How A Procurement Reset Can Reduce Supply Chain Risk

Innovation How A Procurement Reset Can Reduce Supply Chain Risk SAP BRANDVOICE Storytelling and expertise from marketers | Paid Program Sep 27, 2022, 08:59am EDT | Share to Facebook Share to Twitter Share to Linkedin By Gordon Donovan, Market Research Director – Procurement and Supply, SAP “When the world is predictable you need smart people. When the world is unpredictable you need adaptable people. ” This quote from Henry Mintzberg, Canadian academic and author and co-author of 15 business and management books, has never seemed more appropriate for procurement leaders of midsize businesses as it does now.

Although they would like every business purchase to be “quick, good, and cheap,” procurement leaders know that only two of these three goals can be achieved. Suppliers can provide good and cheap products, but not as quickly as expected. Or they can offer a quick and cheap option, yet it’s never really as good as promised.

Does that mean that supply chains will fall short of delivering what the business needs? Not necessarily, based on research findings from SAP Insights . Surveyed procurement leaders from companies with annual revenues under $1 billion shared with SAP Insights that their priorities need to go beyond buying goods and services that are good in quality, priced low, and can be delivered quickly. They also consider suppliers and vendors that can help them navigate risks such as supply chain fragility, resource scarcity, and cybersecurity attacks.

Evolving perspectives through digitalization The dramatic shift in the procurement agenda comes down to the changing nature of risk. Compared to their larger competitors, midsize companies have less buffer to absorb pressures from inflation, supply shortages, demand uncertainty, and other factors of economic turbulence. And the increasing intensity of this reality is compelling procurement leaders to rethink how they choose and negotiate with vendors, source materials and subcomponents, and steer internal buying behaviors.

MORE FROM FORBES SAP BrandVoice: How To Get Your Supply Chain Ready For Christmas By SAP Guest When procurement goals are well-defined, midsize businesses can avoid the risk of diluting savings achieved through one objective at the expense of another. Each purchase decision must be made with a specific purpose in mind – for example cost reduction, increased sustainability, quality improvement, more reliable availability, or regulatory compliance. It’s unlikely that a single good or service can fulfill every business goal, but each choice can bring the business closer to its intended future vision.

The key to obtaining the insight needed to weigh purchases strategically is digitalization. As Minztberg once said, “Strategy is a pattern in a stream of action. ” Through digitalization, those streams to be more easily seen.

Driving greater visibility across business buying behaviors and throughout every supply chain tier helps identify risks earlier and make better decisions faster. According to SAP Insights, approximately 90% of procurement leaders recognize the importance of digitalization to achieve profitability and competitiveness. Using advanced technology that moves them past simple approaches – such as automating simple tasks or making forms available online – plays a critical role in improving performance, response to future risks, and long-term competitiveness while reimagining processes end to end.

MORE FROM FORBES SAP BrandVoice: New Strategies Inspire Big Growth For Manufacturers With Smaller Footprints By SAP Guest Survey respondents attribute their digital transformation accomplishments to technologies including cloud computing, collaboration tools, cybersecurity infrastructure, automated business intelligence dashboards, business process intelligence, application development platforms, and data management architectures. However, their digital investments alone cannot deliver the procurement outcomes necessary for businesses to succeed. Equally important is the expertise of people who can use the technology to turn data into real-time insights, access a global network of suppliers, and accelerate decision-making with embedded artificial intelligence and machine learning.

Decision makers use these skills to take a structured approach to balance, for example, cost models, sustainability impacts, and regulatory compliance while addressing emerging opportunities and risks in their supply chain. Consider the current challenges around supply chain resilience, continuity, and sustainability. By expanding the supplier network, procurement leaders give supply chain organizations the flexibility to switch to more optimal sources of materials, goods, and supplies without getting locked into long-term contracts.

Such a feat could never be accomplished with manual processes. Rather, control over business data on a single, integrated platform and access to a digital business network provides the visibility and insight needed to engage a more consistent and reliable approach to vendor collaboration. Managing and delivering value with less risk Procurement practices and challenges have certainly changed over the last two years and will continue to shift as market dynamics, business requirements, and customer expectations evolve.

This reality may seem incredibly challenging on the surface. But when every purchase is made with a clear purpose and comprehensive, real-time insights, midsize businesses can position themselves to quickly pivot their strategies and seize every opportunity – with as little risk as possible. Explore how procurement leaders from midsize companies move beyond cost savings and toward operational resilience by reading the SAP Insights paper, ” The Transformation Mindset: Procurement’s Role in Delivering Business Value .

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