Why Microsoft Shifted Their Sourcing Strategy

Kerrie Kennedy

September 27, 2022

To see how Microsoft shifted their sourcing strategy with the help of Keelvar’s solution, access the full webinar on demand here

Like so many other companies with global teams managing multiple factories and interconnected supply chains, the pandemic saw sourcing processes change for Microsoft essentially overnight. 

Historically, sourcing teams at the technology giant would spend a lot of time at supplier sites overseas. But as an outcome of lockdowns, Microsoft started to face factory closures, major component shortages, and plenty of risk cropping up at various points within the supply chain. 

From a logistics perspective, the year 2020 into 2021 saw a spate of novel challenges emerge as what were once considered "black swan" events became the everyday norm: freight rates were going to inconceivable places, the capacity situation was getting out of control, and to top it off, demand for goods was extremely high.

 It was essential that all of Microsoft’s roadmaps and work plans continue — meaning the company’s global logistics sourcing team was at a heightened level of alert trying to address both potential and very real supply disruptions. 

In conversation with Keelvar, Microsoft’s Global Logistics Senior Sourcing Manager, Eric Kim, and Strategic Sourcing Director, Matt Billings, explained that they knew they had to deal with the issues in real time.

The Problems With An Excel Heavy Environment

Prior to the pandemic, standard practice for Microsoft had been to run a larger scale RFQ once per year, with annual rates locked in place.

"Contracts were no longer able to be honored by suppliers"

"But contracts were no longer able to be honored by suppliers," explained Eric. "Suppliers couldn’t offer anything longer than weekly [contracts], so we had to pivot and come up with a plan around how to deal with the sourcing element of freight rates and logistics services."

At the time, Microsoft's logistics team was still operating in a very manual environment that was heavily Excel dependent. 

"As the market was so dynamic and so much change was going on, we couldn't follow that path anymore," Eric continued. "It was very dependent on people’s skills—and the amount of results required to run an event, for example, monthly or weekly vs. annually, was very different."

"We spent so much time analyzing and trying to optimize our bids, but the complexity of logistics events meant it was extremely time-consuming and prone to error."

"The old, more manual process of managing all the lanes and all the data captured through the RFQ was just not going to work over the long term,"added Matt.

Embedding A New Dynamic Strategy

Instead, Microsoft sought a sourcing solution that would be powerful enough to capture the scale and scope of the business, and would enable Eric and Matt’s team to run their events in the cadence needed across all modes of transport.

Eric explained that once they landed on Keelvar after a lengthy search for the right tool and solution partner, they were able to switch to a dynamic market sourcing strategy and streamline their sourcing approach.

"Having the ability to scale up and down without being too concerned about the analytical impact of having too many bids, that barrier was lifted."

"But the biggest advantage has been the ability to change our approach while in the middle of a bid due to fluctuations in market dynamics.

"Having that flexibility has been critical for us in reshaping our strategy," he added.

To hear more from Eric Kim and Matt Billings on how Microsoft shifted their sourcing strategy with the help of Keelvar’s solution, watch the full webinar on demand now.

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