For so long, companies have placed efficiency at the center of strategy, focusing strategic thinking on “just in time.” This has meant running operations as close to full capacity as possible and ordering from suppliers in ways that tightly align with production schedules in order to minimize costs.
The downside of this supply chain management approach—as made clear by the recent pandemic and the resulting shutdown of distribution channels such as those from China—is that it does not leave room for businesses to develop resilience. The overall focus on “just in time” needs to shift to include “just in case.” Consider these four steps to building procurement resilience into your future strategies to leave room for disruptions and vulnerabilities “just in case.”
- Anticipate and Plan for Uncertainty
Making a direct link between supply and demand, manufacturers and distributors can anticipate and prepare a better supply chain management plan for uncertainty. Data-driven approaches are beginning to replace the rigorous process of gathering—as well as interpreting—supplier, market, and environmental information. This enables real-time decision-making with businesses building AI-driven integrated data ecosystems that are underpinned by predictive analytics. Insights can then be applied in forward planning on both strategy and performance.
In addition to outsourcing solutions to understand the changing needs of the macro environment, manufacturers and distributors can use technologies such as ERP systems to accurately forecast demand, identify stock availability, establish supplier lead times, cost, material requirements, contingency stock requirements, and warehouse capacity constraints. They can then integrate all this into their unique business model.
Procurement teams can now better determine purchasing requirements based upon demand and hedge against the obsolescence and waste of critical raw materials stock, ultimately improving the organization’s cash flow.
- Embrace Digitalization’s Limitless Potential
With the pandemic and global lockdowns, many manufacturers began to realize the true potential of digital transformation. Digitalization can assist strategic sourcing to become more predictive, transactional procurement more automated, and supplier relationship management more proactive.
Digital procurement solutions enable the future by providing access to previously unavailable insights in supply chain management and bringing order to massive (but unstructured) data sets. This ultimately drives more complex analysis and better supplier strategies for more efficient operations.
- Enable End-to-End Supply Chain Visibility
When world crises occur, procurement teams end up scrambling for alternative and locally based suppliers to ensure they can still fulfill existing orders and produce new orders. End-to-end supply chain visibility—a single platform where everything from early-stage planning based on forecasts through Master Production Schedules (MPS) to final delivery can be tracked and traced in real-time on a global scale—is therefore a necessity for procurement accuracy and resilience. These advanced insights can improve customer service, reduce costs, help with regulatory directives, and mitigate interruptions that will affect supplier inventory levels and ultimately product delivery.
Supply chain visibility adds many other advantages for today’s global businesses, allowing reduced complexity, improved communication throughout the organization, nimbleness, and the ability to keep up with a changing and complex regulatory landscape.
- Build a Robust Procurement Model
There are no standard business models to help businesses manage a global pandemic. The current reality has exposed the fragility and thin margins on which many global businesses run. Highly indebted companies working from lean inventory, supported by just-in-time supply chains, and staffed by short-term contractors are suffering the longer-term impact of market unpredictability. Companies have realized that encouraging procurement departments to pursue greater efficiency through wholesale cost-cutting has ultimately resulted in a sacrifice of robustness, resilience, and effectiveness, sometimes sacrificing the business itself.
Copying competitors is no longer a viable option. Manufacturers and distributors need to identify a business model that will suit their own business. Consider how to reengineer supply chains to be resilient by design, factoring in increased complexity and uncertainty as the new normal. In the months and years ahead, effective supply chain management will be all about agility and finding the perfect balance between “just in time” processes and “just in case” scenarios, while reducing risk as much as possible.
Use an ERP to Your Advantage
An ERP like SYSPRO can help procurement remain resilient in several ways. First, an ERP brings a single integrated platform that shares all the information across all functions. With this integration, manufacturers can optimize inventory forecasting capabilities to improve management of purchasing requirements, while identifying alternative potential suppliers through supplier portals and inviting via a Request For Information or Request For Quote.
The ongoing procurement of raw materials can quickly consume all the cash reserves of the organization and needs to be agreed upon by the organizational leadership if it places the organization in any risk. Using the integrated nature of an ERP system allows everyone a full picture, improving the quality of the decision making within the organization.
While global crises may not be a regular occurrence, crises of many varieties and severities should be expected throughout the lifetime of a business. Adding these steps to prepare “just in case” rather than solely “just in time” will help build procurement resilience to sustain the organization in times of uncertainty.
It all starts with having the right ERP solution implemented for your business. Whether you’re looking for a cloud-based or on-premises solution, you’ll want a partner who relies on extensive expertise and best practices to set your business up with the right system. You want the team at PositiveVision. Contact us now to get started.