Digital technology improves supply chain performance for automotive supplier.
Global manufacturers require tight integration of their enterprise technology systems with suppliers to ensure the timely flow of goods and information. Manufacturers that rely heavily on suppliers around the globe to deliver innovative products, drive critical supply chain processes and ensure a positive customer experience need access to real-time data from multiple sources. For many companies, the requirements for real-time connectivity with the supply base demands software and technology systems that match the fast-paced global marketplace, supplier capabilities and regulatory demands.
While supplier integration and collaboration is not a new topic, many companies still rely on outdated processes or fail to understand the role supplier integration plays in delivering global supply chain performance improvements. We consistently hear a desire from supply professionals seeking a single source of truth that allows manufacturers and suppliers to make decisions based on the same set of information. This is unlike the scenario where manufacturers rely on manually intensive efforts to exchange procurement information or the case where supply information resides within multiple disparate systems across the manufacturer and supplier. In both cases, effective and accurate collaboration strategies result in more accessible and actionable information across the supply network.
Supply Risks and Complications Exist
The global and changing nature of sourcing makes effectively managing procurement with suppliers and other trading partners more complex. Procuring raw materials and goods from international suppliers involves working in multiple languages and meeting local regulations resulting in longer cycle times. Relying on manually intensive procurement and supply chain processes increases risk and the likelihood of stock outages. Multiple risks exist for manufacturers relying on manual and out-dated processes:
- Carrying too much inventory to address potential supply disruptions
- Excessive premium freight charges to meet customer delivery expectations
- Inability to accurately track and trace purchase orders, shipments, receipts and invoices
- Mismanaged documents and processing errors leading to slow cycle times
- Inefficient procurement workflow and processing causing unproductive supplier relationships
- Lack of process alert capabilities resulting in costly responses to unexpected supply disruptions
- Inability to accurately measure and track supplier performance
Supplier Connectivity Benefits
Manufacturers rely heavily on EDI for supplier communication. Additionally, various capabilities exist to address internal and external integration requirements with global suppliers. As a first step, a supplier portal is a more agile approach to supplier collaboration resulting in improved supply chain responsiveness, enhanced data quality and better supply chain decisions. Recently, the deployment of a supplier portal helped a large global automotive supplier achieve the following benefits:
- Increased inventory turns from 40 to 70
- Reduced inventory by 25% and eliminated shortage/overage problems
- Cut missed deliveries by 90%
- Dramatically lowered premium freight costs
- Streamlined invoicing processes and adherence with payment terms
Additional benefits from employing a supplier portal may include:
- Eliminate processing errors by replacing manual methods with digital communication
- Lower procurement costs with supplier self-service and proactive alerts
- Improve supplier performance with quicker and easier access to inventory, order, shipment and invoice information
- Cut production delays by ensuring timely delivery of material through accurate and automated receipt management
- Increase order fill rates and procurement team productivity
- Decrease error rates with full error correcting techniques and accurate labeling
- Better control supply chain risk with greater inventory accuracy across complex warehouse and space management operations
Suppliers Achieve Business Outcomes
Supplier networks are evolving with the adoption of digital technology. Both manufacturers and their suppliers benefit from more direct and digital collaboration. While suppliers share in some of the process, efficiency and visibility benefits highlighted above, suppliers also achieve economic business outcomes. These outcomes can include:
- Improved cash flow resulting from quicker payment cycles
- Resource savings by automating business processes
- Increased revenue with more productive customer support and enhanced supplier performance
- Lower costs by avoiding service level agreement penalties
Improved connectivity with suppliers is a game-changer for ensuring data integrity across the supply network to enhance supply chain responsiveness and real-time supplier collaboration. Digital connections with suppliers improve communication, collaboration and decision making. As a result of transforming supplier collaboration strategies, manufacturers can more quickly connect with suppliers, achieve a single source of supply truth and boost global supply chain performance. How effective are your supplier connectivity strategies today and how effective would you like them to be?
Brent Dawkins, Director of Product Marketing with over 20 years of manufacturing and supply chain experience.