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Areas of End-to-End Purchase Order Visibility
03 January 2023
"Today’s supplier interactions are largely tactical and lack real insight or platform integration. That’s why the future of procurement is expected to depend on creating a new operating model that drives supplier and third-party performance and relationships to a new level. Ones in which analytics and data play a role by providing a means for measuring performance, identifying opportunities, mitigating risk, and helping move the organization from being reactive to proactively engaging with its suppliers. Working with suppliers closely can help you gain better visibility into the supply chain to more easily anticipate any supply issues across the tiers of your supplier base..." (Future of Procurement KPMG Annual Report)
Many factors can contribute to a lack of visibility into the inner workings of your suppliers’ relationships. This chapter will discuss some of the most common end-to-end PO visibility areas:
Suppliers’ On-Time Delivery Suppliers' on-time delivery assesses the dependability of the company's suppliers in terms of timely delivery of shipments. A low value for this KPI may indicate that the company uses ineffective delivery scheduling methods because it is not adequately managing or interacting with its vendors. If suppliers consistently fail to deliver on time, the company may need to spend time and resources looking for new vendors. Suppliers' on-time delivery can be increased by better visibility and collaboration with suppliers, specifically defining on-time deliveries in vendor contracts and offering incentives for on-time delivery.
Supplier's manufacturing process The lack of real-time tracking of suppliers is a growing concern for many supply chain and procurement professionals in the wake of the current supply chain worldwide chaos. Knowing suppliers' manufacturing process progress and delivery schedules allow procurement teams to make informed decisions when placing purchase orders. Having real-time access and complete visibility into the progress of the manufacturing process allows them to predict lead times and develop tactical strategies to address problems caused by delays in the manufacturing process or unexpected changes in lead times. Gaining Intelligent manufacturing collaboration with your suppliers is a must for many organizations. This can be achieved using manufacturing collaboration tools that continuously update WIP and stock levels, manufacturing routings, and first article orders. Using such tools provides early predictions of OTD problems and may help avoid production line downtime. In addition, it allows immediate attention to be focused on the parts and suppliers that need it.
Suppliers’ traceability and visibility Supply chain traceability is the process of tracking the provenance and journey of products and their inputs from the beginning of the supply chain to its end. There are numerous reasons to pursue traceability, and some industries have been doing so for many years, such as food and pharmaceuticals, where safety is critical. Traceability allows companies to find supply chain efficiencies, meet regulatory requirements, connect with and understand the actors in the upstream supply chain, and, of course, tell consumers about the provenance and journey of their products, often by using pictures or scannable QR codes on packaging.
Suppliers’ risks management Supplier risk management is the method of identifying, assessing, and controlling risks to an organization's capital and earnings caused by its supply chain. Companies that have implemented supplier risk management plans typically appoint a chief risk officer (CRO) to oversee the effectiveness of the organization's supplier risk management strategy. When possible, an effective plan reduces supply chain risk and anticipates how the organization will respond quickly to supply chain disruptions. Supplier risk management plans should address the numerous areas where supplier issues may arise. These stages include onboarding (starting a relationship with a supplier), financials, supplier collaboration, mergers, integrated supply chains, natural or geopolitical disasters, and criminal or terrorist threats to the supply chain.
Suppliers’ communication Suppliers' communication is a technique used to communicate with suppliers. It identifies how you can best communicate with them in order to get the job done. Suppliers’ communication also helps you to understand what they need from you and how you can help them achieve their goals.
Suppliers’ performance The adoption of big data in the procurement process improves suppliers’ performance, mainly in terms of time, quality, innovation, flexibility, and sustainability.
