As the world of procurement adapts to the new normal of fractured supply chains, there has been a movement that engenders greater understanding of suppliers and their issues during the COVID-19 pandemic, according to Rich Weissman, an experienced supply chain management practitioner and educator, works with businesses to build scalable and sustainable supply chain strategies.
Perceptions changed when consumers were faced with a shortage of products in retail stores that ranged from toilet paper to bread and cleaning products. This also brought the supply chain into the public arena for the first time.
The response driven by the multitude of large and small suppliers to re-stock supermarket shelves was testament to the robust nature of the hidden engine that drives the supply chain. It also provided a re-boot moment when large retailers had an opportunity to look beyond the purely transactional basis for their relationship with their suppliers and also understand more about their value and flexibility to their business.
Technology is of course still shaping the procurement sector through artificial intelligence, machine learning, cloud-based software solutions, autonomous vehicles, robotic process automation, evolving enterprise systems and dashboards driving supplier analytics, according to Weissman.
Without the existing IT infrastructure and access to good granular data the rapid recovery in supplying vital consumer goods across the world could never have happened. The flexibility and scalability required by large global companies to procure products and manage the sourcing, branding, logistics, storage, transportation and delivery is now in great demand.
SO, WHAT IS THE UPTAKE OF PROCUREMENT TECHNOLOGY?
Now access to cloud computing and automation tools is easier than ever and there is a greater understanding that by using digital technology more can be done with greater efficiency and at a lower cost.
“Fewer than 10 percent of companies have deployed procurement solutions based on key technologies such as the Internet of Things, Big Data and blockchain technology. That same research also shows more than 60 percent of companies either use no tools at all or rely on systems primarily based on Microsoft Office to handle their workflow and supplier relationship management (SRM),” according to PurchaseControl website (planergy.com).
WHAT ARE THE OPTIONS?
If you are solely involved in procurement and nothing else, then your purchasing team can use a procurement platform that can simplify the complex processes that may currently be hard to manage, according to PurchaseControl.
The other option for companies that need procurement as part of a wider portfolio of business processes is to buy the tools that incorporate procurement and purchasing into the overall digital solution.
AI, MACHINE LEARNING TO MEND A FRACTURED SUPPLY CHAIN
During the COVID-19 crisis it is apparent that managing effective supply chains is no longer only about lean processes or the lowest cost, it is about fixing the breakpoints in supply connections according to GEP, a global software solutions company.
In the year ahead, procurement and supply chain leaders need to invest in making those connections seamless and resilient — without losing the advantages of efficiency.
Software that incorporates artificial intelligence, machine learning and automated data feeds can sense changes to demand before they occur. These are the new tools to manage supply and build real supply chain resilience.
OUTSOURCING AS A GROWING TREND IN PROCUREMENT
The procurement industry has outsourced its order processing or the management of invoices for many years. In the last decade companies are outsourcing strategic procurement activities like supplier selection, contract negotiation or specification management, according to Peter Spiller and Martina Tokic, expert principals for McKinsey in Europe.
According to McKinsey’s research 40 to 50 percent of the total savings achieved come from changes in internal factors, like optimising specifications to minimise total cost of ownership or controlling demand. Such savings also tend to be the most sustainable over the long term.
NEXT GENERATION OF PROCUREMENT COMPANIES
A new breed of companies have emerged in recent years, looking to aggregate global suppliers and provide a comprehensive range of services from farm to shelf.
Companies like Hong Kong-based Li & Fung, a global supply chain and procurement company, is now working with 10,000 suppliers through its Vendor Platform.
Founded in 1906, Li & Fung has organically grown with its clients responding to global changes in the supply chain and in recent years made substantial investments in its digital networks.
One of the company’s main aims is to increase the velocity of the procurement and the supply chain process by helping customers reduce production lead times and increase speed-to-market. Decisions are made closer to ‘time to market’, giving buyers a quick response to trends, improved inventory control and decreased mark down – all with the aim of improving profitability.
The company places its suppliers at the heart of their systems with its production platform providing digital order tracking and a direct connection to more than 40 production markets around the globe.
“There is no doubt technology will continue its inexorable transformation of procurement and supply chain management during 2021. But it will be tempered with a large dose of kindness, compassion, patience and understanding, important traits that will hopefully stick around for a while,” said Weissman.