Home Business Re-aligning procurement models in 2021

Re-aligning procurement models in 2021

by maria

By Tony Harris, Global Vice President, Business Network Solutions, SAP

As we watch the steady rollout of Covid-19 vaccines across the UK and as we look forward to getting back some semblance of ‘normal’, the reality is that many businesses will continue to face challenges when it comes to their manufacturing, distribution, logistics and demand functions. The aftermath of the pandemic and the impact of Brexit will simply not disappear overnight.

That’s not to say supply chains and logistic functions ground to a halt when disaster hit. Indeed. one of the area’s first hit by the pandemic, organisations had to transform their procurement functions to respond to the unplanned and unprecedented business environment. But as a different world takes shape, longer term strategies for supply chains and operating models now need to be re-assessed and prioritised in order to advance.

Digital supply chains and networks have been essential to business survival, in all industries, and as companies look to rebuild and protect against future disruption, investment in technology is key.

From Supply Chains to Supply Networks

Businesses must learn key lessons as they look to recovery. At the crux of this is rebuilding and restructuring resilient supply chains for a better future. This means moving beyond the traditional linear supply chain model to the implementation of a dynamic, collaborative supply network.

Supply networks shift away from singular, point-to-point processes to a many-to-many structure that enables 360-degree visibility. Once an organisation is connected to a network, they become both a buyer and a supplier and gain broad visibility into the interconnected operations of their trading partners. Beyond allowing companies to identify emerging trends or issues more easily, access to a network also enables them to collaborate with new partners, improve cash flow and develop new products. They are now connected to a network that includes producers, vendors, distribution centres, warehouses, transportation companies and retailers, allowing them to respond more quickly to demand and address unforeseen circumstances like those we’ve seen throughout the pandemic.

The Dawn of Digital Transformation

Digital procurement will also play a major role in organisations being able to withstand future disruptions and help pivot them toward recovery when disruptions do occur. By taking advantage of the latest digital tools, businesses can remain resilient and scale at a rate that creates a competitive advantage.

Digital supply networks are built to anticipate disruptions and mitigate risks. They leverage technology and data analytics to provide a continuous flow of information which allows business leaders to gain a holistic insight to all areas of the business. Although this move will require fundamental changes to many aspects of an organisation’s planning – from strategy, to business processes, to IT – the ability to keep up with fast-moving market dynamics is essential in today’s business environment more than ever.

An example of this done successfully is demonstrated by the Danish manufacturing company VELUX Group, which automated 64% of its 20,000 monthly order lines after digitally transforming supply chain operations and streamlining supplier collaboration. Now, the VELUX Group seamlessly conducts transactions with more than 200 vendors and enjoys improved processes, accelerated delivery dates and more time saved.

A Deeper Look into Healthcare

Let’s take one of the most critical vertical supply chains impacted by the pandemic: healthcare. SAP Ariba Discovery, a digital solution specifically designed to bring trading partners together at speed, found that, unsurprisingly, medical supplies were the top commodity posted by buyers in the UK for the majority of 2020.

Caused by unprecedented demand for healthcare equipment, traditional linear supply chains just could not cope. Trading partners in the chain were completely dependent upon the next, so as soon as one of those trading partners had a disruption, such as a supply shortage with delivery drivers unable to work, the supply chain ground to a halt. This is where agile, networked supply chains came to the rescue. In a networked environment, each trading partner has the ability to pull from several sources of supply and is less dependent on a single supplier, providing a more resilient solution.

In one example, a U.S.-based construction supply company urgently needed 500 hospital beds for a new temporary hospital being built to treat Covid patients. Its existing supplier had no stock. The company posted its requirements on SAP Ariba Discovery network and within 30 minutes a new source of supply was found.

Overall, the pandemic has accelerated the digitalisation of the procurement industry would face. It’s highlighted the need for linear models to be replaced by agile supply chain networks and for organisations to take advantage of the digital solutions now widely available. It’s now up to leaders in the industry to commit to restructuring business models to help prepare against future disruption and ensure continued growth.

You may also like