How Procurement Automation Can Tackle Supply Chain Uncertainty
Automating procurement processes amidst supply chain uncertainty.
In the aftermath of supply chain uncertainty, rising inflation, and labor shortages, procurement teams still face constant and complex challenges today. Danny Schaarmann, CEO & president of xSuite North America, says digitization in the procure-to-pay process could help procurement teams and suppliers alleviate some of these hurdles.
The world has seen drastic supply chain changes within a few short years. This is partly due to container ship congestion in the North Sea, port shutdowns in Asia due to Covid-19, and even the invasion of Ukraine by Russia. Furthermore, rising inflation and increased labor shortages have also caused disruptions. Currently, procurement teams are still encountering almost nonstop and complex challenges.
While some of these issues were evident before the pandemic, these concerns’ combined impact predominantly falls upon procurement teams. Currently, there is no telling whether the worst is behind us or the situation has reached an impasse. Is the current situation akin to what many refer to as the “new normal,” or are we simply seeing the beginnings of an increasingly volatile global economy?
Time will tell. However, we can be sure that procurement teams will continue to face new challenges in the future. In hopes of combating these multi-layered challenges, companies should consider the resilience of their supply chains.
Lessening Workloads with Digitization
The purchase-to-pay process can see further efficiency or full automation with the help of digitization. For example, this digital process can be used within a standardized setting and allow for internal approvals or demand creations. This can be achieved through utilizing a portal that serves as a centralized platform that vendors and suppliers can use to communicate and exchange documents with one another. Furthermore, incoming documents can be processed automatically. This could be especially helpful when expecting and sending order confirmations and invoices.
Digitization has limitless potential to create an easier process for purchasing teams. In today’s uncertain supply-chain crisis, it also makes even more sense that automation is the next step. Heavy workloads have become the norm among those most impacted by a chaotic supply chain, pushing companies to turn to digital automation in these areas. Due to many processes in procurement following certain standard procedures, these additional workloads can be made easier to handle with automated digital solutions.
See More: The Digitization vs. Digitalization of HR: Why the Difference Matters
No Longer “Order Confirmed”
Before the pandemic, purchasing teams followed a smooth procedure where order confirmation was all but guaranteed. These teams provided vendors with a PO and could often expect a “confirmed as ordered” response. It was considered rare and inconvenient if the quantity, delivery date, or price did not match specifications. Today’s world is very different.
According to a 2022 international survey conducted by Globalise, nearly half of the companies surveyed worldwide indicated that last year’s supply chain bottlenecks had a severe impact. Even more concerning, 44% of surveyed companies anticipate these bottlenecks to continue for another 24 months. This survey included 600 top global executives and focused on how ongoing bottlenecks in the supply chains between June and July 2022 continue to cause large impacts worldwide.
This shows that “confirmed as ordered” has begun to be the exception to a previously unquestioned rule. For some products, although especially seen within raw materials and intermediate products, companies frequently encounter the following:
- Delivery date discrepancies: Container ship congestions on the Suez Canal and in the North Sea, along with Covid-19 shutdowns among Asian ports, have caused large disruptions with no end. Deliveries continue to see significant delays, and there is no longer a guarantee that orders will come within tight timeframes.
- Pricing disparities: Raw materials are in high demand, especially within the construction industry, as homes and businesses continue to be built every day. Rising tensions with Russia and increased inflation have also increased price variations among industries, from food to microchips.
- Quantity inconsistencies: Companies that purchase semi-finished products and individual parts from upstream suppliers face increasing problems with order quantities. It becomes more complicated when certain suppliers face a similar procurement challenge with raw materials. These circumstances continue to cause issues when supplying downstream products.
In today’s world, encountering so much uncertainty, it’s no wonder suppliers face a frustrating reality – the rule has now become the exception. Orders cannot be guaranteed or confirmed.
Purchasing staff now need more time to handle deviations when processing order confirmations than ever. To make matters more dire, incoming confirmation numbers due to partial or delayed deliveries have dramatically increased.
The workloads within procurement teams have grown too large for manual procedures. For companies looking to alleviate the supply chain’s current impact on internal processes, consider automating procurement processes, beginning with incoming order confirmations.
How do you think procurement teams can utilize automated processes to tackle supply chain uncertainty? Share with us on Facebook, Twitter, and LinkedIn.
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