacturing industry grapples with challenges such as complex supply chains, cost management, new product development, supplier risks, sustainability, and digital transformation. Companies like Cisco, Apple, Tesla, Intel, and HP have implemented successful solutions ranging from leveraging blockchain to circular economy models to drive efficiency and innovation.

The hardware manufacturing industry is an essential pillar of the global economy, responsible for producing a diverse range of products, from smartphones and computers to industrial machinery and aerospace components. In this industry, procurement plays a crucial role as it facilitates sourcing raw materials and components necessary for product manufacturing. However, the hardware manufacturing sector faces distinct procurement challenges, such as intricate supply chain dynamics, cost pressures, supplier risk, and the ongoing wave of digital transformation. In this article, we will delve into these challenges and the different global procurement solutions that companies have implemented to tackle them. 

What are the procurement challenges & solutions in the Hardware Industry? 

Supply chain complexity

Hardware manufacturing often involves multiple tiers of suppliers, making supply chain complexity a key procurement challenge. According to a report by Deloitte, companies in the industry can use digital tools like blockchain and IoT to gain greater visibility and control over their supply chains. One example of a company that has successfully used digital tools to manage supply chain complexity is Cisco Systems, a global technology company that produces networking hardware. In a case study published by Gartner, Cisco mentioned that it had implemented a blockchain-based solution to improve the traceability of its supply chain. As a result, the company was able to reduce the time required for supply chain audits by 90%. 

Cost management

Hardware manufacturing involves significant costs, including raw materials, labor, and transportation. According to a report by McKinsey, companies in the industry can use various approaches to manage costs, such as strategic sourcing, value engineering, and supplier negotiations. One example of a company that has implemented effective cost management strategies is Apple, a leading manufacturer of consumer electronics. In its 2020 Supplier Responsibility Report, Apple mentioned that it had negotiated with suppliers to reduce costs and improve efficiency. The company also uses value engineering to optimize product design and reduce manufacturing costs. FactWise enables teams to increase savings up to 25% using holistic supplier analytics and increased supplier diversity. 

New product development

Hardware manufacturing is a dynamic industry that requires companies to continually innovate and introduce new products. According to a report by Gartner, companies can use various tools and methodologies to manage new product development, such as agile development, rapid prototyping, and design for manufacturing. One example of a company that has successfully managed new product development is Tesla, a leading producer of electric vehicles and renewable energy products. In its 2020 Annual Report, Tesla mentioned that it had implemented a rapid prototyping process that enables it to develop new products quickly and efficiently. The company also uses a design-for-manufacturing approach to optimize product design for manufacturing and reduce costs. 

Supplier risk management

Hardware manufacturing involves a range of supplier risks, including supply disruptions, quality issues, and intellectual property theft. According to a report by Deloitte, companies can use various approaches to manage supplier risks, such as supplier assessments, contingency planning, and supplier diversification. One example of a company that has implemented effective supplier risk management strategies is Intel, a global technology company that produces microprocessors and other hardware components. In its 2020 Corporate Responsibility Report, Intel mentioned that it uses a risk-based approach to supplier management that includes supplier assessments and contingency planning. The company also works with suppliers to implement sustainability initiatives that reduce environmental risks. 

Environmental sustainability

The hardware manufacturing industry has a significant environmental impact, including greenhouse gas emissions, waste generation, and water consumption. According to a report by Gartner, companies in the industry can use various sustainability strategies, such as circular economy models, eco-design, and renewable energy sourcing. One example of a company that has implemented effective sustainability strategies is HP Inc., a global technology company that produces personal computers, printers, and other hardware products. In its 2020 Sustainable Impact Report, HP mentioned that it had implemented a circular economy approach to product design and production. The company also uses renewable energy sources, such as wind and solar power, to reduce its carbon footprint. 

FactWise empowers procurement organizations to prioritize preferred vendors and discover new, pre-vetted, well-rated vendors that meet their quality and ESG requirements, and to define their item specifications and logistics/delivery requirements in detail on POs. At FactWise, we are committed to transforming the procurement journey and generating win-win solutions for buyers and suppliers globally. 

Digital transformation

The hardware manufacturing industry is undergoing significant digital transformation, with new technologies like artificial intelligence, robotics, and 3D printing changing the way products are designed and produced. According to a report by McKinsey, companies in the industry can use digital tools and technologies to optimize their procurement processes, such as supplier collaboration, demand forecasting, and inventory management. One example of a company that has successfully implemented digital transformation in procurement is Siemens, a global engineering and technology company. In a case study published by Gartner, Siemens mentioned that it had implemented a digital procurement platform that enabled it to optimize its procurement processes and reduce costs. The platform includes features such as e-auctions, supplier scorecards, and demand forecasting.  

FactWise is a unified E-commerce platform with a fully integrated suite of procurement products. The platform is used by global product manufacturing companies to transform their procurement organization via analytics and automation.   

In conclusion, the hardware manufacturing industry faces a diverse range of procurement challenges that require creative and effective procurement solutions. Companies in the industry must manage supply chain complexity and the challenges involved to remain competitive. Examples of renowned companies demonstrate that effective procurement solutions can lead to improved efficiency, reduced costs, and increased competitiveness in the marketplace. By embracing innovative procurement practices and accessing varied global technology procurement solutions in a rapidly changing market, hardware manufacturing companies can navigate the challenges of procurement and achieve success. 

At FactWise, we are committed to building truly distinctive procurement software solutions that delight users and provide a sustainable positive impact on the organizations we serve. We do this by providing transparency and insights to leaders (31% increase in governance), streamlining and automating processes to improve efficiency (20% increase in efficiency), and driving bottom-line impact by unlocking savings potential (25% cost reduction for direct spend).  

About the Author

Stawan is the founder and CEO of FactWise. Before founding FactWise, Stawan was the NA TMT-Procurement Leader at McKinsey. Passionate about procurement, Stawan has 15 years’ experience in enabling clients of all sizes to achieve business impact via procurement.


Show all

No comments to show

Suggested Articles



Privacy Policy

Terms & Conditions

©Copyright 2024. FactWise. All Rights Reserved.