Contract Management

3 Strategies Procurement Professionals in Manufacturing need to implement in 2018

Manufacturing is more than just putting parts together. It’s coming up with ideas, testing principles and perfecting the engineering, as well as final assembly.

James Dyson

Manufacturing touches our lives every day, in more ways than we realize.  It contributes £6.7trillion to the global economy (1). It drives 12.3 million jobs in top industries such as transportation, food and fabricated metal, and in the US alone counts for $2.2 trillion of the economy(2). In the UK, Manufacturing makes up 10% of GVA and 45% of UK exports and directly employs 2.7 million people (2).  

Despite competitive pressure and significant economic and political uncertainty, Manufacturers are optimistic. According to KPMG’s Global Manufacturing Outlook, 74% of manufacturers say that growth will be a high priority over the next 2 years. (3).  To that end, most global manufacturers have entered China and India, and some are evaluating markets like Mexico, Turkey, South Africa and Vietnam in the search for new customers and to lower costs.

New markets and new ways of doing things mean that this industry must constantly evolve. IDC predicts that by 2019, 40% of G2000 manufacturers will use design democratization and collaborative innovation to meet revenue targets from newly developed products and services (2).  The driving need for innovation, accountability, sustainability, and speed to market for new products requires new strategies and new business models.

What does this all mean for the Procurement and Supply Chain functions at manufacturers?  

We strongly believe that Procurement is ideally positioned in the center of this maelstrom. Effective Procurement and Supply Chain leaders can open the doors to not just better manage costs, but also reduce risk, unlock supplier innovation to drive competitive advantage and ultimately revenues, and much more.

Effectively doing so requires the right mindset, with a willingness to change and innovate one’s processes. It also requires the right technology. Technology that empowers Procurement & Supply Chain leaders to be smarter, with actionable insights at your fingertips. Procurement must be collaborative, not just in terms of processing and tracking orders but throughout the entire Source-to-Pay process. It must also be agile, to respond to evolving needs and new requirements.

Manufacturers who wish to survive in this competitive and agile market, let alone thrive, must consider strategies in the following areas

  1. Accelerating Innovation, Product Development and Time to Market –  expanding into new markets with unique products has become the norm and organizations that are successful are maximising their value chain and delivering what customers want ahead of the competition.  Procurement is at the heart of this evolution bringing order by creating global, cross-functional teams and creating operational efficiency and competitive advantage. An effective process to tap supplier innovation for new product introduction (NPI) is essential.
  2. Incorporating Mature and Emerging Digital Technologies –  Digital technology is now the norm for Manufacturers.  Take AI as an example.  Data is central to making informed decisions and taking risks –  AI can quickly help to harness enormous amounts of data and put it into context at the right time, for the right person. Data involving spend, suppliers, contracts, assets, and risk can all of sudden make Procurement predictive and using technologies like natural language processing (NLP) and chatbots make users self-sufficient.
  3. Enhancing Collaboration with Customers, Suppliers, and Partners– leading global manufacturers to talk openly about how they are switching from beating suppliers up and being perceived by many as arrogant to working collaboratively – to mutual benefit
The uncertainty manufacturers face today presents many challenges, but with the right mindset and empowering technology, savvy Procurement & Supply Chain leaders have a unique opportunity to build a competitive advantage.

1. The Manufacturer, 2017

2. Industry Week Infograpic, March 2017

3. KPMG’s Global Manufacturing Outlook 2016

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