A review of the key elements in supplier management for manufacturers and how Source-to-Pay procurement technology can support the journey towards supply chain resilience and agility in times of crisis.
As the COVID-19 pandemic disrupts global supply chains, procurement organizations around the world are scrambling to react. There are many supply chain management lessons to learn from the Covid-19 crisis. However, some organizations are better prepared to weather this storm than others. Many of these organizations are already using Source-to-Pay technology and are now realizing more than ever that technology is a “must have” to ensure their supply chain remains resilient and agile throughout a crisis. In this article we’ll review how supplier management capabilities in Source-to-Pay technology can free-up and enable a manufacturer’s direct material procurement team to do what they do best to ensure the supply chain remains resilient and agile: be creative and strategic.
Supplier Data Quality & Management in Decision Making
It may be the most basic level, but data management may also be the most daunting for some organizations. Supplier Data is at the core of every procurement activity, and it is critical for those dealing with direct materials in manufacturing. Often, what procurement teams end up with are multiple collections of data stored in tiny, disconnected data silos, such as: spreadsheets, MS Access databases, email and even the dreaded manila file folder and sticky note.
Obviously, these methods of capturing and recording data have limitations, and these limitations can hamper decision making in several ways, and ultimately impact the management and resilience of the organizations supply chain. Some of these challenges include limited:
- Ability to collaborate, identify opportunities or issues and act
- Transparency, or ability to scale data, across an organization
- Ability to enrich data sets with other, related data sets.
These challenges in the direct material supply chain pose a real threat, especially in a time of crisis and let’s face it, there is no shortage of events that could jeopardise and/or disrupt a business, potentially impacting their profitability, business continuity, image, and reputation. Often, organizations try to band-aid the data problem, which can cause long term problems and inefficiencies long into the future. This is where Source-to-Pay systems can help – by providing procurement teams with a system that centralizes information and ensures data quality meets a high standard. This in turn enables procurement teams to better evaluate a situation, make decisions and act.
Managing a complex network of direct material suppliers
Manufacturing supply chains are notoriously complex, and this fact has been a common topic of the news media throughout the COVID-19 pandemic. It’s a manufacturing organizations’ procurement team that is on the front lines fighting for the supply chain’s survival. However, procurement teams often lack consistent visibility beyond their tier 1 strategic suppliers for each product line, and this limits a company’s ability to ensure the materials and processes required to produce a product are consistently available.
It’s not uncommon for direct materials procurement teams to capture information on sub-tier 1 suppliers. However, organizing and making sense of this data is so challenging that it is uncommon for all but the most critical product elements in the most mature procurement organizations. This is where Source-to-Pay (S2P) technology can help, by enabling procurement teams to capture important information across the entire supply chain so they can identify potential issues early, initiate collaboration with the necessary parties and take action to support suppliers and mitigate potential issues.
Risk & Performance Management
The evaluation of direct material suppliers is often nuanced and complex depending on the final product, regulatory concerns, and other requirements. However, it is up to the procurement team to find a way to ensure that suppliers:
- Are not risky;
- Perform well over time;
- Meet quality & regulatory requirements;
- Maintains the right certifications, and more; and
- Meet Corporate Social Responsibility (CSR) expectations.
Empowered with all this information, procurement teams can ensure supply chain continuity and resiliency, and that value is maximized for the company. But it just isn’t possible to achieve the levels of organization and collaboration necessary to collect all the data from suppliers, 3rd party data providers and internal business processes to give buyers a complete picture of each supplier across the supply chain without a serious database and supporting processes. To get started and keep the process more manageable, many companies focus on a smaller subset of key suppliers.
Source-to-Pay technology can help procurement teams establish and organize campaigns to collect & update supplier information and receive real-time supplier risk management updates on important risk factors (e.g. Financial, etc.). Furthermore, these solutions can help procurement collect feedback from stakeholders, track and maintain certifications and more. With this information, procurement can rapidly identify and classify issues and then collaboratively work with suppliers on improvement plans.
Developing Suppliers: Establishing & Implementing Supplier Strategies
One of the benefits that effective supplier development programs have in common is they establish mutually beneficial partnerships between the supplier and buying company. These programs enable bilateral feedback, opportunities for product and service innovation, access to new markets and investment. The key to the success of these strategies begins with communication and transparency, both of which are also essential in times of crisis. Additionally, manufacturers with mature supplier development strategies in place tend to have:
- Access to reliable data,
- The ability to identify critical suppliers across all tiers of the supply chain,
- Capabilities to monitor and manage supplier risk and performance,
- The ability to closely collaborate with the supplier, often including commercial, operational and technical strategies and plans.
Accomplishing and maintaining each of these elements over time is often a challenge for all but the most mature procurement organizations, but it is never too soon to lay the foundation. Source-to-Pay technology can help procurement lay the foundation, by fostering communication, collaboration and better visibility across the global supply chain.
Supply Chain Resilience and Agility
Due to the COVID-19 pandemic, the world is now painfully aware that even the best run supply chains can encounter significant challenges. However, some supply chains will recover faster than others because of their resilience and agility. What the best performing supply chains most likely have in common is a procurement organization with a strong data foundation to support effective decision making, the ability to collaborate and communicate with and support all tiers of their supply chain, monitor and track risk and performance and effective supplier management and development strategies that has produced close partnerships.
Throughout each of the elements described in this article, Source-to-Pay technology replaces much of the manual, non-strategic effort necessary to support and manage supplier relationships. The result is a foundation that empowers procurement teams to add more value to the organization and be better prepared to manage their supply chain through times of crisis.