Future-proofing procurement

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Future-proofing procurement
When you know where and what to look for, predicting how supply chains may react to disruption is somewhat possible.
Photo by Akinori UEMURA on Unsplash

Why organisations must invest in technology to build resilience.

The pandemic has shone a spotlight on the greater need for more strategic investment in procurement and supply chain technologies – one that Australian businesses can no longer afford to ignore. With the right investment, businesses can build resilience, optimise performance and operate seamlessly when challenges arise – here’s how.

The pandemic has been a major wakeup call for businesses to re-evaluate the importance of back-office functions. Ongoing disruptions to supply chains has had significant implications around the world – like the global chip shortage impacting electronics manufacturers, to the timber shortage creating 18 month backlogs in Australia’s housing and construction industry. These events are a cautionary tale for what can happen when organisations neglect to invest in mission-critical functions that keep organisations afloat. 

The pandemic has shone a spotlight on the greater need for more strategic investment in procurement and supply chain technologies – one that Australian organisations can no longer afford to ignore.

While the pandemic ensued a level of disruption not seen for several decades, interruptions and risks could have been significantly reduced had more organisations invested in digitising sooner. By fully embracing digital transformation in procurement, organisations can achieve 25% lower costs, more than double the return on investment and up to five times greater cost benefits from supplier collaboration.

With digital transformation budgets on the rise for 63% of organisations, ensuring procurement is a critical part of this investment is vital to creating an agile, future-proofed supply chain. A supply chain strategy centred around building resilience and investing in the right technology solutions to meet your business needs will enable organisations to optimise performance and operate more seamlessly when challenges arise.

Resilience looks different for everyone

On the road to recovery out of the pandemic, resilience has been the buzzword of choice for decision makers when setting the strategic direction for the future. For procurement professionals, disruptions to global supply chains have created a mindset shift from “just in time” to “just in case” and signalled the need for greater emphasis on building robust and resilient supply chains that afford more visibility and flexibility. 

A resilient supply chain strategy will look different for every organisation but having a diverse supplier portfolio and building stronger relationships with dependable suppliers are two key areas many organisations should be looking to invest in to enhance their procurement function.

Greater supplier diversity is important for several reasons. A limited supplier network increases a company’s exposure to risks when disruptions arise and reduces the ability to be flexible when required. Relying on a single supplier base or delivery route can have disastrous consequences when those key components are compromised – the blockage of the Suez Canal earlier this year is a poignant reminder of how easily things can go wrong. By diversifying the supplier base businesses can mitigate these challenges and make themselves more adaptable to changing conditions.

For others, resilience may manifest as developing stronger and more beneficial relationships with suppliers. With decision-makers moving away from viewing procurement as a strictly cost-reducing exercise, organisations are increasingly looking at suppliers through a more holistic lens. A supply chain built on the foundations of enduring, mutually beneficial partnerships can help businesses mitigate many risk factors and increase reliability, leading to a more sustainable supply chain in the long term.

Throughout the pandemic, organisations with the closest and strongest relationships with their key suppliers saw the least disruption for key goods in short supply. No matter what your procurement priorities, building resiliency across processes and teams is fundamental to long-term success.   

Technology is your friend

It has become clear that organisations that moved quickly in the use and adoption of technology during the early months of the pandemic outperformed those who were hesitant to adjust or waited until it was too late. Advances in technology have meant there are many solutions available to help organisations develop robust procurement processes, such as advanced analytics, automation and streamlined workflows.

The days of manual back-office management are over. Many parts of the procure-to pay cycle can be easily automated – delivery, invoices, receipting and general supplier relationship management can all be done by technology. Automating these mundane processes saves time and money and enables teams to focus on value-adding activities and more strategic thinking. Automated procurement platforms also allow data to be documented and accessed through secure dashboards or trackers, so that businesses can act on this information to create wide-ranging improvements. This leads to optimisation of core processes and visibility across orders, performance, spend, and cycle times.

Businesses can’t expect to build resilience if they don’t have the right technology foundation in place. A global survey by McKinsey found 69% of organisations consider digital and analytics solutions to be even more valuable post-pandemic than they already are, with greater potential to increase procurement’s effectiveness. With the financial impacts of COVID-19 likely to be felt for some time, this presents an unmissable opportunity for organisations to accelerate investment in technology that delivers wide-spread optimisation.

Future-proofing procurement

In many ways the pandemic has been the catalyst organisations needed to rethink their strategic technology investments and prioritise areas that present the greatest risks, but also the greatest opportunity. Procurement is rising up the corporate agenda, highlighting the need for organisations to embrace technology in order to become smarter and more efficient.

When you know where and what to look for, predicting how supply chains may react to disruption is somewhat possible. But black swan events like the pandemic can’t be predicted or controlled. Organisations must focus on the things they can control, build resilience, and invest in technology to ensure they are as prepared as they can be for the future. No matter what shape your supply chain strategy takes, a resilient supply chain is one that can adapt, endure or transform in the face of unexpected circumstances.

Sanjay Kadkol is the Technical Account Director at JAGGAER.

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