As we’ve all seen recently, the supply chain’s total spending, efficiency, and productivity can all suffer as a result of the failure to adapt to changes in your supply chains. When your workflow is disrupted, it just takes a few weeks for it to stop functioning normally.
As a result, business executives must have a strong understanding of the costs of disruption in order to determine the value of various remedies.
In light of recent circumstances like China’s power outage and global port congestion, the primary concern of supply chain executives is procurement. In fact, 79% of supply chain leaders name sourcing and procurement as a top priority, according to a recent APQC study.
When China’s industrial output fell by 95% during the current crisis and remained near nil for weeks, few firms farther down the supply chain were prepared with a backup plan. One of the most important aspects of supply chain resilience is being prepared, not when a problem occurs, but when you learn that one could occur in the future.
5 best practices to enhance supply chain procurement
Prior to any supply chain disruptions, companies should reduce vendor risk by identifying alternate suppliers and partners. If the company can understand what its supply and demand are, it can optimize its strategy and margins.
Conduct an analysis
Before making any strategic changes, examine your present process and procurement criteria, as well as design a strategy for strengthening or terminating existing supplier relationships. Rethinking how you handle connections and weighing the pros and cons of signing a contract might help you better understand your company’s objectives and ambitions.
Examine internal expenditure patterns, work culture, communication strategy, and the business units involved. Because detailed, data-based research is essential for enhancing procurement efficiency, starting with current procedures is a must.
Understand the limitations
After assessing historical data, it’s critical to understand the current supply chain limitations. A limitation is a factor that either directly or indirectly limits one’s capacity to achieve something. These limitations are frequently neglected, yet this leads to solutions that are neither realistic nor practicable.
Financial and budgetary limits, as well as manufacturing capacity limitations, are obvious obstacles to enhancing your supply chain. Regulatory constraints and supplier interdependencies, however, are two less apparent examples.
Mapping out the evident and not-so-evident gaps and exceptions is critical. Consider manufacturing and sourcing limits, as well as specific tariffs, levies, and regional restrictions that limit business potential inside your network.
Technology to increase visibility
Having strong technical skills may help firms get important insights, streamline the procurement process, speed up transactions, and organize data for better purchase choices. Companies may use advanced data infrastructures, predictive analytics, and AI to get more insight into their present processes and make procurement more efficient.
These tools may provide forecasts based on market conditions, time of year, and geopolitical concerns, as well as offer recommendations based on past performance and current data.
If a new contract creates a tremendous uptick in invoices to process, then, invoicing and supplier agreements present an opportunity for additional automation.
Finally, it is important to keep track of the dollar amount of the savings you’ve made with the new supplier, so you can demonstrate how procurement’s cost-cutting strategies have improved the bottom line.
Procurement may be difficult even under the best of conditions. Your organization will be able to consistently overcome market turbulence, supplier limits, and shifting needs if you have a sound technological infrastructure in place.
Model the new strategy
Preparing a strategy for supply chain procurement once you’ve defined restrictions and objectives is the next step. The new strategy must account for both supply chain specifics and limitations.
The areas of supply chain procurement that are worth remodeling might include:
- The most effective sourcing tactics
- Inventory levels that are optimal
- The most ideal warehouse sites
- The most cost-effective distribution routes to reduce transportation costs
- Sustainability practices
Performing strategy analysis on your supply chain digital twin, using the optimization capabilities of prescriptive analytics to examine alternative solutions, is advanced, but a proven technique to accurately model the new strategy.
Plan to manage exceptions
The last couple of years has shown that supply chain and procurement risks shouldn’t be underestimated. The supply chain environment is still rather unpredictable, with many market fluctuations still percolating. With that being said, supply chain strategy should cover contingency planning, whether it is in procurement or any other aspect of your global supply chain.
These considerations might include taking production out of China and relocating it to other low-cost locations, shortening the supply chain through reshoring, or diversifying the supplier network so that the company is not reliant on a single, distant vendor.
To increase supplier loyalty, it’s worth trying to implement sophisticated preferred supplier programs as a way to move towards strategic sourcing. A focus on supply chain transparency, including more insight into the behavior of second and third-tier suppliers, will be a key to proper risk management.
By making all data from throughout the business available for deeper analysis, including pattern and anomaly detection by the appropriate stakeholders, you may get higher-quality insight (that goes beyond data), which leads to better planning and security.
Reach procurement visibility with Agistix
A visibility platform like Agistix can help tackle your sourcing supply chain challenges. Our key advantage is centralized data infrastructure and seamless integration that requires no change to your regular business flow.
With Agistix, you can get profound insights into your procurement spending and analyze your suppliers better. Learn more about Agistix visibility solutions today.