Industry executives and experts share their predictions for 2022. Read them in this 14th annual VMblog.com series exclusive.
Increasing Importance of Tight Relationships with Suppliers
By Brent Dawkins, Product Marketing, QAD
Recent business turbulence has increased the awareness among manufacturers for improved communication and collaboration with suppliers. Manufacturers and suppliers have seen increasing order fulfillment times and costs resulting from labor and raw material shortages in 2021. Most experts believe these challenges will continue into 2022 placing extreme focus on working more closely with suppliers to enable efficiency and supply chain performance improvements. Visibility is a key element of collaboration, and most studies indicate that organizations are falling short in this area.
The Deloitte 2020 CPO Flash Survey highlighted that “only 50% of procurement leaders surveyed had high or very high visibility into their tier 1 suppliers, while 90% of organizations rated their visibility into their extended supply networks as moderate to very low.”
Improved connectivity with suppliers is an imperative for boosting data integrity throughout the inbound supply network to enhance supply chain responsiveness and agility. Digital connectivity with suppliers enhances communication and improves decision-making. By developing tighter relationships with suppliers, manufacturers can enhance sourcing decisions, quickly connect with suppliers, achieve a single source of supply truth from data analytics and boost global supply chain performance.
Let’s highlight three areas where tighter alignment with suppliers will help your organization in 2022.
Fortify Long-term Supplier Relationships
Beyond the initial sourcing, supplier selection and contracting process, supplier management and development efforts need to include performance measurement and ongoing feedback with suppliers for continuous improvement to meet and exceed SLAs. Suppliers can better mitigate any issues and maintain focus where efforts are working well. For the procurement team, the goal of mutual success is better supported and performance data is readily available to further develop suppliers and ensure mutually beneficial relationships with the supply base.
Expand Efficiencies with Automation
It’s still common to manage procurement activities with a mix of spreadsheets, emails, phone calls and buyers’ memories to track hundreds of supplier activities and details. Resulting issues from manual efforts include a lack of process governance and overlooked supplier insights. The missed opportunities for manufacturers include an inability to identify the best suppliers with the best overall price, accurately monitor supplier performance and enhance supplier development that could add business value.
Seeking overlooked areas that could benefit from automation and digital transformation is an imperative. Ernst and Young research recently indicated that “enterprises urgently need to design a supply chain organization that will fit the new digital and autonomous-focused era.” By automating procurement activities and deploying effective standards across the organization, manufacturers gain a systematic approach for accurately selecting, managing and engaging with suppliers. Automation removes the guesswork and over-reliance on buyer memories to assess and compare costs, quality, capacity, services and other important factors associated with a variety of suppliers. This helps ensure a rapid response to issues, more time to identify opportunities with suppliers and improved execution against sourcing and procurement priorities.
Recognize Supplier Risks
The global and disruptive nature of supplier management causes complexity for procurement professionals. Procuring raw materials and goods from international suppliers involves working in multiple languages and meeting local regulations resulting in longer cycle times. Relying on manually intensive processes increases risk and the likelihood of stock outages, excessive freight charges, unexpected supply disruptions and poor supplier performance.
As business requirements and compliance needs become more extensive and complex, so do the risks associated with supplier relationships. Supplier risk areas include ensuring business continuity, avoiding disruptions with key suppliers, verifying sustainability standards, maintaining quality specifications and others. As more digitalization takes places and digital information is increasingly relied upon between businesses, sourcing and procurement groups must include the ownership, management, and use of information into their collaboration with suppliers. Along with risk priorities identified, information security is a high priority for many procurement teams’ risk management and compliance efforts. In today’s digital world, cybersecurity plays a critical role in managing supplier risk and protecting the data shared with suppliers.
Procurement and supply chain professionals are consistently seeking innovative ways to maximize efficiency and address unexpected supply disruption at many levels – 2022 will be no different. Successful professionals will have a positive business impact by understanding where improved communication and collaboration with suppliers will enhance supply chain responsiveness.
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ABOUT THE AUTHOR
Brent is QAD’s Director of Product Marketing with over 20 years of manufacturing and supply chain experience. In his spare time, you can find him hiking the Rocky Mountains of Colorado, coaching youth hockey or enjoying time with family.
