Buyers and procurement teams play an invaluable role in the supply chain, sourcing materials and running constant analysis to ensure cost savings and reliability. Like many other aspects of the supply chain, their role has become increasingly complex and challenging through the course of the COVID-19 pandemic, as companies attempt to navigate a fractured global market and continually rising costs. The modern buyer must learn to adapt their supply chain procurement strategy and adopt a proactive approach to supply chain planning.
This article examines variability as it applies to procurement in the supply chain and how supply chain buyers can adapt their strategies to ensure success in the procurement process.
Why Variability in the Supply Chain Causes Issues
The supply chain is a complex global network of material suppliers, manufacturers, transportation providers, importers, warehouses, distribution centers, and more. Each stakeholder is highly dependent on the others, and a single weak link in the chain trickles down to impact the whole. Due to this interconnectedness, the supply chain is highly reliant on consistency and predictability — what it cannot tolerate is variability.
Variability refers to the difference between actual and planned lead times and can occur at each tier, from material sourcing to distribution. Variability always exists within the supply chain to some extent, as random disruptions and unexpected setbacks are inevitable in such a complex process. However, disruptions have been more frequent and extreme over the past two years, causing tremendous variability and uncertainty. The variability caused by disruptions also led to further disruptions and even more variability — an accumulative snowball effect that has wreaked havoc on overall supply chain planning.
The primary reason variability has caused this level of chaos is a lack of true visibility within the supply chain. When things are running smoothly and following a relatively set schedule, buyers and procurement teams rely on historical data and assume purchase orders will arrive within an established timeframe. From there, production and distribution schedules fall in line, customers receive orders on time, and shelves stay stocked. Lack of visibility, while perhaps not ideal, might not feel like a pressing issue when the supply chain is stable. Unfortunately, this lack of visibility becomes highly problematic in times of disruption, like what we have seen in the wake of the pandemic.
Consider, for example, the congestion issues that plague U.S. West Coast ports. The Ports of Los Angeles and Long Beach struggle to clear a backlog of containers that have landed in their terminals, so dwell times for inbound container ships remain high. This creates longer transit times on the U.S.’s most prominent import routes from Asia, directly impacting procurement and supply chain planning. It is in this type of scenario, where one weak link creates a snowball of issues, that lack of visibility becomes the most troublesome. Supply chain buyers and procurement planners are flying blind, with no reliable, automated information on where orders are or when to expect them into inventory. They are attempting to manually track orders with suppliers and transportation providers, who themselves often don’t have clear answers to the status of a single container on a ship sitting 100 miles off the port.
The issue is further complicated by the fact that purchase orders and containers do not have a one-to-one relationship. A single purchase order may span across multiple containers, or a container may contain multiple purchase orders. Getting an update on a single PO or SKU that is holding up production can be a tedious and potentially fruitless task. Even technologies designed to address visibility have failed to meaningfully improve the situation, as most rely on adoption across a supply chain network to sync data and provide the accurate updates needed for effective supply chain planning. Considering the hundreds of thousands of suppliers and transportation providers potentially involved with a purchase order, it would take an enormous amount of collaboration and industry-wide adoption to create substantial visibility with these technologies.
The New Role of Buyers and Procurement Teams
Supply chain procurement, the process of acquiring materials and supplies, plays an essential role within a company’s supply chain. Buyers are responsible for sourcing suppliers and managing costs of goods to ensure that the company’s products remain profitable. To do this effectively, buyers must assess factors like quality, quantity, time, and location regularly while negotiating the best possible pricing.
With its high level of variability, today’s global supply chain requires buyers to create strategic and increasingly complex procurement plans. The new role of buyer goes beyond procurement and should include:
- Supplier diversification: In the past, supply chains have proved to be inflexible in times of distress. Buyers should be looking to diversify their supplier networks to insulate from variability in the supply chain.
- Seeking out cost-savings opportunities: With total costs of goods on the rise due to labor and capacity shortages, buyers need to be cognizant of any opportunity to minimize procurement costs.
- Contingency planning: Modern buyers should recognize issues the supply chain currently faces and work to proactively identify potential pitfalls within their network. Developing a contingency plan allows the company to react quickly when a disruption threatens production or inventory.
- Time management and workforce efficiency: Buyers and procurement teams are challenged in the current market to take proactive roles in the supply chain and solve problems quickly. This leaves little time for tedious purchase order tracking and inventory management. Modern buyers should embrace automation and artificial intelligence (AI) technologies to create efficiencies in the procurement process and free up time for strategic initiatives and supply chain planning.
Automation as a Solution for Visibility and Navigating Variability in the Supply Chain
Variability creates issues for supply chain buyers due to a lack of true visibility. Without visibility into incoming purchase orders and inventory levels, supply chain procurement teams cannot accurately plan or execute. This is particularly true in the current supply chain environment, with its unreliable transit times and ongoing capacity constraints. Additionally, buyers do not have the time to manually track orders and manage inventory — particularly since the time spent does not create a long-term solution to the visibility issue.
Buyers and procurement teams need visibility and efficiency. The answer may lie in automation and AI technology. Automation is designed to eliminate or minimize menial tasks by collecting and organizing data, while AI interprets and analyzes the data quickly and efficiently. This gives buyers the time to focus on big picture issues, while simultaneously providing them with insights to improve contingency planning and minimize the impacts of delays.
Leverage provides today’s supply chain buyer with the automation solutions to improve purchase order visibility and the AI insights to anticipate inventory risks and proactively address issues. The platform integrates easily with existing systems, such as ERPs, without requiring suppliers to learn and adopt new programs. Leverage auto-collects PO status updates from EDI, email, WeChat, and WhatsApp, giving procurement teams the information they need, instantly. Status updates upload to a centralized hub, allowing procurement teams to monitor incoming SKUs against current inventory levels in real-time. Using AI-powered heat maps within the platform to track inventory data and alert buyers to potential inventory risks, supply chain procurement teams have the time to proactively address issues.
With Leverage, buyers can get back to solving problems, diversifying suppliers, and managing costs with the confidence of meeting inventory targets and fulfilling customer orders. Contact the experts at Leverage today for a consultation and learn more about their simple integration for automated purchase order collection.
