The Role of Procurement in Supplier Management for Competitive Business Gain
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 sedate, uni-dimensional sequences of discrete functions to being dynamic, adventurous and interconnected networks. To achieve business objectives and deliver maximum customer satisfaction, functions such as manufacturing, planning, procurement, inventory management, and logistics are collectively harnessing end-to-end supply chain.
The aforesaid holistic approach is enabled by new age technologies. An example would be cloud computing with ingredients such as built-in flexibility, connectivity, embedded analytics and mobile accessibility which serves a great dish for companies to gain competitive advantage in the markets. But is this enough? Newer considerations are underway where in suppliers are expected to deliver a lot more and play an important part toward a company’s success. Their ability to meet customer demand, supply chain execution and overall business performance and profit outcome.
In this regard, there is a need to manage suppliers to ensure reliable delivery from their end and risk mitigation. This responsibility belongs to procurement that must consider a transformation of traditional procure-to-pay and cost-savings to a more strategic approach toward qualifying, on-boarding and managing suppliers.
Supplier risk is known as the second highest priority for CPOs after their traditional role in managing cost and profit. If not managed competently, Supplier performance can severely impact a company’s financial results and damage its reputation. To beat 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, must in no time adopt a supplier risk management strategy by which they can create a disciplined framework for suppliers to deliver to the company’s utmost business expectations.
As of 2018, Supplier Management Practices in many companies-
- are inconsistent
- lack accuracy
- exist in silos &
- poorly leveraged across functions (sourcing, contracting, & supplier on-boarding)
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
After all of the above, companies venturing into markets and in new geographies need to qualify suppliers as their key business partners that would ascertain-
- dependability for material sourcing
- as per schedule
- for tapping agile business opportunities
Transform the Game
The tectonic movements in the global supply chain landscape, require Procurement to lead it by-
- thoroughly evaluating their supplier base
- involving them in the bidding processes
- rewarding the best supplier/s
- soliciting supplier’s participation during contract renewal for best bargain
- increasing the pace of supplier on-boarding
For full-fledged transformation of supplier risk management, capabilities to be considered are as below-
- Safeguard business from risk by reducing supplier management costs by building supplier data inventory that includes supplier categories, regions they represent and historic performance
- Ensure all suppliers are qualified on trust that a business expects for its growth. Safe and responsible sourcing are two key aspects of reliance from extended supply chains
- Smart execution of contracts nearing expiration or revision in terms and conditions that’ll ascertain negligible hindrances to business continuity
The invincibility of cloud technology to scale up supplier management dubs procurement as a strategic business partner thereby expanding its influence company wide. And to achieve this, procurement has to bring in automation and streamline processes involved in the entire source-to-settle cycle. This kind of full-proof supply chain expects a synchronization of functions including manufacturing, production, logistics, inventory management and procurement. This also includes procurement to educate suppliers in owning responsibilities and orient them to the fulfillment of the company’s utmost financial objective and customer delight.