2015 may be “a watershed year for strategic procurement transformation”, according to recent research by software provider Zycus. Supplier management solutions emerged as a key point of interest, as companies pursue supply chain visibility.
Building supplier relationships
The new Pulse of Procurement report describes an ongoing shift from defensive, internally focused actions to a more pro-active and ambitious search for new growth and innovation opportunities. It revealed that many procurement professionals currently are focusing on forging strong supplier relationships. However, research by supply chain risk management company Achilles found that a shocking 20% of large manufacturers base their confidence in a suppliers’ ethical compliance standards on personal relationships alone. Clearly, a more reliable solution is required.
Supplier management technology
Unsurprisingly, technology enablement for procurement is expanding rapidly. Zycus found that roughly one third of surveyed companies rated their technology as ‘behind the curve’, and a similar number were found to be currently planning technology upgrades.
Supplier performance management was ranked among the top three procurement priorities for 2015. In fact, 42% of those surveyed were currently planning supplier management system upgrades - that’s nearly half of all companies questioned!
While 60% cited that they currently have supplier management solutions in place, 41% said that their systems are ‘home grown’ or semi-manual, and only 11% rated their current supplier management solutions as cutting edge. Interestingly, 22% of supplier management solutions are ERP based.
We’ve previously posited whether ERP solutions could promise vendor compliance. The problem is, while ERP systems enable the movement of information between business activities, they don’t always examine the entire sourcing model. Total visibility can be achieved, but only at a prohibitively high cost. As a result full component supply and subcontracting isn’t always monitored, and full supply chain visibility isn’t achieved.
ERP systems can track incoming supplies of materials and goods between the company and their tier one suppliers. However, moving beyond tier one into the tier two, tier three and beyond to the original source of components is rarely possible. As a result, secondary supply chain visibility is hampered. Missing orders, as well as poor quality components which may also be unethically and unsustainably sourced, cannot be traced to the offending supplier. They can therefore find their way into a company’s supply chain and goods without their knowledge.
However, our software works alongside ERP solutions thanks to a full EDI transactional layer, functioning as part of a bigger supply chain management solution. Segura monitors a customer’s entire supply chain, providing visibility of all orders and interactions with finished goods, components suppliers and subcontractors. This provides customers with vastly improved visibility.
An affordable supply chain visibility solution
According to research by Zycus, companies that are building their procurement capabilities most aggressively are reaping the greatest rewards and achieving significantly higher performance levels.
More spending is normally a key component of virtually all aggressive business growth strategies. However, can many companies really afford to take a risk and adjust to more assertive spending strategies? Within the garment industry in particular, we know that production margins can be tight. Can retailers and manufacturers spend big on procurement, and is it really wise?
Luckily, Segura’s supply chain visibility solution is provided on an innovative low (in many cases zero) capex and transaction-based pricing model. This is in contrast to capex-based and user license pricing models more common with other software platforms, such as traditional ERP systems. With Segura, you only pay for what you use, so even the most diverse upstream supply chain can be monitored at an affordable cost.