Streamlining supplier management with cloud portals
Supplier fraud is rising sharply and it may be affecting your supplier network. According to the 2015 Kroll Global Fraud Report, 17 percent of companies experienced some type of vendor, supplier or procurement fraud in the past 12 months. Of the firms that were victims of procurement fraud, 49 percent felt highly or moderately vulnerable.
Between negotiations among multiple suppliers and integrating ERPs into a unified system, it becomes vital to leverage supplier relationships for supply chain resiliency. Multiple suppliers vying for control can lead to internal process breakdowns including delay and errors that impact orders, shipments and data transfer critical to manufacturing success. Often times, suppliers cause internal chaos by:
- Requiring your company to develop a way for your ERP to communicate with their systems regarding orders and shipments;
- Urging your company’s IT staff to develop a way for their systems to communicate with your ERP regarding orders and shipments – commonly done via EDIs or APIs for large-volume suppliers;
- Attempting to use your preferred portal system to manually log order and shipment data, with little or no training and in the task of doing something different for every customer, potentially causing errors and delays; or
- Using outdated processes such as paper invoices, or communicating via phone, fax, and email – causing more labour for your company to transfer the data to your ERP
Effective supplier relationship management (SRM) is not a one-time operation. Companies must set realistic expectations and goals and continue to build trustworthy relationships within each team. To improve communication between multiple partnerships, companies can integrate web-based cloud portals into their technology portfolio to enable stronger collaboration and supplier management. From business cost reductions to higher quality products, cloud and web technologies have the ability to better streamline and manage a diverse supplier network.
Companies can learn to manage vendor interactions and improve resiliency by implementing a strategic approach that begins by categorising suppliers to better serve their needs and end goals. There are four specific categories to highlight: strategic, tactical, operational, and commodity supplier types.
While strategic suppliers need to be monitored closely and internal and external business processes may need to be adjusted for smooth functioning, tactical suppliers have less overall impact on product delivery success. As a result, less management is required, but regular monitoring is still needed to ensure quality improvement. Operational suppliers can be managed less strictly than tactical suppliers, but local decision making may be needed. Following the operational group in priority are commodity suppliers. Commodity suppliers provide the lowest value to the organisation and may be easily replaced, but can be used to provide the same material or service interchangeably based on ability to deliver demand requirements. Identifying supplier types can help companies learn how to approach and work with diverse supplier groups.
Once foundational practices have been established, cloud portals can be utilised as an SRM tool in order to prepare companies for potential external chaos, such as environmental, economic or regulatory changes/disasters. Through data integration, cloud portals bring true supplier management control – and internal sanity – in the form of visibility and efficiency. Instead of straining to see what’s coming around the corner, cloud portals bring proactive insight into supplier data, helping to accurately identify potential order fulfilment issues or pain points earlier on in the ordering process.
Today’s advanced cloud-based technologies are becoming more cost-effective given SaaS subscription models that enable companies to charge a monthly fee based on the number of transactions the supply network performs. Ultimately, this all brings a streamlined supplier network to help management gain a stronger grip on its internal processes.
To maintain effective management, however, companies should consider a few cloud collaboration methods when working with diverse networks. For instance, for suppliers already using B2B integration to upload data to your ERP system, consider consolidating various formats of the supplier’s B2B integration using a cloud portal, which can handle various B2B formats and transmit a single format file back to your ERP. When working with medium-volume suppliers, take advantage of packaged methods to batch transmission data into the web portal, and note that smaller-volume suppliers can quickly login to enter order and shipment data. Other ways to help manage suppliers may factor in KPI measurement, scorecards regulatory compliance and even negotiation methods to measure and maximise performance.
