The role that procurement plays in manufacturing organizations is a difficult one. This function must simultaneously balance cost reduction, quality, and assurance of supply in their quest to maximize profits.
Without digitization, many manufacturing organizations see one or more of these areas suffer due to a reliance on manual processes, a lack of collaboration with suppliers, and little to no visibility of risk during the product development process. Procurement needs digitization at its core to enable automation, efficiency, and innovation within the supply chain.
Digitization Benefit #1: Inter-Enterprise Collaboration
Most of the benefits that can be realized by manufacturing procurement organizations are gained through external collaboration with suppliers and partners – which ERP systems, internal portals, and Excel spreadsheets are not designed to handle.
To foster inter-enterprise collaboration, best-in-class procurement teams are implementing cloud-based technologies that support workflow-enabled processes. These platforms bring key stakeholders together to address customer expectations, regulation compliance, supply risks, and much more. The resulting synergies unlock value and efficiency, improve visibility of risk, and take unnecessary costs out of the supply chain.
Digitization Benefit #2: Strategic Sourcing Alignment
Procurement tends to be an afterthought in the product design process, and without early visibility into product criteria, it is harder for them to find the right supplier at the right quality and the right cost. This practice significantly increases risk and time-to-market, directly impacting the likelihood of product success.
Manufacturers that use collaborative digital platforms have the capability to collaborate with key stakeholders early in the product development process. Teams are able to align on project deliverables, product criteria, and success metrics from the offset, creating synergies that bring efficiency to every stage of the product development lifecycle.
Digitization Benefit #3: Total Spend Management
ERP systems can handle only basic transactional procurement needs. Manufacturing organizations see the value in digitizing their spend management, but many have done so only for their indirect spend, which can include tooling/Maintenance, Repair, and Operations (MRO), packaging, and logistics.
There is only so much value that can be harnessed from digitizing this type of spend. The larger opportunity lies in optimizing all procurement and supply chain processes and bringing all spend types under management to gain a full picture of the complete Source-to-Pay process across all business units and regions.
Digitization Benefit #4: Enabling Innovation
While procurement is traditionally seen as a driver for efficiency and cost-cutting, the most successful manufacturing organizations have found that it can also be a powerful tool for strategic innovation. All too often, procurement teams are involved in mundane, manual tasks and spend too much time reacting to daily fires that arise.
Digitization starts with automating and streamlining processes, which improves efficiency and reduces time spent on manual work. It also provides a platform to collaborate with suppliers, who can introduce creative ideas for product differentiation. These benefits open the door to new opportunities for innovation and growth, giving manufacturing organizations a powerful competitive advantage.
Realize the Possibilities
Manufacturing supply chains are inherently complex and impacted by various factors outside of their control – unpredictable environmental factors, global health crises, changing industry regulations, and disruptive new technologies.
Leading manufacturers have found a way to limit the impact these factors have on their supply chain by finding the right balance of people, process, and technology. They invest in smart, collaborative, and agile technology platforms that allow them to automate processes, understand risk, and fully leverage their organizational resources.
The procurement function becomes empowered to not only deliver on efficiency, cost reduction, and quality goals, but to also unlock new value from the supply chain that drives strategic innovation and lasting differentiation.
Global Head of Manufacturing at Ivalua
Sundar Kamak has over 20 years of experience in Direct Materials, Supply Chain Management, Customer Marketing, Product Management, and Engineering. He currently serves as the Global Head of Manufacturing Solutions at Ivalua where he works with customers around the world to improve their procurement practices.
Prior to joining Ivalua, Sundar held an executive leadership position at SAP Ariba and spent a number of years with Covisint, where he led large strategic sourcing and e-business transformation initiatives for automotive manufacturers. He holds a Master’s degree in both Materials Science & Engineering and Mechanical Engineering from Wayne State University in Detroit, Michigan.
You can connect with Sundar on Linkedin