In this article, you'll find three elements of successful and resilient procurement organizations enabled by transformation:
How Procurement Leaders can adapt to the “New Normal”
Procurement is a business function traditionally measured by the savings gained through purchasing materials at the right time for the right price. However, recent events have shown a new set of preliminary concerns. Instances of businesses declaring ‘force majeures,’ or the inability to deliver on a contract due to unforeseeable circumstances such as climate catastrophes and the COVID-19 pandemic, have the global supply chain increasingly oscillating between scarcity and congestion, frustrating business leaders, employees and consumers around the world. As a result, price is still of paramount importance, but procurement professionals and their stakeholders have been forced to place new – and innovative – emphasis on securing the supplies that keep operations running.
Many have wondered when things will return to normal while others have attempted to predict a new normal. In the face of repeated shortages and market shifts, it is possible the industry may never reach former standards of normalcy again. Rather, procurement organizations that wish to stay competitive should prepare for the unexpected by deploying advanced digital solutions that accelerate response time.
Despite an explosion of technological advancements, many large enterprise procurement organizations are running on legacy structures comprised of clunky point solutions, over-dependence on human communication and, as a result, inefficient processes that cannot respond fast enough to the current climate of unpredictable supply chain disruptions. Digital transformation offers solutions to build resilience, enable a competitive edge through three primary levers: real-time visibility, rapid response capabilities and enhanced supplier relationships.
1. Gain Real-Time Visibility
Procurement is one of the most complex functions, requiring sourcing teams to sort through mountains of data, dozens of spend categories and lengthy reporting processes. Without visibility into categories or a streamlined way to edit classifications, it’s difficult to implement effective sourcing strategies or see where leakage occurs. However, one of the most common challenges facing procurement teams is visibility into, and effective use of, the data. Often, data is siloed between departments, and valuable time is wasted between manual tasks such as emails and data collection.
Organizations should consider enabling comprehensive visibility by connecting and applying intelligence to enterprise-wide data through a central platform that integrates multiple point solutions and data sources into one KPI-driven view. External factors, scenario modeling, and machine learning algorithms can now drive these AI systems that provide predictive visibility. When incorporating personas into the solution, employees can engage with the real-time, data-driven applications that allow them to make sense of this digital world and facilitate time-sensitive decisions unencumbered by bottlenecks. By applying technology for visibility, teams avoid surprises and enhance resilience.
2. Prioritize Rapid Response
With continued supply chain disruptions, commodity price inflation and labor markets tightening, organizations need the ability to respond rapidly more than ever. EBITDA impact and realized savings are becoming the commercial metrics of choice and organizations are willing to invest time and energy to have this level of visibility and tracking. Intelligent tools that pull real-time data into actionable insights create opportunities for organizations to respond to market changes quickly, for example predicting material availability and price fluctuations
A comprehensive AI driven tool can reduce manual efforts and aids in effective decision making between teams. For example, sales pricing can now be compared to process material usage and Goods Receipt value of the material. That level of detail, combined with market indices, enable an unprecedented depth of understanding into prices. When unanticipated events cause supply fluctuations, organizations may face unexpected costs and tighter margins. If prepared with the right tools and capabilities to make faster decisions, businesses avoid incurring greater costs and may even be able to pass savings along to their customers. While disruptions are difficult to model, built-in indexes enable more accurate forecasting for price.
(See one example of our sales pricing tool view below. Find a detailed case study for this tool here.)
3. Cultivate and Enhance Supplier Relationships
As demand for many products are running high, it’s critical to keep operations and manufacturing running at maximum efficiency. Supplier relationship management is a vital component and will only strengthen in importance in the force majeure economy. However, staying on top of contracts, invoice payment, product delivery and more can be a burden for even the most organized procurement team. To help ease the strain, Procurement needs solutions that can:
- Enable collaboration, innovation and information sharing with key suppliers
- Quickly identify, evaluate, and qualify new suppliers.
- Achieve best-value agreements by streamlining and automating pieces of the RFx-award cycle.
- Reduce the time, effort and paper used to create, manage and monitor contracts
- Improve spend visibility and compliance.
- Monitor thousands of suppliers while easily tracking, measuring and optimizing supplier’s performance.
When materials are limited by unexpected circumstances, a strong supplier relationship built with goodwill could mean receiving scarce goods over competing organizations. In addition to regular one-on-one meetings, using an intelligent SRM system provides consistent visibility into supplier performance that allows procurement teams to make informed decisions that create real value.
New products, optimization and cost savings ideas come from all the corners within one’s own organization, and also from the various supplier personnel, from repair technicians to the R&D function at each organization. At Aligned Automation, we have enabled a mechanism to log ideas, evaluate them, take them through project execution and capture value generated from these initiatives. The same information on performance is available across both organizations, limiting conversations on the accuracy of information and instead focusing on how to improve performance on the metrics. Real-time visibility, Rapid Response, and Enhanced SRM are all available in one centralized application called our Nerve Center.
Plan for Long-Term Success
Many Procurement organizations are looking beyond price and toward a more analytical, efficient operations model to stay competitive in an increasingly unpredictable economy. At Aligned Automation, we combine cutting edge procurement technology with dedicated experts to ensure streamlined operations and better supplier relationships so our clients can work smarter across their organizations. Our Nerve Center platform offers real-time insights into every part of the procurement organization, from strategy to supplier performance, so that teams gain real-time visibility, rapid response times and more strategic supplier relationships. Discover more about the Nerve Center and our additional solutions here.
About the Author:
Hardik Bhatt is a Procurement Practice Lead at Aligned Automation with more than 14-years of experience. He has led a $400 Mill USD category, managed buyers in an operational role and implemented various procurement solutions for Fortune 500 companies through positions at Wipro BPO, Zycus, Maersk and now Aligned Automation.
The Aligned Automation Procurement Practice currently consists of over 80 professionals who work as category managers for technical materials & services, raw materials and indirect categories; data & market analysts as well as delivering procurement solutions including Spend Visibility, Supplier Management, Contract Management, P2P Automation, Project Management and more.