Procurement is often the weak link in the supply chain, warns Nick McGrane of K3 Syspro. It needn’t be and changing circumstances mean it must play its part...
Undoubtedly, 2020 has tested supply chains to breaking point. Dramatic changes to supply and demand has meant 85% of manufacturers have either already reviewed or will review their supply chain resilience to deal with the challenges of the pandemic.
This is a vital task to complete if manufacturers are to survive and thrive in the post-pandemic world. Processes must now be fully optimised and enable the speed and agility required to deal with the fast-moving landscape of UK manufacturing.
One business area which has the unfortunate reputation of hindering this adaptability and needs special attention is procurement. Inefficient procurement processes can grind business decisions to a halt, acting as a bottleneck on changes that might have substantial effects. This may have been an inconvenience before the pandemic, but now is the difference between a thriving business and a struggling one.
Effect back to cause
The first issue businesses need to address is inefficient procurement processes. While at their least disruptive when processes are running smoothly, inefficient procurement processes can quickly derail a business in times of crisis. An example of the pace of change seen in the wake of the first lockdown came from one hand sanitiser manufacturer in Denbighshire, which had to shift from the production of 5-6 million bottles of hand sanitiser a year to 2 million in 10 days.
The first issue businesses need to address is inefficient procurement processes
At the same time, 64% of small and medium-sized manufacturers have seen orders drop due to the pandemic. This has knock-on consequences for a manufacturer’s suppliers, who have to quickly ramp up their fulfilment, or be flexible in reducing order sizes. Manufacturers therefore need to have procurement processes that can rapidly respond to new material requirements. However, they are often held back by outdated systems.
Beware of the dark
Manufacturers with such procurement systems have still been forced to make quick supply chain changes to manage Covid-19 disruption. For many, this has meant going outside of their standard procurement practices to fulfil orders; what is known as 'dark purchasing'. This is a double-edged sword. While in the short term it can help enable quicker decisions, these orders are more likely to contain mistakes, be difficult to reference and risk a drop in quality in the future. If there are large mistakes, these become harder to fix. Businesses need to avoid these processes, as the immediate benefits are soon outweighed by the long term costs.
To avoid these issues, manufacturers can look to replace their procurement system with a wider business solution. An enterprise resource planning (ERP) system for example can support a procurement procedure in which order changes, supplier onboarding and real-time approvals can be done quickly within a system which allows for long term traceability. These systems, unlike the simple back-office systems some manufacturers currently use, can be personalised to fit the exact needs of the business.
Entering 2021, those that can’t move with speed and agility will find the challenges of the new year difficult. Not only will these manufacturers have to deal with the ongoing challenges of the pandemic, but the disruption Brexit is likely to bring too. It’s time then to get on top of procurement systems.