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The need for manufacturing supply chain optimization is more relevant today than ever. Leveraging procurement levers is essential to navigate disruptions like the COVID-19 pandemic, which has been the Black Swan event of 2020.

This global crisis has adversely impacted lives, livelihoods, and manufacturing operations worldwide, bringing factories and businesses to a standstill due to lockdowns and the virus’s widespread impact.

Need for Manufacturing Supply Chain Optimization

Even as government officials, civic authorities and healthcare professionals across countries do their best to contain the spread, one thing is for certain — the ripples felt throughout global supply chains, from raw materials to finished products, are not going away anytime soon.

Material shortages due to steep surge in demand for products in food, drug, and mass (FDM) categories, sustaining manufacturing operations & weakening links in the supply chain due to some vendors & suppliers facing operational & financial struggles, are the three significant dimensions of supply chain challenges for manufacturers.

Digest this, according to a recent study conducted by fractal, 88% of the supply chain, finance, and procurement directors complain about the lack of real-time information considering rapidly changing conditions.

Thus, organizations need to focus on business resilience using digital technology solutions that can scale on-demand, be flexible & adaptable.

Here are 5 procurement levers manufacturers can use to align various operational functions and navigate their way ahead:

1) Know your spending and prioritize it:

Manufacturing supply chains are becoming increasingly complex. Hence, most manufacturers see anywhere from 40% to 70% of their cash generated as revenues head out the door to third-party suppliers and partners. However, amid current uncertainties, leveraging procurement levers to manage cash efficiently can make or break the business.

Organizations with stronger balance sheets will be better placed to deploy cash in the right places and stay afloat. Manufacturers that have suppliers in heavily affected regions should understand which categories of spend they are procuring from these regions and apply procurement levers to mitigate risks effectively.

The risks in the supply chain of the manufacturing industry are pertinent to the nature of the categories, not the level of spending. That’s why analyzing the impact and classifying spend at a granular level using procurement levers is essential.

Zycus’ source-to-pay (S2P) suite comes with a spend analysis module with patented artificial intelligence-based automated classification mechanism & extensive global commodity-pricing intelligence embedded to support risk management.

2) Build a demand-driven agile supply chain:

To ensure cash efficiency and build a supply chain in the manufacturing industry that is agile, responsive, and adaptable, ditch old-school planning methods and focus on leveraging procurement levers effectively. Start by mapping your supply chain network, analyzing bottlenecks, and planning workarounds.

Artificial Intelligence, combined with procurement levers, will drive forward-looking trends and demand projection across supply chain categories, making it a crucial aspect of forecasting the post-crisis landscape.

Zycus’ integrated strategic sourcing suite helps collaboratively, rigorously and efficiently define requirements, discover, vet, bid, evaluate and compare suppliers worldwide, providing improved visibility into supply and capacity options, making manufacturers better prepared to mitigate supply shortages in near real-time by collaborating proactively with ecosystem partners.

3) Simplify supplier management:

13% of manufacturers lack relevant market intelligence to evaluate alternative supply sources. Engage with tier 2/3 suppliers and create a robust pipeline to mitigate risk.

The trend of ‘localization of suppliers’ is gaining rapid traction in the post COVID world as travel and transportation restrictions are expected to stay put for longer than previously anticipated.

Embrace Agile Sourcing and consider alternative sourcing options such as in-region sourcing and flexible sourcing. The supplier management module in Zycus’ procurement solutions helps rapidly verify and on-board new suppliers, proactively manage supplier relationships, ensure regulatory compliance, and continuously track, benchmark, and improve supplier performance measurement with reduced cycle time.

To gain further deep dive – please read our full paper on- Manufacturing Supply Chains in the COVID Era.

4) Sharpen contract intelligence:

Manufacturing contracts can be complicated, and managing them across the life-cycle requires ongoing effort. To recover from the COVID crisis, procurement must focus on managing supplier contracts effectively. This will ensure that any fixed or recurring costs are terminated or at least minimize.

The contract management module in Zycus’ procurement suite helps rapidly build, negotiate, and execute creative contracts. With the latest Zycus’ Contract BOTs from Merlin AI Suites, procurement professionals can auto-identify clauses in the agreement, benchmark them, and highlight the contract level’s review score to achieve process compliance.

5) Maximize ROI without compromising quality:

Align finance, supply chain, and procurement functions to track savings right to the bottom-line. Manufacturing CFOs must take a holistic view of their top to spend categories such as raw materials, production machinery, plant/facility services, utilities, and MRO.

Once the high spend processes are identified, bring CPOs and supply chain leaders into the picture. This will help you evaluate how these functions can help optimize across the high spend areas.

The financial savings management module in Zycus’ procurement solutions helps align procurement with both bottoms- and top-line business performance objectives.

Further, the procure to pay suite drives operational visibility and efficiency while ensuring compliant purchasing and clear chain-of-custody documentation worldwide.

Bottom-line:

For manufacturers, now is the time to re-imagine their procurement function by strategically utilizing procurement levers alongside digital thinking, technology, automation, and customer experience as focal points.

Which procurement lever do you think will help you the most for manufacturing supply chain optimization? What technologies are you considering to build business resiliency post-pandemic?

Ready to revolutionize your procurement processes? Book a demo with Zycus today to see how our S2P suite and procure-to-pay solutions can help you optimize high-spend areas, enhance efficiency, and align procurement with your business objectives.

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