After setting SRM in place and adding cloud portal tool(s), companies will find continued success by building processes and leveraging relationships to make their SRM program a cornerstone of resilience. Companies should institute business practices that will maintain brand integrity and provide a competitive edge. Specifically, it may be useful to identify areas where competitors tend to cut corners to achieve short-term cost savings. In 2015, for example, Blue Bell Creameries suffered recalls, factory shutdowns and negative publicity in the wake of the discovery of listeria in its frozen dairy products. The lack of strict regulatory compliance with dairy/food inspection not only contaminated their products, but also presented an open opportunity for other frozen dairy vendors to benefit from sales by following Federal Food, Drug, and Cosmetic Act (FDCA) standards and compliance.
Before signing any supplier agreements, companies should also consider researching suppliers for potential risk. In other words, consider how your suppliers’ practices could adversely affect the company’s brand in ways that might not be detected by technology or internal practices. For example, there is a huge push to increase supplier audits in emerging economies, such as Asia and the Middle East due to concerns around child, slave and other unethical labour practices that have negatively impacted the brands of their American and European customers.
With the globalisation of supply chain operations, companies are sharing more data upstream and downstream, which requires a supportive supplier network. Selecting strategic suppliers that provide manufacturing locations with consistent global quality and reliable local service is a challenge for many, but collaboration within supply chain management can forge business relationships and secure a clear and competitive advantage for companies desiring to reach best in class status. Effective SRM can lead to better resource management by understanding supplier types and utilising a cloud portal tool to reduce costs and improve operational visibility.
Cloud portals are a cost-effective tool to improve SRM and take vendor relationships to higher – and more strategic levels.
Anil Kodali is Vice President of Services for TAKE Supply Chain
NTT DATA Services, Remodelling Supply Chains for Resilience
Joey Dean, the man with the coolest name ever and Managing Director in the healthcare consulting practice for NTT DATA and is focused on delivering workplace transformation and enabling the future workforce for healthcare providers. Dean also leads client innovation programs to enhance service delivery and business outcomes for clients.
The pandemic has shifted priorities and created opportunities to do things differently, and companies are now looking to build more resilient supply chains, none needed more urgently than those within the healthcare system. Dean shares with us how he feels they can get there.
A Multi-Vendor Sourcing Approach
“Healthcare systems cannot afford delays in the supply chain when there are lives at stake. Healthcare procurement teams are looking at multi-vendor sourcing strategies, stockpiling more inventory, and ways to use data and AI to have a predictive view into the future and drive greater efficiency.
“The priority should be to shore up procurement channels and re-evaluate inventory management norms, i.e. stockpiling for assurance. Health systems should take the opportunity to renegotiate with their current vendors and broaden the supplier channel. Through those efforts, work with suppliers that have greater geographic diversity and transparency around manufacturing data, process, and continuity plans,” says Dean.
But here ensues the never-ending battle of domestic vs global supply chains. As I see it, domestic sourcing limits the high-risk exposure related to offshore sourcing— Canada’s issue with importing the vaccine is a good example of that. So, of course, I had to ask, for lifesaving products, is building domestic capabilities an option that is being considered?
“Domestic supply chains are sparse or have a high dependence on overseas centres for parts and raw materials. There are measures being discussed from a legislative perspective to drive more domestic sourcing, and there will need to be a concerted effort by Western countries through a mix of investments and financial incentives,” Dean explains.
Wielding Big Tech for Better Outcomes
So, that’s a long way off. In the meantime, leveraging technology is another way to mitigate the risks that lie within global supply chains while decreasing costs and improving quality. Dean expands on the potential of blockchain and AI in the industry.
“Blockchain is particularly interesting in creating more transparency and visibility across all supply chain activities. Organisations can create a decentralised record of all transactions to track assets from production to delivery or use by end-user. This increased supply chain transparency provides more visibility to both buyers and suppliers to resolve disputes and build more trusting relationships. Another benefit is that the validation of data is more efficient to prioritise time on the delivery of goods and services to reduce cost and improve quality.
“Artificial Intelligence and Machine Learning (AI/ML) is another area where there’s incredible value in processing massive amounts of data to aggregate and normalise the data to produce proactive recommendations on actions to improve the speed and cost-efficiency of the supply chain.”
