Achieving cost-savings is always primary buying objective, but procurement’s true value is realised by delivering benefits beyond monetary savings.
We consider some the challenges currently facing procurement and the responses of a function that is no longer just about sourcing services and reducing cost.
Procurement has gained greater credibility over the last 12 months when it has managed sourcing, stakeholders, and suppliers effectively during the pandemic. Keeping supply chains moving and optimising them to meet the emerging challenges of transport under-capacity and sustained demand is testing the most seasoned buying teams.
The pandemic highlighted the inadequacies of previous risk management activities and the focus is now moving to a broader scope of risks including:
- Financial stability of critical and high-spend suppliers
- Issues that may cause reputational damage
- Cyber security and data resilience
- Supply chain certainty
Sustainability concerns have evolved into direct attention – by the C-Suite and their consumers – on and the mitigation of economic, social and corporate governance issues including:
- Ethical and sustainable sourcing
- Prevention of bribery and corruption
- Human capital practices including modern day slavery
- Energy and water use
- Reduction of CO2 emissions
Historically buyers have sought extended payment terms, but organisations are now adapting their policies for payment terms so that smaller suppliers are not penalised.
Rather than lengthening payment terms, options for supply chain financing and implementing an invoice discounting process are being considered.
The pandemic highlights the importance of protecting the supply base to ensure continuous trading, through a collaborative partnership approach.
End-to-end supply chain visibility has been critical during the pandemic – and illustrated again by the recent Suez grounding crisis – in flexing and adapting procurement strategy.
Now is the time for the procurement function to seek investment in the systems and tools that will improve purchasing and supply chain efficiency.
- Cloud-based applications
- Supplier and supply chain management
- Data visualisation tools
Gaining support by selling the benefits of effective supply chain management in purchasing to internal stakeholders is critical to the success of procurement projects.
Establish what level of support is required from each stakeholder and tailor messages that highlight the benefits most relevant to them, focusing on key performance drivers such as delivering improvements or increasing profitability.
Procurement must communicate and share its successes beyond price, leveraging its position between suppliers and the business to manage relationships effectively and deliver value beyond savings. This is especially highlighted in the current high demand global freight markets where it is a carrier or seller controlled pricing model that is taking precedent. Capacity is ‘king’ and cost takes a back seat but unless products, components or raw materials reach their destinations goods cannot be marketed and converted to cash.
Developing trust and relationships through collaboration and mutual respect will get them involved early enough to recognise the opportunities that will make an impact.
Optimising supply chains by introducing innovation, enhancing sustainability and boosting revenues through supplier-led initiatives benefit the business and add to procurement’s credibility.
We manage global supply chains and support procurement teams in some of the UK’s largest brands and manufacturers. Optimising and flexing operations, so that they can adapt to the changing environment. Metro have always taken the approach to understand our customers’ requirements, deadlines and expectations since long before the Covid Pandemic – we have extended this and focused on collaboration and partnership at even closer levels.
Our MVT supply chain management platform, integrates with ERP systems for real-time end-to-end visibility and control to SKU level.
We provide scheduled and bespoke solutions across all modes of transport and geographies, to keep supply chains running smoothly and efficiently.
Please contact Elliot Carlile or Grant Liddell to learn how we can support your global procurement requirements and ensure that every delivery deadline is achieved, even in current challenging market conditions.