Our short series of articles on the concept of visibility and what it means for Chief Procurement Officers continues this month. The response to this series has been so strong that we thought we would continue with it to include other key parts of the source-to-settle process. Thus, today’s article highlights the top areas in which procurement leaders and suppliers need to have visibility…and what they can do to gain a better view into the process.
Like category managers, suppliers need to have “eyes on” many different internal and external variables in order to maintain operations and keep serving their markets. Common market trends that the two must monitor include commodity levels, price fluctuations, commodity supply and demand, recent or future innovations, governmental regulations, and all associated risks, like legal, political, natural, reputational, etc. While these are given for suppliers – it would be negligent if they were not keeping tabs on them – suppliers have a host of internal variables that they must also monitor and manage. The following is a brief discussion of these variables and how suppliers can get visibility into them.
A supplier’s business runs on the relationships it has with its network of commodity traders and customers looking to procure goods and services. Thus, suppliers need to track the various business-to-business (B2B) and business-to-consumer (B2C) orders that it processes on a daily basis – particularly since they are interdependent. For example, if a supplier receives an order for a given commodity from Consumer A that the supplier must acquire from Source A, the supplier must ensure that they receive the bulk order from Source A in time to process and deliver the order to Customer A. The supplier has to track delivery of the shipment from Source A to the supplier, confirm receipt in their warehouse – especially if there have been issues with delivery confirmation, order discrepancies, quality issues, etc. – and then turn the shipment around for distribution to Customer A. Indeed, it is a three-way kabuki dance, but one that suppliers do all the time and must master.
Moreover, suppliers need to be able to track what is coming from and going into their inventory so that they do not promise something to the customer that they cannot deliver in the time they promised they would deliver it. Often, suppliers can fulfill orders from their current inventory without first resupplying their stock. But without processes and tools that allow suppliers to quickly glance into their inventories and determine if they can do this, suppliers risk having to back order for customers after promising them they could immediately fill the order. If done enough times, or even once, suppliers can lose customers, who will go in search for more reliable suppliers that can immediately fulfill their needs.
How suppliers handle payment terms and conditions is also crucial, since customer payments or deposits often provide the working capital to purchase or replenish inventory stocks for the given commodity. Thus, it is imperative that suppliers have visibility into current finances and future cash flows to ensure that they can fulfill orders.
Fortunately for suppliers, inventory management solutions (IMS) can consolidate these steps and provide visibility into the whole process. They can help suppliers manage multiple aspects of their inventories – such as current and projected levels, order fulfillment, stock replenishment, delivery confirmation, etc. Just as important, IMS solutions can also consolidate these variables into one dashboard and provide suppliers with the visibility they need before making promises to their customers. Tying in accounts payable/accounts receivable with inventory management can also help suppliers determine if they have enough working capital on hand to complete commodity trades, or if they will need to require a deposit or full payment up front from the customer.
For suppliers, there are many moving parts in the B2B game. But with innovative tools and solutions on the market today, suppliers can gain visibility into the process, monitor and mitigate risks, and be of better service to their clients and themselves than ever before.
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