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In this guest post, Procurement Leaders invites GT Nexus’ Greg Kefer to offer insight on how procurement organisations are looking to develop supply chain visibility and translate those efforts into financial impact.
From a procurement perspective, the focus of supply chain visibility engagements is on the direct side and typically begins with the supply chain organization. The current definition of global supply chain visibility means much more than tracking shipments and inventory flows and extends to orders, supplier activities, production, payments and commercial documents. In other words, it is very much in the influence zone of many procurement organizations.
Over the course of some 5,000 meetings with leading companies, we were intrigued to encounter organization structures where the procurement and supply chain teams did not even know each other. They were disconnected, silos focused on their specific issues. "Our job is to get the right goods at the best price," we heard. Also: "Our job is to get the goods from point A to point B on time, in an efficient manner." Not a big surprise, right?
But here’s what happening today: the topic of supply chain has risen to the C-level. The media, analysts and consumers have a major interest in knowing where and how goods are produced. The way companies procure and manufacture goods has a direct impact on the brand, its share price and its revenue. Supply chain is a top priority in board rooms everywhere.
With this comes a wave of holistic supply chain strategies that break down the walls between supply chain, procurement and treasury – to work towards the same set of goals. Companies seek to generate operational efficiency and mitigate risk by connecting their global trading networks in the same way that ERP systems have integrated internal business processes. But many found a disconnect between traditional solutions and the ability to connect a global network of businesses.
In the last few years there’s been a major shift in thinking. New cloud-based technology systems are connecting buyers and sellers in ways that were once viewed as impossible. Suddenly, the supplier is a vital player in the march towards achieving operational excellence because visibility is the enabler and the front end of the supply chain must participate.
True supply chain visibility doesn’t just tell the buyer where the stuff is; it’s the foundational information hub, driving process innovation across the organization. Supply chain finance and Procure-to-pay is enabled by visibility. Omnichannel fulfillment in retail is driven by visibility. Segmentation is enabled with visibility. This is top level (or, bottom line) stuff.
Companies are faced with very conflicting priorities. On one hand, they’re pressured to drive down costs through outsourcing things like production and logistics. They are also trying to drive down excess inventory buffer stocks in the context of lean initiatives. And finally all of this is must happen in an environment of global expansion into new markets and shifting sourcing patterns.
How can all of this happen without heavy involvement from the procurement organization? It can’t.
One of the emerging value dimensions of supply chain visibility systems is their ability to better connect companies internally. The thrust has been getting entire networks on the same information page, decentralized corporations have also seen the value of connecting themselves, which could mean different regions, or departments that typically operated in the dreaded silo.
What kind of "bottom line" influence would a CEO be happy about? How about the removal of a week’s worth of inventory buffer stock? For big company, that’s a few hundred million dollars. Or, how about extending payables to net 90 days, while also paying suppliers in 30 days so they remain solvent? These are the kind of opportunities that are squarely in the influence zone of the procurement organization: it’s direct, it’s strategic and it’s big.
Greg Kefer is VP corporate marketing with GT Nexus.