In today’s fast-paced business environment, effective supplier management is a crucial element helping organisations to stay competitive and thrive. Technology is rapidly changing the way companies manage their suppliers, encompassing automation, collaboration, analytics, transparency and artificial intelligence to drive value and performance.
Research published in the Harvard Business Review stated that inefficient contract management (a key element within supplier management) causes firms to lose between 5% to 40% of the expected value to be delivered post-contractually. This is compounded by the fact that 75% of procurement functions have either a basic, very limited or no SRM programme in place for the collaborative management of suppliers in the supply chain (4C Transformative Procurement Annual Report 2023). Recent technological developments like artificial intelligence (AI), however, are now helping companies overcome many of the challenges to contract and supplier relationship management.
Indeed, for effective commercial and supply chain operations it is important to understand how technologies are transforming supplier management processes and how organisations can capitalise on these advancements to streamline their supplier processes, improve supplier performance, reduce risk, enhance resilience and drive better outcomes. Whether you operate as a small organisation or a large enterprise, we will explain how technology is propelling supplier management to the next level.
With the introduction of a powerful supplier management automation tool, your organisation can efficiently manage their supplier’s information in one place without requiring manual data entry or paperwork, thus automating routine tasks like the ordering, invoicing and shipping processes, saving time and reducing errors. Adopting supplier management automation allows the time to focus on more strategic and value-adding tasks such as proactive contract and performance management and relationship management, leading to increased efficiency, cost savings and improved supplier performance and the delivery of enhanced value. For example, utilising supply chain management processes and systems can reduce stockout and improve inventory management and supplier coordination with an estimated saving of 10-15% of their supply chain costs.
Another way technology is remodelling the supplier management process is through analytics. Analytics allows organisations to use real-time data to gain key insights into supplier performance, trends and demand and supply-side risks. By advanced analysis of multiple complex data sources (purchase orders, invoices and contracts), businesses can identify areas to improve their supplier relationships and proactively manage cost structures and value delivered by the supply base and extended supply chain. Analytics can drive faster and more-informed decisions when it comes to make-buy analysis, supplier selection, negotiation, risk management and cost-reduction programs.
Technology has also made supplier collaboration easier and more efficient. With the help of collaboration tools such as cloud-based platforms and mobile apps, organisations can communicate with their suppliers in real time and share information securely. Collaboration tools can also help to foster better relationships with suppliers based on trust by supporting greater transparency, leading to more successful partnerships and increased value for both parties.
Organisational transparency is becoming increasingly important to both customers and regulators as they demand greater visibility of how organisations conduct themselves and perform internally and externally. New supplier management processes and technology are making transparency easier to achieve with the help of supply chain visibility tools to track products and materials from the extended supply chain, through the supplier all the way to the end customer. This ensures improved compliance with regulations and ethical and environmental standards, enhanced and more resilient supplier performance and reduction in risks.
Many industry experts are predicting that artificial intelligence (AI) will revolutionise how we do business. In supplier management, AI-powered tools will automate complex processes such as risk assessment, supplier selection and performance monitoring and improvement. AI applies machine learning algorithms tools to analyse vast amounts of data and provide organisations with valuable insights and recommendations, helping to identify potential risks and opportunities before they materialise. As organisations start to trust AI-powered decisions to automate their organisation’s decisions and not just use them as analytical insight, they will build effective and efficient processes and systems, allowing them to optimise their supplier cost base, performance and time to focus on the more strategic and value-adding tasks such as proactive performance improvement and supplier relationships management.
The actual cost savings and benefits organisations can achieve through supplier management technology will vary depending on the specific use, industry and organisational size, although various authors on the subject suggest that a 10-25% supplier cost-base saving could be achieved by applying a variety of these technologies and processes.
In conclusion, technology is transforming supplier management, and organisations that embrace these advancements can reap significant benefits. From automation to analytics, collaboration to transparency and AI, technology enables the streamlining of procurement processes, improving supplier performance, reducing risk and driving better decision-making and strategic outcomes. By embracing technology and investing in the latest tools and platforms, organisations can gain a competitive edge in the marketplace and ensure they are well-equipped to meet the demands of a rapidly evolving business environment.
4C Associates understand the importance of staying up-to-date with the latest technology and tools in supplier management. We’re here to help organisations navigate the rapidly evolving landscape and leverage technology to their advantage. If you’re interested in exploring how we can assist you in optimising your supplier management, please don’t hesitate to reach out to myself, Bruce Kirkwood, Manager or Allison Ford-Langstaff, Managing Partner at 4C Associates.