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Role of Procurement in Supplier Value Chain for Business Advantage

Role of Procurement in Supplier Value
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First and foremost, to be able to handle the rapidly changing demand patterns and agile business operating models, today’s supply chains are undergoing a makeover. From being sedated, uni-dimensional sequences of discrete functions, the supply chain has transformed into dynamic, adventurous, and interconnected network. Furthermore, to achieve business objectives and deliver customer satisfaction, manufacturing, planning, procurement, inventory management, and logistics are harnessing end-to-end supply chain.

End-to-End Supply Chain

Firstly, new-age technologies enable the end-to-end supply chain. For example, cloud computing, with built-in flexibility, connectivity, embedded analytics, and mobile accessibility, serves great for companies for competitive advantage. In addition to this, newer considerations are underway wherein suppliers are expected to deliver a lot more. Suppliers play an essential part in a company’s success, and therefore, their ability to meet customer demand delivers overall business performance and profit.

Role of Procurement in Supply Chain

In this case, there is a need to manage suppliers to ensure reliable delivery from their end and risk mitigation. It is the procurement’s role to transform traditional procure-to-pay and cost-savings to a more strategic approach. The responsibility includes qualifying, on-boarding, and managing suppliers.

Supplier Management Strategy & Procurement

It should be noted that supplier risk is known as the second-highest priority for CPOs after managing cost and profit. If not managed competently, Supplier performance impacts a company’s financial results and damages its reputation. For this, a comprehensive supplier management strategy is crucial. Procurement authorities with large supplier bases, complex supply chain operations, and a large amount of direct spend, should adopt supplier risk management strategy. Through this, Procurement can create a disciplined framework for suppliers to deliver to the company’s business expectations.

Present Scenario: Supplier Management Practices

As of 2018, Supplier Management practice in many companies-

  • is inconsistent
  • lacks accuracy
  • exists in silos &
  • poorly leverages functions (sourcing, contracting, & supplier onboarding)

Consequences: Poor Supplier Management Practices

The supplier value chain  can’t be nurtured if inadequate and inaccurate information of supplier capabilities, their qualifications, and past performance expose companies to financial consequences including-

  • process disruption
  • missed deliveries
  • compliance issues &
  • reputational losses

Metrics to Qualify Suppliers

In addition to all the above, companies venturing into markets and in new geographies need to qualify suppliers as their principal business partners that would ascertain-

  • dependability for material sourcing
  • as per schedule
  • for tapping agile business opportunities

Transform the Game through Procurement

The tectonic movements in the global supply chain landscape, require Procurement to lead it by example, such as-

  • thoroughly evaluate their supplier base
  • involve them in the bidding processes
  • reward the best supplier/s in the supplier value chain
  • solicit supplier’s participation during contract renewal for the best bargain
  • increase the pace of supplier onboarding

Capabilities for Supplier Risk Management Transformation

At this time, it is important to revise the practice. Not only induct modern S2P technology, but also nurture a supplier value chain mindset.
Along with the above, for a full-fledged transformation of supplier risk management, abilities to be considered are as below-

    1. Without a doubt, safeguard a business from risk by reducing supplier management costs by building supplier data inventory that includes supplier categories, regions they represent and historical performance
  1. Definitely ensure all suppliers have qualified on trust that a business expects for its growth. Safe and responsible sourcing are two critical aspects of reliance from extended supply chains
  2. unlike previously, execute contracts nearing expiration or revision in terms and conditions that’ll ascertain negligible hindrances to business continuity

Procurement to Initiate Automation in the Supplier Value Chain

Finally, the invincibility of cloud technology to scale up supplier management dubs procurement as a strategic business partner. In addition to this, Procurement has to introduce automation and streamline processes involved in the source-to-settle cycle. Also, a full-proof supply chain implies synchronization of functions including manufacturing, production, logistics, inventory management, and procurement. Besides that, procurement should also educate suppliers about responsibilities and orient them to fulfill a company’s financial objective and customer delight. It is indeed time for a change in the supplier value chain.

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