How to Get to Cleverer Purchasing Decisions

Effective and efficient automation of Supply management and Procurement functions can yield fruitful results. Automation facilitates supply management and procurement professionals to make wise decisions through enhanced tools and visibility. It is definitely a reliable substitute for time consuming and costly manual tasks.

Editor’s note: This article is part of the MyPurchasingCenter content archive. It was originally published in 2015 and appears here without revision.

[Former] ISM Services Director for the Institute for Supply Management and ADR North America Jim Barnes talks about technology and automation of supply chain and procurement and the interesting trends that follow in an interview with My Purchasing Center.

Accurately forecasting is almost unreal in today’s volatile market. Procurement and supply chain organizations are immensely pressurized with the burden of providing purchased materials and assemblies on time, all the time, in order to meet customer demands. Faced with sometimes uncertain market forecasts; procurement frequently over buys requirements creating excess inventories. And here comes the role of technology in the day to day responsibilities of supply management professionals.

Technology has traditionally been a productivity enhancer by taking paper transactions and digitizing them which can help professionals to buy as per need and avoid surplus inventories. “This has occurred in Procure-to-Pay processes for many years and recent trends of supplier portals are furthering the progress of P2P applications, Barnes says. 

“Today, the ability to leverage emerging technologies such as Big Data, 3D printing and the Internet of Things (IOT), is giving brand new insights into supply chain performance improvement and the ability to make step changes to manufacturing efficiencies. All these emerging technologies can have a positive bottom-line impact.”

Technology has so far changed the way supply management professionals accomplish their objectives to a great extent. When it comes to old-fashioned procurement and payables jobs, some specialists believe that nearly half of those jobs will evaporate in the next five years due to the automation of Procurement and Supply Management functions. The significant skills for supply chain professionals, and organizations in general, to exhibit now and in the future will be far more than merely processing requisitions and purchase orders.  Organizations will need to focus more on how their procurement and supply chain professionals can add value to their respective supply chain. 

Barnes further tells My Purchasing Center that, “Skills such as business acumen, sales and operations planning and supplier relationship management are critical right now to the ISM clients we serve. These are not new in supply chain and procurement but there is a greater emphasis on them now.

“For example, when it comes to business acumen, one of the questions that came up is whether the focus would be more on skills needed before you start working in the profession, or skills you should be gaining after starting in the profession that will help your team moving forward,” he says. Sales and operation planning is always going to be important because this can lead to cost savings. And with better relationships with suppliers, procurement can improve its collaborative efforts with them to provide better value. The companies that work to improve their suppler relationship can be light years ahead of the competition.

When asked what a does a future marked with 3D Printing has in store for procurement, Barnes says that, though 3D printing impacts the conventional procurement process, it is likely that shipping, trucking and logistics in general will continue to be just as important as it is today. 

For some companies will find that 3D Printing is the answer to components or tools that have a long lead time or unpredictable availability.  But the problems that 3D Printing creates in intellectual property rights cannot be ignored. Besides that, quality is one of the biggest concerns. “You can also lose your intellectual property easily when the design is distributed prior to manufacturing, resulting in a hit to your brand,” Barnes says “Any perception of poor quality can permanently damage a long-term relationship with a client.”

Big data is another innovation that’s affecting supply management. For Big Data, it is about the capability to leverage in-memory computing to analyse plant performance in a fraction of seconds; and then applying those insights regarding best practices across the enterprise.  The challenge is that many companies struggle with cleaning up the data and governance going forward, so sorting through a mass of garbage can produce less than optimal results.

In an industry where profits are tight and manifold departments often requisition items numerous times a day, it completely makes sense to automate procurement and supply management. This applies to small boutique hotels as well as for large multi-property chains. An automated solution helps to reduce costs, save time, improve accuracy, enhance supplier and ensure compliance. The consequence is more streamlined maneuvers, cleverer purchasing decisions and augmented control over the supply chain.