How can procurement and supply chain departments be more effective?

supply chain
August 20th, 2019
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The supply chain is responsible for ensuring that the company's products are available to its customers within short timeframes and with a high-quality process in place. To guarantee these results, the supply chain provides teams with the resources required for each stage of production.

International development, increased levels of outsourcing and the need to personalise the customer experience are just some of the new challenges facing supply chains.

In order to combat these challenges, supply chains must rethink their organisational models, but from a more collaborative perspective. In particular, they must approach procurement with the following three factors in mind:

Shared objectives between supply chains and procurement departments

The main aims for procurement and supply chain departments are almost identical:

  • To reduce the time between order and delivery
  • To ensure that products conform with the agreed specifications
  • To reduce the weights of stocks in your portfolio
  • To incorporate environmental clauses
  • To optimise the overall cost of making products available

The supply chain's ability to achieve its objectives will be enhanced by closer collaboration with the procurement department.

Expanding into foreign markets, where customers have their own expectations, therefore involves slight modifications to the manufacturing process and/or packaging. Procurement must assist the supply chain in developing the product process, by sourcing suitable components. In an environment with heightened competition, it is clear that responsive procurement is a key requirement for overall performance. Similarly, reducing stocks of finished and "just in time" products, particularly with a view to maximise personalisation, requires a high level of co-ordination between procurement and supply chain departments, to integrate current suppliers into this dynamic or identify new ones that can add this value. 

Optimising exchanges between supply chain and procurement departments

Like procurement, the quality of supply chain management is based on the ability to control three flows:

  • The flow of products which includes all movements of goods between a supplier and a recipient, for delivery but also sometimes for returns
  • The flow of information such as sending orders and tracking delivery
  • The flow of finances which focuses on payment methods and transfer of ownership

The synergy between supply chain and procurement is built on the accelerated exchange of standardised information. Information about forecasting sales across a range of products, future launch dates or opening up a new market with specific standards, is crucial in enabling procurement departments to direct their actions accordingly.

In contrast, information relating to the discovery of an innovative technology that can add value to production or the on-boarding of a supplier that can deliver by-products with more added value should be shared with the supply chain as soon as possible.

Both supply chain and procurement departments can therefore benefit from optimised exchanges.

Shared methodologies that can be adapted by both supply chains and procurement departments

Finally, full co-operation between the supply chain and procurement departments requires them to adopt shared methodologies and repositories. The interoperability of digital solutions is essential.

However, sharing best practices is also fundamental in order to sustain excellent supply chain management. This includes defining a set of shared criteria for selecting a new supplier, which include aspects such as traceability factors, a definition of quality and delivery time commitments, for example. Another example is sharing a joint information platform to process customer complaints, some of which will undoubtedly involve how a supplier is selected and the availability of components.

The supply chain and procurement departments are both committed to the company's strategic objectives. The organisation's overall performance is based on the stability of the chain — from identifying components to delivering the finished product. In an environment with intense competition and increasing societal demands for transparency and traceability, supply chain and procurement departments need to be able to work more closely together.  

Read the "Seven steps to improve your spend management" article to find out more about the effectiveness of collaborations between supply chain and procurement departments.