Many companies segregate their procurement functions from their supply chain and logistics operations. Goals are often considered incongruent, skills for practitioners are thought to be contrasting. Firms could profit from ending the segregation and bringing both functions together for mutual benefit.
The main objective for supply chain practitioners is relatively straightforward - to ensure that the right level of inventory is at the right point if the supply chain at the right time.
Technological development and increased recognition of the benefits of collaboration between suppliers and buying organisations have meant that data analysis and interpretation play a more vital role than ever.
Contrastingly, procurement as a function is still on the journey to becoming data-driven. Sourcing efforts are increasingly relying on spend analysis to pinpoint the biggest opportunities for cost reduction.
The inevitable migration to data-driven analysis as a constant must take - and is taking place in procurement. Over the past decade we have seen a shift from the historical holders of the purse strings to buyers with analytical skills and forward thinking graduates. These progressive procurement professionals are keen to take greater responsibility for a range of design, specification, buying, inventory, fulfillment, and related decisions as part of a single buying process.
Essentially the worlds of procurement and supply chain are converging. Buyers can now make integrated decisions that formerly occurred within business silos and shape supply chains as an output of sourcing design rather than operate within them as a constraint.
This powerful union of procurement and supply chain is one that can reshape what strategic procurement can influence for firms of all types, industries, and sizes. By taking into account a wide range of criteria and data as part of a sourcing process that encourages options and supplier creativity, procurement professionals can explore a plethora of potential supply chain and procurement outcomes, quantifying the costs and benefits and extracting optimum value.
Integrating Category Management
Category management is all too often buried within a procurement process or bolted on as a nice to have.
Brand management (e.g., pricing, design, quality) and category management in the procurement sense of the term can also be integrated with great success. Again, using integrated information gathering is the key. A process can be developed to take into account an incredibly wide range of cost, quality, design, margin, risk, and related variables in a specific project bridging procurement, supply chain, manufacturing, sales, and marketing.
It should also include awareness of the cost structure, capacities, and future plans of all of its potential suppliers.
With this information in hand, an organisation will be able to design an optimal production and supply network both for current and future scenarios, so the supply chain can flex based on potential demand and market scenarios over the course of three to five years.
Sourcing and Supply Chain – Operating in unison
Market leading organisations across retail and manufacturing are proving today that sourcing and supply chain can become one and the same for strategic production and procurement decisions. But it’s no easy feat to arrive at shared and collective decisions based on a combination of product design, demand forecasting, market variability, supply chain flexibility, and sourcing decisions.
It requires stakeholder involvement. It requires the ability to gather vast amounts of accurate supply chain and production information, and it also requires the right set of technologies that can gather, hold and interpret data from internal stakeholders and suppliers and apply specific conditions which will allow procurement professionals to model potential changes and contingencies as market conditions change.