One of the trends we’ve been following is how companies are responding to growing customer expectations of faster delivery, personalized products, and more transparency. For consumers, these are seen as table stakes. For organizations, these present a never-ending cycle of finding improvements wherever possible to optimize the supply chain without compromising cost and with minimal disruption. Efficient direct procurement risk management is the key.
Direct Procurement Risks
Direct procurement refers to that part of your spending that goes into the vital ingredients you need to build your products, including all the raw materials that make up the finished product. This is likely the lifeblood of your business, and fluctuations in the supply chain at this point can have real and lasting impacts on ability to meet customer expectations and deliver customer satisfaction. We know that, on average, 52% of direct spend PO lines will change during the process – and probably multiple times. Managing these changes well is a key enabler to an organization’s ability to adapt to changing conditions in the supply chain and the market.
Let’s look at some familiar sources of risk in this segment of your supply chain:
- Supply Chain Disruption – Building and managing a reliable supply chain in industries where market shifts and geopolitical events impact raw materials can be particularly challenging. We’ve discussed how supply chain performance can fluctuate when there are local, regional, or global events that impact the way in which goods are shipped and companies do business with each other.
- Quality Issues – With all of the planning that goes into purchasing enough material, the right components, and in the right quantities to build the finished product, the quality of materials they provide is largely out of your hands. Rejects at incoming inspection, for example, can result in manufacturing delays and missed shipments.
- Delivery Time and Accuracy – By providing real-time visibility into supplier performance and order status, SourceDay ensures that any potential delays or disruptions are promptly addressed. This proactive approach reduces lead times and helps maintain consistent delivery schedules, improving supply chain reliability.
Buyer/Supplier Communication is at the Root of Risk
Any of these risks has the potential to impact an organization through lost time, increased cost of goods, and an inability to forecast revenue accurately. However, it can also damage customer relationships by failing to meet customer expectations, which is much harder to correct. In our experience, issues with buyer/supplier communication pose one of the most persistent sources of risk. Manual procedures or archaic management leads to a staggering amount of clerical work, which naturally leads to missing or incorrect data, missed emails, lost documentation, or any number of other inefficiencies that lead to lost time, slow communication, and, ultimately, frustration.
Proactive Risk Management
An organization’s ability to handle risk often comes down to being proactive. Identifying risks and having processes that allow one to adapt when they occur has been transformational for our customers. Having a system that allows your supply chain team to analyze supplier behavior, both historically and in real time, makes it possible for a team to identify single points of failure, plan for contingencies, and monitor performance.
The silver bullet for meeting all of these challenges is better supply chain visibility.
SourceDay Enables Direct Procurement Risk Management
The SourceDay platform addresses the difficulties outlined above by providing key tools that empower supply chain teams:
- Real-Time Supplier Performance Monitoring: The SourceDay Overall Supplier Performance view allows you to track the overall performance of your suppliers. This feature breaks down key metrics across different suppliers so you can see how different suppliers compare. These metrics are updated in real-time, and individual supplier scorecards allow you to check in on a particular supplier’s score across four metrics (On-time Delivery, Responsiveness, Price Variance, and Quality). You will be able to see at a glance how key suppliers of raw materials have been performing, and any changes in performance due to disruption will be clearly visible.
- Collaboration Hub: The key to succeeding in supplier relationship management is collaboration that makes it easy to exchange important information like changes to order and delivery or required documentation. SourceDay benefits buyers and suppliers by fostering transparency and real-time communication so everyone can work together to resolve issues.
- Automated Workflows: SourceDay talks a lot about how simple data errors or miscommunication present all kinds of risk, and it’s difficult to overstate the power of replacing manual, often tedious, steps with automated workflows. This increases efficiency and avoids human error on both sides of the platform, making life easier for suppliers and procurement and proactively addressing a source of risk.
- Real-Time PO Visibility: SourceDay provides you with real-time updates on purchase order status, enabling proactive decision-making, which, as we noted above, is a core component in managing risk. By gaining real-time visibility, your organization can react faster and stay ahead of disruptions in the supply chain.
SourceDay acts as a force multiplier in your approach to direct procurement risk management, giving you the insights you need to proactively and adaptively respond to changes in the supply chain, ensuring you can protect your organization from those disruptions and continue to meet customer expectations.
