Most were glad to leave 2020 behind. Yet, for all the uncertainties and unusual changes the world faced, people also learned important lessons and, as a result, changed their habits in ways that will be in effect for years to come. Nowhere is this more apparent than in manufacturing procurement.
Remote work, social distancing, supply chain issues, shortages, and other disruptions have permanently reshaped operating strategy trends and created new opportunities for cost-saving initiatives in procurement. The operational landscape has altered, and many long-held practices are being adjusted to reflect the new reality.
Partly due to the pandemic and partly because of advances in technology, several trends have emerged in 2021 that promise to affect procurement strategies for years to come. Additionally, these changes offer new cost-saving opportunities. Below are four trends and cost-saving initiatives in procurement that every manager should consider implementing.
1. Develop a Digital Strategy
The effects of the pandemic were widespread and profound. For example, many employees shifted from office-based work to remote, home-based. Consumer buying practices changed from in-store shopping to online. More products were shipped directly to consumers, meaning manufacturers and distributors needed more and smaller packaging.
Many work-related activities also changed, including face-to-face things such as meetings with vendors and in-person plant visits. Many of these changes are likely to be permanent.
Forging ahead means using new tools and techniques to adjust to the changes that have occurred and take advantage of the associated cost-saving opportunities. A forward-looking digital strategy includes a wide range of new digital tools to increase procurement efficiency. For example, use artificial intelligence (AI) to manage low-value purchases or update catalogs and inventories. Blockchain platforms are already being used to control smart contracts and track supply chain goods movement, and stacked technology is replacing end-to-end programs for managing operations.
2. Increase Use of Data Analysis
One essential component of procurement success is having access to and analyzing large quantities of high-quality data. Developing insights into markets, prices, trends, industry changes, and other intelligence is vital for procurement managers moving forward.
Levels of sophistication are rising across industries. To stay competitive, procurement organizations today must use all the analytical tools available to them. Because a single procurement department has limited market visibility and resources, it behooves companies to build partnerships with consulting firms such as Strategic Resource Management (SRM).
SRM offers clients market intelligence and vendor evaluations through analysis of our vast database of industry information. A consulting firm like ours can bring years of procurement expertise, data from hundreds of markets and industries, and insight into a network of vendors and markets.
A strategic consulting firm can help position your procurement team as a strong player within your organization. Contract negotiations, market analysis, and project management are just some of the highly effective services that a partnership can offer. The results include significant cost savings and shortened project time frames.
3. Implement an Advanced Risk Management Program
The necessity of putting a solid risk management program in place became starkly apparent during the pandemic. Supply chain disruptions, material shortages, changing consumer purchasing patterns, and geopolitical events created material acquisition and distribution failures across the board.
Now that these weaknesses have been uncovered, companies are moving to establish alternative processes that will allow them to anticipate and respond to unexpected disruptions. Reviewing purchase contract terms, analyzing vendor reliability, reviewing event response procedures, and building market intelligence is necessary for those who want to be prepared for possible future events. SRM has years of experience delivering cost-saving initiatives in procurement by analyzing operation expenses (OpEx) spending patterns, providing vendor and market data, and simplifying specifications.
4. Build Closer Supplier Collaborations
Closer supplier collaboration can set the stage for improved procurement performance. Building working relationships with primary vendors include establishing rapid response actions in the event of supply disruptions, developing contingency plans for lower-tier supplier problems, and negotiating more cost-effective contracts.
Ensuring confidentiality and completing thorough vendor evaluations can build confidence and help maintain these relationships. As a strategic partner, SRM can play a crucial role in qualifying and selecting vendors, assisting with contract negotiations, and providing negotiating skills. With a strategic partner’s extensive expertise and in-depth market intelligence, companies build strong supplier relationships and strengthen their cost-savings initiatives in procurement.
It’s Not Last Year’s Procurement Landscape
Although 2020 presented significant challenges for procurement organizations, many organizations rose to the challenge and realized numerous operational and cost-saving opportunities. Continuing to rely on pre-pandemic methods is not likely to be effective in the future. The above trends and cost-saving initiatives in procurement can open the door to improving overall operations.
Partnering with our team can help companies take advantage of these and other emerging trends and opportunities. Connect with us today to discuss how we can assist you and your organization in designing and implementing programs to adapt to the future and capture cost-saving initiatives in procurement.