To Manage Supply Chain Disruptions Manufacturers Accelerate Procurement
To manage supply chain disruptions in 2022 and beyond, manufacturers are working to accelerate digitisation initiatives, according to a survey by Ivalua.
Nearly all executives surveyed (97%) point to significant disruption today in their direct materials supply chain, according to the survey of 233 senior procurement executives from leading manufacturing companies in the U.S. and UK about their strategic plans for optimising sourcing and supply chain processes.
Two-thirds (67%) of respondents say they are not confident that their existing technology can adequately handle current challenges or those expected in the next 3 years. Moreover, companies slow to modernise face serious business risk as 90% of procurement leaders indicate that supply chain problems are a greater threat than competitive market dynamics by nearly 2 to 1.
A full 84% of procurement leaders agree that dealing with supply chain disruptions has been their biggest career challenge to date. That same number (84%) of businesses see modernising the manufacturing procurement and supply chain function as an organisational priority today, with a direct impact on reducing risk and ensuring supply chain continuity of direct materials.
Alex Saric, CMO of Ivalua, said, “2020’s global supply chain crisis has extended into 2022, compounded by the current geopolitical events. As manufacturing organizations battle today’s crisis and work to avoid the next one, modernizing procurement technology has emerged as a top priority. The right technology can help provide the transparency needed to better assess risk and contingency options, and improve the effectiveness and efficiency of collaboration with suppliers.”
According to the survey, two-thirds (64%) of respondents say they are ‘not confident’ their current supply chain is equipped to meet the increasing expectations of executives, and only 46% say they have a deep understanding of their suppliers’ capabilities and risks. Notably, 71% of procurement leaders say they’ve had a supplier take advantage of supply chain problems to unjustifiably increase prices.
- Supply Chain Crisis Expected to Continue: nearly half of procurement leaders (44%) expect the supply chain crisis to ease by the end of 2023 while only 18% expect the supply chain crisis to ease by the end of 2022. Notably, procurement leaders with modernised sourcing technology are more than twice as likely to say the supply chain crisis will end sooner in 2022 versus later in 2023.
- Technology Advantage: 76% of manufacturing procurement leaders use supplier management software to optimise supplier relationships. Procurement leaders that use supplier management software are nearly 2x times more likely to say their supplier relationships are healthy, and they also hit new product introduction deadlines over 3x more often. In addition, procurement leaders with modernised sourcing technology are 76% more likely to say they have an effective relationship with their suppliers, and they also consider procurement tech to be more important than growing headcount by about 4 to 1.
- Technology Gaps: respondents indicated that the most significant gaps in their current procurement and supply chain infrastructure include: (1) Lack of visibility into supplier risk, (2) A “disjointed” source-to-pay process due to multiple systems, and (3) Lack of spend reporting.
- Leadership Challenge: 84% of procurement leaders say dealing with supply chain disruptions has been the most significant challenge of their career. In fact, 92% of procurement leaders say that avoiding supply chain disruption is in their top 3 priorities for this year. More specifically, the top challenges procurement leaders face as they try to modernise their supply chain include (1) Concern of disruption during technology implementation, (2) Skills shortage, and (3) Scale and challenge of change management.
- Geographical Disruptions: according to the survey, managing geographical disruptions to the supply chain has been a significant challenge. A full 89% of procurement leaders need to view supply chain data by geography, but only 73% can easily access it.
- ESG Compliance: procurement technology is key to contributing to organisational ESG (Environmental, Social, and Governance) and CSR (Corporate Social Responsibility) initiatives at 89% of organisations.
Source: MH&L News