Most people who have used any sort of business software offhandedly consider the importance of maintaining quality data, but few make it a priority. Too often in my world, organizations will meticulously enter supplier information into a spreadsheet and dust off their hands. They see ongoing data quality as a difficult to achieve “nice-to-have,” accept the risk of bad data, and carry on with other business demands, fingers crossed. Not everyone realizes, however, the magnitude of that risk, especially around supplier data.
Supplier Relationship Management (SRM)
Inflation is our call to arms.
Born from supply chain disruptions and shortages of commodities, renewed demand, cyberattacks and natural disasters, the annual producer price inflation for final manufactured goods jumped a whopping 7.8% in September 2021, up from 7.2% in August. With U.S. inflation hitting a 30-year high, there is no clear end in sight.
All organizations are interested in improving their working capital. One popular method of doing this is through the reevaluation of supplier payment terms. There are clear benefits to paying invoices later – for the organization requesting the extensions.
Today, a lot of the low-hanging fruit has been picked by CPOs. But one area where there is significant scope for procurement to deliver value is supplier-enabled innovation (SEI). With 25% to 45% of revenues coming from product innovation and up to 65% of innovations sourced externally through external partners and suppliers, SEI represents a treasure trove of opportunity.
The global COVID-19 pandemic put supply chain management and procurement in a very bright and positive spotlight for keeping life moving as normal as possible during all the shutdowns, disruption and general uncertainty.
It also highlighted that business and supply chain disruption are ongoing facts of life – such as ongoing extreme weather events globally and a megaship blocking the Suez Canal for weeks, to name just two. And the impacts created a snowball effect on other industries:
CPOs are always looking for new ways to increase internal advocacy and improve strategic value to elevate the role of Procurement. As the lead of an organization’s financial vision, CFOs can support their counterparts in Procurement by helping them achieve this goal.
For CFOs looking to build up that relationship, we suggest starting the conversation by focusing on building a strategic procurement plan aligned with Finance’s working capital strategy.
Global trends, including the COVID-19 pandemic, have taught procurement professionals the value of identifying supplier red flags and mitigating the risks they may pose before it’s too late. To do this, some organizations are making local buying their top priority, while others are committing to consolidating their supplier lists or further diversifying as their needs demand.
Sourcing leaders today operate within an intricate web of interconnected buyers and suppliers from around the globe. When awarding parts of a business, companies must weigh more than the cost of what they buy. Prospective suppliers have to be viewed through multiple lenses. Prioritizing cost savings alone may seem like a clear win for your bottom line, but it can lead to missed opportunities to capitalize on other forms of value that suppliers can extend.
With 80% of an organization’s sustainability impact intertwined in its supply chain, businesses will need to identify where they can work with suppliers to realize their corporate purpose ambitions. On average, over 90% of an organization’s carbon footprint sits in “scope 3,” mainly in its supply chain and product lifecycle. Defer that logic across the wider scope of business initiatives, and you uncover a better understanding of where most sustainability lies.
Supply chain resiliency took on a new meaning in 2020. In the first few months of the pandemic, suppliers and procurement teams alike were left scrambling, desperately trying to maintain business continuity. The situation called for unprecedented levels of collaboration and visibility, which many organizations were not able to meet.
When it comes to packaging, raw material generally represents the largest cost component, especially in an inflationary commodity environment. Raw material also represents the largest carbon footprint share of the packaging itself. With the climate in peril, sourcing sustainable materials is instrumental in creating an environmentally aware product. So, it’s all the more important to ensure you’re considering key elements when determining the sustainability performance of the packaging solution.
Just as there was no roadmap for navigating a crisis like COVID-19, there is no formula for the best way to come out of a pandemic, either. However, if anyone has proven that they are up to charting the way forward, it’s procurement professionals. As resourcing experts, procurement is known for finding strategic solutions that satisfy diverse stakeholder needs — and fast.
Poor contract management costs businesses up to 9% percent of their annual revenues. Contracts determine the flow of an organization’s finances and directly impact customer satisfaction, savings, risk exposure and productivity. However, organizations can have thousands of working contracts at any given time—each with their own set of set of risks, terms and expectations.
Supplier management is something that many companies overlook. Customer satisfaction is the natural focus for businesses, but it's not the only relationship you should be cultivating, as it is also critical to have a good relationship with your suppliers. Supplier relationship management is a domain in which all companies can excel because it has far-reaching implications.