CHALLENGES FOR OPTIMIZING PROCUREMENT

When it comes to direct materials – the products that go into your finished goods – many manufacturers struggle, with rising costs due to high inventory levels, and, on the other hand, with critical out-of-stock situations that sometimes lead to lost production time, expensive plant problems (such as unplanned overtime, production line setups and tear downs), and high logistics costs. When you have excess inventory in some places and not enough inventory of the right products in others, inventory costs increase. High transport costs arise when the product shortages need to be addressed by expedites.

Another issue is long lead times in information with suppliers that affect responsiveness. Even when businesses send suppliers weekly or regular emails, the farther down the supply chain you go, known as the "bullwhip effect" can be significantly lagging. To ensure that replenishment requirements are met with optimal service levels, businesses need to be agile to deliver information to all suppliers with near to zero time lags.

Most significantly, in today's setting, you 're going to want to ensure a robust supply mechanism is in place, one that maintains continuity of supply and minimizes operational and consumer disruption. Part of this involves a simplified and highly productive mechanism for rapid on-boarding of eligible suppliers around the world and the ability to quickly scale up or down the supply network in response to changes in demand or supply, economic, geopolitical or natural disasters, such as the recent pandemic.