Innovations in Supplier Collaboration
A typical enterprise has more than 50% of its operational costs locked up in its supply chain. There are numerous business risks with dependencies on factors beyond entirely their control, including price conflicts, currency fluctuations, labour disputes, and many other issues.
Henry Ford once said, “If everyone is moving forward together, then success takes care of itself.” Instead of a cost centre that must be efficiently managed, organizations should look to strategically collaborate with suppliers and take a more holistic management approach to be successful. Enterprises have increasingly started to recognize that they have unexplored opportunities for short-term and long-term benefits via better collaboration with their suppliers. This article explores the key challenges, but importantly details the whitespaces which when filled, could significantly accelerate the pace to seeing continual reduction in cost coupled with better quality delivery to stakeholders.
Supplier collaboration has become increasingly complex and enterprises face a lot of challenges while managing hundreds or thousands of mission-critical suppliers.
Pain Points in Supplier Collaboration
The more common pain points in supplier collaboration are poor data management, the slow turnaround time to dispute resolution, lack of compliance with supplier contract terms, late delivery, late payments, etc. These could be classified under two broad categories – inefficient processes and cost savings.
Supplier information and relationship management methodologies are manual in several enterprises. Many interactions are often repeated, resulting in wasting company time and resources. When enterprises receive too many routine inquiries and become overloaded, responding to suppliers becomes a time-consuming task and response times could get very slow. On the other hand, some processes which need to be followed could get missed out due to a high workload for the procurement team, thereby putting the enterprise to risks that may not even be fully known. These challenges, in turn, have a significant negative impact on supplier relationships.
Several supplier processes are typically manually executed. Lack of full visibility into processes means that enterprises are not able to predict risks such as say better contract negotiations as a result of analyzing patterns such as percentage of defects/delays/returns etc. This is results in poor negotiation and lost savings.
According to an Oxford Economics survey, 65% of procurement practitioners say procurement at their company is gradually becoming more collaborative with suppliers. This is because the pace of the business has increased exponentially, and businesses must be able to respond to new market demands with innovation and agility. Therefore, buyers are now reliant on suppliers more than ever before. Suppliers are no longer just the providers of materials and goods, instead they act as strategic partners that can help organizations create products that prove to be competitive differentiators.
Supplier Collaboration Trends:
Top procurement leaders globally, believe that supplier management, sourcing and buying, as well as business strategy (including spend and research), will undergo monumental changes due to digital technologies over the next few years.
According to Gartner, the procurement function will become the biggest risk forecaster in an organization in the near future, given that the function sits as the gateway to the outside world – both in terms of inputs and outputs.
According to a study by ISG, automation could enable a reduction in resources for tasks such as invoicing and vendor management by up to 34%. Organizations are expected to rely on automation to improve productivity, reduce costs, increase compliance and improve query turnaround time.
Automation opportunities in Supplier Collaboration:
Automated supplier collaboration solutions address various pain points by facilitating timely information exchange, workflow, and task automation and decreasing the demand for manual and time-consuming help desk support with supplier self-service tools. These solutions directly address the goals of buying organizations and is what many companies are increasingly turning to for help. Supplier relationship management applications allow organizations to respond quickly and accurately settling disputes in a timely manner. Automation in supplier relationship management can strategically increase efficiency and positively impact profitability.
Supplier relationship management tools help identify relevant suppliers and could be efficiently used to develop and maintain an effective working relationship based on business needs. Suppliers could be ranked using machine learning algorithms which could then proactively trigger feedback to the procurement and respective business teams detailing suppliers who could be relied on during critical business situations.
E-Sourcing automates the entire tender process so that it involves minimal efforts from the buyer organization and helps find the best suppliers and prices for the business’ needs. Processes such as cataloguing, tender creation, response analysis and contract awarding could be automated based on pre-determined criteria.
Contract management tools enable the business to easily manage their entire supplier database from a central location. Availability of supplier contracts makes it easier to recognize service delivery issues, including non-competitive and/or non-sustainable pricing terms and slow service times.
Solutions that automate the source to contract process allow users to review information from the initial tenders, all the way through to conducting e-auctions and online contracts with digital signatures. These solutions also enable adequate audit trails for future reference.
Supplier Relationship Management
Enhancing supplier relationships is a promising way to reduce supply chain risk. Enterprises are increasingly relying on Supplier Relationship Management (SRM) solutions to create a centralised environment for buyers to communicate with suppliers, have easy access to relevant information and seamlessly engage with their suppliers.
Velocious Supplier Relationship Management Application
The Velocious Supplier relationship management (SRM) application is a comprehensive solution to enhance supplier performance and improve supplier relations. The tool facilitates greater visibility for both the supplier and buyer team, enabling them to have a common view of data and communicate efficiently. It is replete with features for both suppliers and buyers, who could reap immense benefits from the system. Some of the key features of the application are:
The buyer/procurement team can float RFQs to all or selected set of vendors registered in the application with ease. Suppliers, in turn, have a comprehensive view of all RFQs and the ability to easily track them add immense value to their experience. The buyer can add RFQ details, additional messages, detail submission deadlines for suppliers and have a comprehensive view of the details on open RFQs, the current status of RFQ responses etc. The supplier can check all the RFQ documents sent by the buyer, submit responses within the expiry date and can respond to the buyer anytime with a text or an attachment.
Through Velocious SRM, the buyer can automate the supplier onboarding process ensuring accuracy, completeness and visibility to the process. When extended with solutions such as Robotic Process Automation, the entire Master Data Management process could be automated saving a lot of time and ensuring Master Data accuracy.
Purchase Order Information & Invoice Uploading:
The application allow suppliers to have comprehensive visibility to all the purchase orders raised by the buyer. Invoice submission and tracking are typically major pain points for many suppliers across industries. Through the invoice upload feature of Velocious SRM, suppliers could upload invoices and associated supporting documents with ease. A buyer could have a comprehensive view of and access to all the submitted invoices.
Early Payment Request:
Supplier discounting empowers suppliers by increasing their working capital and the buyer/ procurement team can, in turn, convert themselves to a profit centre. This provision could significantly value add to buyer-supplier relationships.
The buying entity can provision their policy for early payments for selected suppliers and execute this via the application. Suppliers could also have the provision to select invoices and request for early payment to the buyer/purchasing team. A buyer could evaluate all such requests and take necessary action.
Dashboard & Reports:
Easy and timely access to a variety of information empowers suppliers and is the key to better supplier relationships. Velocious SRM dashboards provide suppliers with visibility into key information such as invoice Status across complete life cycle of Invoice, open RFQ count, next payment due date etc. Suppliers also have access to a variety of reports for their perusal including payment reports, purchase order, invoice summary etc.
Supplier Collaboration is strategic to any enterprise. When done well, enterprises have been able to increase revenues, accelerate the speed of execution while increasing business insight.