The procurement process at manufacturing companies such as consumer goods, industrial manufacturers, automotive, food & beverage, and others can be a hurdle in other operational and business activities if not planned well in advance. From sourcing, purchase processing, supplier relationship, inventory management to budgets, standards and forecasting needs for long durations. This is why industrial buyers and procurement leaders have a lot of responsibilities like needs identification, vendor management and payment processing. We will discuss the most common procurement related problems and the solutions we offer to overcome these.
Supply Chain Risk Management:
Maintaining adequate stock of the right quality is crucial as the company’s reputation is linked to quality products & customer satisfaction. There are numerous suppliers & choosing one involves factors like legal and trade requirements, new national boundaries and new governments. The risks increase with the growing complexity of this supply chain network.
To overcome this, we have built analytical tools and dashboards that compare and help in making the right choice. Past historical data is now made available that reduces the risks involved with an informed decision. Vendors are pre-approved for the required raw materials and are present in the approved list for your purchase. Comparison between the vendors who have applied for the proposal based on their historical data has improved this supply chain management.
For instance, a vendor is selected for delivering a product based on his price quoted, payment, delivery conditions and other terms. But down the line of execution, there may have been problems in execution, legal issues, or the quality may have been compromised. All this information was previously not available during vendor comparison. Only the buyers involved during the execution of that particular order might be aware. This information is lost with employee turnover.
Supplier Related Issues:
Good quality, right quantity, on-time delivery, continuous supply, and sufficient inventory at optimum costs are extremely important in a supplier. Any bottlenecks in the supplier network can result in dark purchasing to fill the gaps and keep running the bottom line. This is done without any prior knowledge about the new vendor. This can be costly in long term and result in loss of revenue and business reputation.
In such cases, we propose a solution with alternate vendors, different sources of supply or alternate items. Vendor development is one of the biggest challenges in the manufacturing industry. During COVID and the globally imposed lockdowns, though there were suppliers, procuring goods from them was a challenge due to no interstate movement of logistics in lockdown. We can also do supplier evaluation in S/4HANA.
Another common problem for instance is, vendor A may call a material ABC while vendor B may call it XYZ, while the organization itself may call it as PQR. The lack of a global naming convention here might hinder in the process of finding this material if the vendor is not developed. Similarly for existing users, if return to vendor scenario is not configured correctly then there is a missing link between vendor returns and finance payments. There are overpayments or underpayments in the system for such material returns. Our recent improvements offer solutions to these problems.
Knowing these pitfalls and gaps beforehand can help reduce complexities in vendor management, contract management, procure-to-pay process, efficient supplier communication network and relationships to meet your procurement goals.