Supercharging Your Supply Chain: Streamlining Procurement (1st blog in the series)
- May 25th, 2012
- By: Sean Riley
Today, B2B.com is launching a new series of blogs by supply-chain experts on super charging 5 key areas of supply chain, from procurement to the retail. Over the next five weeks, our experts will release a new blog every Friday covering these areas :
- Streamlining procurement
- Bringing order to order management
- Ensuring your logistics move smoothly
- Taking the pain out of returns
- The end game; Retail
Today, we start our series with a look at streamlining procurement.
Why should you Streamline Procurement?
There are 4 reasons in today’s markets that are forcing companies to re-examine procurement and look for ways to streamline the process of dealing with existing suppliers and bringing new ones on-board.
1. Up to 70 % of Procurement cost is related to manual processes and dealing with errors. Large companies have realized that they can save hundreds of millions of dollars just by streamlining procurement. Reducing cost is # 1 driver for streamlining procurement.
2. The need for end-to-end visibility is on every major company’s radar. Chief Procurement Officers (CPOs) want visibility into every aspect of Supply chain to see the performance against KPIs, to evaluate suppliers and to avoid disruptions.
3. To reduce risk to supply chain; natural disasters in the last few years have made companies realize that ‘just in time’ based inventory levels can bring production to a halt and cause major losses. Earhquake & Tsunami in Asia caused plant shutdowns and recent explosion in German resin manufacturer’s plant has disrupted auto manufacturers globally.
4. Last but not the least, its competitive advantage. For items like ‘Flash Memory’ which always seem to be in demand, a reliable supply is a huge competitive advantage. Ensuring the supply of critical parts helps bring new products to market faster than your competition.
B2B Gateways bring automation, cost savings and visibility to Procurement
Streamlining procurement boils down to automating and simplifying processes. Whether you’re bringing on new suppliers or your making a new acquisition with an existing supplier, if you’re going to remain agile and responsive to a supply crisis, you need to be able to act quickly, and your ability to do so will depend on how thoroughly you’ve automated the procurement processes.
Where you start depends upon where you are, of course. Those who still rely on paper-based processes can gain immediate benefit by adopting B2B document standards such as EDI or XML for electronic exchanges.
In some cases, you may find you’re actually using too many B2B systems, those companies, streamlining procurement will mean consolidating on one system and centralizing the procurement process to gain full visibility into supplier transactions.
Keep in mind the various data and transfer standards your company will need to support. Suppliers frequently use EDI, but others may rely on XML or AS2. These can actually vary by geography and your market sector. A consolidated B2B strategy not only reduces the cost of procurement, but also improves the speed of on-boarding new suppliers.
Besides giving you more flexibility in bringing on new suppliers, streamlining procurement can also:
- Provide better insight into your supply chain, thanks to more easily accessed electronic records.
- Allow you to quickly add temporary suppliers to accommodate special products or seasonal demand changes.
- Compare suppliers and their cost or performance.
- Monitor service level agreements to ensure suppliers are keeping their commitments.
- Collaborate with suppliers to make procurement more efficient and cost-effective.
These are all important if you’re going to make more supply chain more responsive, resilient and reduce procurement cost. That’s why we see streamlining procurement is a critical first step in super charging any supply chain.