Role of Procurement in Value Chain for Enhanced Business Advantage

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First and foremost, to handle rapidly changing demand patterns and agile business operating models, today’s supply chains are undergoing a makeover. The role of procurement in value chain has become pivotal, as supply chains shift from being sedated, uni-dimensional sequences of discrete functions to dynamic, interconnected networks.

Furthermore, to achieve business objectives and deliver customer satisfaction, manufacturing, planning, procurement, inventory management solution, and logistics are harnessing end-to-end procurement in supply chain management solutions.

End-to-End Supply Chain

Firstly, new-age technologies enable the procurement process and supply chain solutions. 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 Value 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, what is procurement and supply chain management solutions, and a large amount of direct spend, should adopt a 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 2024, 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

Download our whitepaper: Essential Components of a World-Class Supplier Performance Management Tool : A MENA Perspective

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

Also Read: Supplier Performance Evaluation – A Quick Checklist

Transform the Game through Procurement

The tectonic movements in the global supply chain solution, require procurement solutions 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 procurement 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—what is procurement and supply chain management.

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
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
unlike previously, execute contracts nearing expiration or revision in terms and conditions that’ll ascertain negligible hindrances to business continuity

Download our whitepaper: How prepared are you to combat your supply chain risks?

Procurement to Initiate Automation in the Supplier Value Chain

Finally, the invincibility of cloud technology to scale up supplier management positions procurement in supply chain management solutions as a strategic business partner. In addition, procurement solutions must introduce automation and streamline processes involved in the source-to-settle cycle. A robust supply chain solution requires synchronization of functions, including manufacturing, production, logistics, inventory management, and procurement solutions.

Furthermore, procurement in value chain should focus on educating suppliers about their responsibilities and orienting them to fulfill a company’s financial objectives and enhance customer delight. It is indeed time for a transformation in the supplier value chain.

Experience the transformative power of our solutions firsthand—request a demo today and take the first step toward optimizing your procurement processes!

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Zycus

Zycus is a leader in Cognititive Procurement. A leading SaaS platform used by many large enterprises across the globe for enabling efficiency and effectiveness of the procurement function.