It’s time to move the direct materials supply chain to the digitalization front


The lack of visibility and the ability to respond quickly to the pandemic has highlighted the limited progress organizations are making in their digital supply chain efforts. In a survey of McKinsey, 85% of respondents struggle with inefficient digital technologies in their supply chains.

The inability to address disrupted supply chains while simultaneously accommodating a remote workforce has forced organizations to re-prioritize goals. In the context of raw materials and direct materials, the supply chain procurement, negotiation and execution processes were locked into a mixture of manual steps, disconnected systems and inaccessible spreadsheets. Procurement teams were unable to assess the supply chain risks and the enterprise-wide impact they faced. Because workers were remote, collaboration channels were limited between internal teams and extended to major vendors and partners.

Business leaders now understand that the ability to connect the dots between systems, data, and their people is key to maintaining business continuity, staying competitive, and ensuring sustained growth.

What is a resilient supply chain?

Achieving a resilient supply chain requires tapping into transformational digital capabilities that include automation, ecosystem engagement, and supporting new ways of working as key areas:

Automation of processes: In rapidly changing markets, businesses demand speed and agility, but the reality on the ground is that teams must manage with limited time and resources. This is where businesses stand to gain from accelerating automation efforts.

As goods move through the supply chain, there are a myriad of stages throughout the process.

Each stage contains multiple activities and countless transfers of transportation, warehousing, inventory tracking, trading and risk management, and international shipping. Businesses will benefit from implementing standardized processes that enable automation at each of these stages, allowing them to respond more quickly to disruptions, dramatically improving efficiency and resiliency. Teams can use the time saved by checking for updates by investing it in more strategic areas.

Engage the ecosystem: On 73% of organizations in a recent McKinsey survey encountered issues in their supplier base, and 75% encountered production and distribution issues due to Covid-19. Participation in the entire supply chain ecosystem will be crucial over the next two years. One of the main problems in achieving this is the insufficiency of digital technologies in the supply chain.

Having said that, it is not about more, but about the right type that is developed for companies that are intensive in raw materials and raw materials. Critical focus areas include collaboration between suppliers and buyers; supply chain execution; and transparency of sustainability.

Collaboration with suppliers: Relationship matters. The importance of moving from a transactional relationship to a more collaborative one cannot be underestimated. A conscious effort to adopt behaviors and practices early in the source process not only helps build trust in the supplier network, but also improves competitive advantage over the longer term.

What plays a key role in building this relationship is establishing trust and full transparency by allowing suppliers to collaborate effectively. Business demands speed and agility, but the reality on the ground is that teams must manage with limited time and resources. Automation of communication can help generate value in rapidly changing markets. By digitizing collaboration with suppliers, purchasing organizations can reduce the cost and latency of sharing information, while ensuring that everyone is operating on the same version of the truth. Teams can use the time saved by checking for updates by investing it in more strategic areas.

Support new ways of working: Today, two in three employees say they have to put too much effort into using the technology provided by employers. Meanwhile, the average employee spends more than five hours a week battling technical issues. Gone are the days when an employee could go to the IT office to troubleshoot issues.

Remote work is here to stay. New ways of working are emerging and will require special attention to the need to enable collaboration and self-service to support remote working at scale, not only for employees but also for buyers and suppliers. For example, Simplified user interfaces will go a long way in enabling jobs to do their jobs easily and transparently.

The need to continue an aggressive digitization program could not be clearer. Prone to human error, manual tools such as spreadsheets or legacy ERP’s cannot provide the speed, visibility, or functionality needed to gain insight to make timely decisions. It’s time to bring the direct materials supply chain to the forefront and push for digital change.



The opinions expressed above are those of the author.



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