National Connections, Local Ownership
National Connections, Local Ownership

How Digitization Can Mitigate Supply Chain Disruption

A global supply chain. A pandemic that disrupts production. A demanding customer base (both B2C and B2B) expecting on-time delivery and not interested in why they can’t get what they want when they want it. These are the challenges facing businesses today.

There’s no question that COVID-19 has been the major, unforeseen disruption that’s made this all the worse; but globalization and customer demand have been putting pressure on the supply chain long before this. Companies still relying on function-based silos and legacy manual and paper-based processes will find themselves falling farther and farther behind.

Collaboration between procurement, logistics, and finance is essential and all functions need to be aligned with overall company goals. Without digitization of each function, this becomes increasingly difficult. And that could badly impact the customer experience. Automating processes creates greater speed, accuracy, and efficiency. Digitizing all data also provides visibility into the status of every order and every transaction…for all stakeholders.

A recent article from KPMG details the key challenges impacting the global supply chain in 2022 and offers advice on how to mitigate these challenges, with technology playing a major role

Challenge #1 – Logistics is expected to do more with less. The disruption created by the pandemic has exacerbated an already difficult situation. Logistics needs to work with Procurement to find alternative supply chains to better ensure product is available. To ensure shipping and delivery meets customer expectations, logistics may recommend companies have micro-facilities, putting inventory closer to the customer base.

Challenge #2 – Rethinking the JIT philosophy – There was a point in time where companies turned to just-in-time delivery so as not to have excess inventory. The pandemic showed that this could be a short-sighted strategy. Procurement needs to be flexible and resilient when it comes to this topic. Price, which was always the first concern for Procurement, should now be only one issue, with availability, compliance, and risk playing more prominent roles. Analytics will help decide inventory needs to meet customer demands…and give a company a competitive advantage.

Challenge #3 – Reliance on a limited number of vendors – Relationships develop over time and sometimes, Procurement can become complacent, giving most business to a smaller group of vendors. The thought is this gives Procurement greater control and an advantage when it comes to pricing. But supply chain disruptions left companies like this with little to no leverage over alternative vendors when their own list could not supply the needed product. Having the right technology and tools will enable companies to identify the suppliers that will help them meet their needs. This is not to minimize the importance of maintaining good supplier relationships. It just means companies need to have readily available alternatives.

Challenge #5 – Pricing – Being a good negotiator is no longer enough for Procurement professionals. According to the KPMG article, those in charge need a better understanding of the commodities pricing in relation to categories, since a specific category of a commodity could have different pricing issues. Procurement also needs to take into account the timing of ordering as well as optimal quantity. Again, analytics will play a key role. Relying on phone calls to suppliers is no longer a viable way to operate.

Challenge #6 – A workforce that needs different skillsets – We’ve all read about (or are experiencing) the problems of too many jobs and not enough workers. For many industries, the worker shortage may dissipate once the pandemic comes totally under control and workers can return to the office or factory. But for many other companies, new technology needs employees with the skills (or at the very least the raw talent) to optimize that technology. Recruiting Millennials and Gen Z employees will require new ways of recruiting, with salary levels alone not being enough to attract the best and brightest.

Technology will help address these issues. I can’t say it any better than the KPMG article does when it comes to overcoming these challenges. ”.…teams are focusing on digital transformation and technology – seamless flow of information across value chain and insights delivers faster decision making. Organizations are leveraging spend analytics tools and software packages to increase visibility of where, how, and when they spend. Consolidation of spend enables improved buying leverage and negotiating power to help drive value or push for improvements.

Read what other steps you should be taking in 2022 in a recent NationaLease blog.

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