Managing modern supply chains is a crucible for today’s procurement leaders. It’s never been easy, but the increasingly interconnected nature of global commerce means the slightest disruption could have a significant impact on delivery. Even for the most senior buying professionals, it might be difficult to point to a more challenging time in our industry. Climate change, inflation, and geopolitical uncertainty are just some of the variables contributing to this difficulty. However, managing costs is still the primary issue facing procurement leaders. The rising costs of raw materials, insurance premiums, unpredictable energy prices, shipping and transportation costs, and labor prices all have to be managed while also maintaining service levels. Doing this effectively is a requirement for maintaining profitability and staying competitive.
Unpredictability is Here to Stay
The COVID-19 pandemic highlighted critical weaknesses in our global supply chain that, four years later, are still reverberating in our business. Global commerce ground to a halt and threw production and delivery around the world into question. But a funny thing happened when COVID-19 ended: the global supply chain never really bounced back. Changing consumer priorities, labor shortages, shipping bottlenecks, and a world of uncertainty descended on supply chains, creating a new normal that organizations have to plan for.
This reorientation of supply chains has forced organizations to recognize the need for resiliency in their systems as a way to navigate unpredictability but also to manage costs. The world is an unpredictable place, and procurement professionals have always had to contend with those variables. However, through effective direct procurement risk management, business leaders can address the risks they can control and manage the ones they can’t. Up to 70% of inbound supply chain issues happen before shipment, and this could be anything from a missed purchase request that gets lost in an email to an error in order processing. But even with the unpredictability in today’s modern supply chain that is outside of your control, most of it is entirely addressable with the right technology.
Managing Costs through Direct Procurement Risk Management
Managing costs throughout the PO lifecycle management process begins and ends with reliable ERP data. Access to accurate, AI-powered real-time risk management information helps procurement leaders manage costs effectively through better supplier collaboration, visibility into potential disruptions, actionable performance metrics, and by eliminating tedious, manual processes that often lead to errors in the first place.
SourceDay can give procurement teams full visibility into their PO lifecycle management workflow and eliminate manual processes that are subject to costly human error. By automating the steps associated with the seemingly never-ending PO updates, SourceDay is the single source of truth for every interaction between suppliers and buyers. Trustworthy information makes it possible to make better decisions, and having a centralized communication hub means approvals can happen right away. This helps manage costs by not wasting communication cycles because of outdated information or spending hours on manual processes that might only be accessible to a few people. And because SourceDay integrates with any ERP, there’s no onboarding or specialized training that needs to happen.
Managing Costs While Maintaining Service Levels
Relationships are core to PO lifecycle management, and failure to manage any of the risks we’ve discussed can negatively impact the buyer/supplier dynamic. In our current business environment, maintaining service levels is critical and can be even more important as organizations face the challenge of rising supply costs. The adaptability and flexibility of procurement teams are more important than ever, and agility is another area where the SourceDay platform can help. Direct communication between buyers and suppliers, reliable data, and transparency at every step of the supply chain can strengthen these relationships and foster a greater sense of collaboration. When these teams can work together to control and overcome risks within their control, it builds a foundation for cooperation in areas that might be outside of their influence.
The SourceDay platform has a long track record of demonstrating its ability to improve efficiency and get suppliers paid faster. Nothing improves service levels like making sure cash flow is protected against unnecessary risk. Additionally, meeting service levels allows teams to negotiate better deals, as suppliers are more likely to offer favorable terms to reliable partners.
As costs rise, procurement teams need to be strategic in their sourcing and supplier management to balance service quality with cost control. Juggling both ensures that businesses can remain competitive, avoid costly downtime, and maintain customer satisfaction. Ultimately, effective direct procurement risk management can have a big impact on managing costs and overall business growth.
