strategic sourcing, procurement, supplier relationships, supply chain, integrated supplier management

I caught up with a former colleague recently to discuss her procurement project which comprised a year-long strategic sourcing engagement. During the project, she was able to rationalize the supply base, boost procurement efficiencies and drive positive financial results. As with most projects, she was thrilled that the effort had a positive impact on the business, but the conversation quickly turned to what happens next. Although she and her team had delivered on a number of procurement objectives through strategic sourcing, she was uncertain where efforts on the supply base should focus next. As we discussed various procurement transformation options, we landed on the need to build long-term and collaborative supplier relationships.

Recent business turbulence has certainly increased the awareness among manufacturers for improved communication and collaboration with suppliers. Visibility is a key element of collaboration and most studies indicate that organizations are falling short in this area. The Deloitte 2020 CPO Flash Survey highlighted that “only 50% of procurement leaders surveyed had high or very high visibility into their tier 1 suppliers, while 90% of organizations rated their visibility into their extended supply networks as moderate to very low.”

As our conversation continued, we focused on the following topics as prime candidates for some of her team’s next steps:

Support Long-term Supplier Relationships

Beyond the initial sourcing, supplier selection and contracting process, supplier management and development efforts need to include performance measurement and ongoing feedback with suppliers for continuous improvement to meet and exceed SLAs. Suppliers can better mitigate any issues and maintain focus where efforts are working well. For the procurement team, the goal of mutual success is better supported and performance data is readily available to further develop suppliers and ensure mutually beneficial relationships with the supply base. 

Gain Efficiencies with Automation

It’s still common to manage procurement activities with a mix of spreadsheets, emails, phone calls and buyers’ memories to track hundreds of supplier activities and details. Resulting issues from manual efforts include a lack of process governance and overlooked supplier insights. The missed opportunities for manufacturers include an inability to identify the best suppliers with the best overall price, accurately monitor supplier performance and enhance supplier development that could add business value.

Seeking overlooked areas that could benefit from automation and digital transformation is an imperative. Ernst and Young research recently indicated that “enterprises urgently need to design a supply chain organization that will fit the new digital and autonomous-focused era.” By automating procurement activities and deploying effective standards across the organization, manufacturers gain a systematic approach for accurately selecting, managing and engaging with suppliers. Automation removes the guesswork and over-reliance on buyer memories to assess and compare costs, quality, capacity, services and other important factors associated with a variety of suppliers. This helps ensure a rapid response to issues, more time to identify opportunities with suppliers and improved execution against sourcing and procurement priorities.

Understand Supplier Risks 

As business requirements and compliance needs become more extensive and complex, so do the risks associated with supplier relationships. Top risk priorities for procurement organizations include ensuring business continuity, avoiding disruptions with key suppliers, maintaining quality standards and others. As more digitalization takes place and digital information is increasingly relied upon between businesses, sourcing and procurement groups must include the ownership, management and use of information into their collaboration with suppliers. Along with risk priorities identified, information security is a high priority for many procurement teams’ risk management and compliance efforts. In today’s digital world, cybersecurity plays a critical role in managing supplier risk and protecting the data shared with suppliers.

Like my former colleague, procurement executives are consistently seeking innovative ways to maximize efficiency and address unexpected supply disruption at many levels. Are you running into questions about ways to enhance your organization’s strategic, tactical and operational activities with suppliers? If so, you might find QAD’s Integrated Supplier Management diagnostic tool beneficial. It only takes a few minutes to uncover where your organization’s abilities lie upon a maturity model. Or, contact us directly to find out how QAD can progress your sourcing, procurement and supplier management efforts.

2 COMMENTS

  1. Great post! Your insights into post-strategic sourcing challenges are spot-on. Building long-term supplier relationships, automating procurement for efficiency, and understanding supplier risks are critical next steps. The statistics from Deloitte’s survey highlight the industry’s need for improved collaboration. The mention of QAD’s Integrated Supplier Management tool adds a practical solution for organizations seeking enhancement. Thanks for the valuable insights!

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