Evolving Procurement Models
From asking more of suppliers to beefing up stocks, Dean believes procurement models should be remodelled to favour resilience, mitigate risk and ensure the needs of the customer are kept in view.
“The bottom line is that healthcare systems are expecting more from their suppliers. While transactional approaches focused solely on price and transactions have been the norm, collaborative relationships, where the buyer and supplier establish mutual objectives and outcomes, drives a trusting and transparent relationship. Healthcare systems are also looking to multi-vendor strategies to mitigate risk, so it is imperative for suppliers to stand out and embrace evolving procurement models.
“Healthcare systems are looking at partners that can establish domestic centres for supplies to mitigate the risks of having ‘all of their eggs’ in overseas locations. Suppliers should look to perform a strategic evaluation review that includes a distribution network analysis and distribution footprint review to understand cost, service, flexibility, and risks. Included in that strategy should be a “voice of the customer” assessment to understand current pain points and needs of customers.”
“Healthcare supply chain leaders are re-evaluating the Just In Time (JIT) model with supplies delivered on a regular basis. The approach does not require an investment in infrastructure but leaves organisations open to risk of disruption. Having domestic centres and warehousing from suppliers gives healthcare systems the ability to have inventory on hand without having to invest in their own infrastructure. Also, in the spirit of transparency, having predictive views into inventory levels can help enable better decision making from both sides.”
But, again, I had to ask, what about the risks and associated costs that come with higher inventory levels, such as expired product if there isn’t fast enough turnover, tying up cash flow, warehousing and inventory management costs?
“In the current supply chain environment, it is advisable for buyers to carry an in-house inventory on a just-in-time basis, while suppliers take a just-in-case approach, preserving capacity for surges, retaining safety stock, and building rapid replenishment channels for restock. But the risk of expired product is very real. This could be curbed with better data intelligence and improved technology that could forecast surges and predictively automate future supply needs. In this way, ordering would be more data-driven and rationalised to align with anticipated surges. Further adoption of data and intelligence and will be crucial for modernised buying in the new normal.
These are tough tasks, so I asked Dean to speak to some of the challenges. Luckily, he’s a patient guy with a lot to say.
On managing stakeholders and ensuring alignment on priorities and objectives, Dean says, “In order for managing stakeholders to stay aligned on priorities, they’ll need more transparency and collaborative win-win business relationships in which both healthcare systems and medical device manufacturers are equally committed to each other’s success. On the healthcare side, they need to understand where parts and products are manufactured to perform more predictive data and analytics for forecasting and planning efforts. And the manufacturers should offer more data transparency which will result in better planning and forecasting to navigate the ebbs and flows and enable better decision-making by healthcare systems.
Due to the sensitive nature of the information being requested, the effort to increase visibility is typically met with a lot of reluctance and push back. Dean essentially puts the onus back on suppliers to get with the times. “Traditionally, the relationships between buyers and suppliers are transactional, based only on the transaction between the two parties: what is the supplier providing, at what cost, and for what length of time. The relationship begins and ends there. The tide is shifting, and buyers expect more from their suppliers, especially given what the pandemic exposed around the fragility of the supply chain. The suppliers that get ahead of this will not only reap the benefits of improved relationships, but they will be able to take action on insights derived from greater visibility to manage risks more effectively.”
He offers a final tip. “A first step in enabling a supply chain data exchange is to make sure partners and buyers are aware of the conditions throughout the supply chain based on real-time data to enable predictive views into delays and disruptions. With well understand data sets, both parties can respond more effectively and work together when disruptions occur.”
As for where supply chain is heading, Dean says, “Moving forward, we’ll continue to see a shift toward Robotic Process Automation (RPA), Artificial Intelligence (AI), and advanced analytics to optimise the supply chain. The pandemic, as it has done in many other industries, will accelerate the move to digital, with the benefits of improving efficiency, visibility, and error rate. AI can consume enormous amounts of data to drive real-time pattern detection and mitigate risk from global disruptive events.”