This is the second in our series of four major procurement trends. Welcome to the digital supply chain.
There are few areas within an enterprise that have traditionally been more paper-intensive than that of procurement. From POs to advanced shipping notices (ASNs) to receipt of goods to invoices, paper can clog the system. Add in partial shipments and deliveries and a single PO can result in multiple paper documents. This, in turn, requires more hours to track products, deliveries, and shipments and less time devoted to value-added tasks that can enhance productivity and profitability. But, due to advancing technology, that is changing.
In a time where CPOs and CFOs have their feet to the proverbial fire when it comes to the challenge of infrastructure maintenance and labor costs, many recognize the necessity to employ digital technology. But it’s not enough to just digitize your supply chain. According to the consulting firm, Accenture, “simply adding digital technology is not the answer.” They note that companies need to “reimagine supply chain as a digital supply network (DSN) that unites not just physical flows but also talent, information and finance.”
The cloud, of course, has made this more possible. That’s why many organizations are transitioning to the cloud. A majority of procurement professionals are looking to mitigate the layers of responsibility and risk inherent in the traditional paper-based system, and the cloud enables them to do this. The 24/7 real-time visibility into all data that the cloud provides enables procurement to analyze that data and use the results to focus on supply chain improvements and continuity.
Having that visibility allows procurement to answer a number of questions immediately instead of guesstimating. “Which suppliers are the most reliable when it comes to deliveries and/or backorders?” “Which suppliers are not compliant with contract terms?” “How can I use this information to drive better negotiations next time?” “How long is the spread between invoice receipt and payment?” “Am I over-purchasing some products and under-purchasing others?”
Being able to answer these and other questions accurately will lead to increased security and reduced risk throughout the supply chain. It will also enable procurement to scale purchasing to need rather than fulfilling calendar-based demands.
Another advantage to digitizing the supply chain is how it allows purchasing to reallocate resources by eliminating the non-value transactional work necessitated by traditional paper-based processes. That will enable organizations to use their strategic resources (their people) to focus on their core competencies and thus increase competitive advantage. This move to technology also creates more opportunities to develop a seamless source-to-pay process. In the first installment of this series, “Four Most Important Collaborative ‘Partners’ of Procurement,” I spoke about how successful procurement teams are breaking down silos and pushing collaboration between all stakeholders. This is especially true when it comes to the source-to-pay process. By having real-time visibility into transactions, end-to-end, procurement can now oversee the status of the transaction and, if necessary, intercede to remove barriers to payment and end disputes before they start.
By creating a truly integrated digital supply chain, procurement will play a larger role than ever in the enterprise, moving procurement into the position of a truly strategic player in the enterprise’s growth.