If you work in manufacturing procurement, you know how crucial supply chain visibility is for ensuring smooth operations. But did you know that only 6% of companies report they have full supply chain visibility?
In this article, we’ll explore how the same technologies that have revolutionized sales and marketing will shape supply chain management in 2023. First, we'll examine the obstacles stopping procurement teams from having complete visibility. After, we'll explore how technology can help your team save time, mitigate risk, and make better decisions.
Despite the hundreds of tools targeting procurement teams on the market, most teams still rely on emailing and calling suppliers, and manually updating spreadsheets or ERP systems to track order fulfillment information like PO confirmations or supplier delivery schedules. Data is not available in real time or centralized for evaluating suppliers, and most manufacturing companies' supply chain is exposed to more risk and is less efficient than it should be.
Even in companies that have larger teams dedicated to following up with suppliers, follow up is not as consistent, standardized, or proactive as it is in sales teams. Supply chain/procurement is arguably equally if not more important than sales, so why are we still using manual processes like it’s 1993?
The advent of CRM and email automation revolutionized the way businesses approach sales and prospect follow-up. Before the CRM, sales teams were burdened with manual processes, such as tracking leads, manually logging interactions, and crafting individual follow-up emails. This mirrors the state of many procurement teams today who have little structure in their vendor communication, and no centralized/automated place to track on time delivery rates, vendor responsiveness, and product quality.
CRM and email automation systems streamlined these tasks, allowing sales people to focus on building relationships and closing deals. In the same way, new systems are emerging to do the same for supplier-buyer communication and purchase order tracking.
A key gap in supply chain visibility
ERP systems, though designed to streamline supplier management, often disappoint procurement departments. Since most suppliers don’t have direct integrations, procurement teams still have to manually check order status and manually update order ETA’s in their ERP.
In many cases, procurement teams don’t even bother updating the ERP system and instead create a parallel system to track orders in a spreadsheet, leaving less visibility to the rest of the team. Order follow up is not proactive or structured, and vendor quality, lead time, responsiveness and other key KPI’s aren’t tracked in a systematic way. This leads to procurement teams at best facing unnecessary headwinds and at worst flying blind, unable to anticipate order delays and potentially putting the entire operation at risk.
Having worked in manufacturing myself before founding Factor, I saw first hand how even Tier 1 suppliers for major manufacturing companies have limited visibility, structure or automation in their own supplier communication. Instead, procurement teams relied on phone calls, email chains and spreadsheets to fill the gaps when supplier portals didn’t capture enough information or suppliers “forgot” to use them.
I witnessed how these manual processes lead to enormous losses of revenue as delayed orders or inaccurate orders reverberated throughout the supply chain. This led me to realize manufacturing companies needed an innovative solution that suppliers would actually use. In an ideal world, this procurement system would offer the following features:
- Centralize supplier communication: Facilitate easy communication with suppliers, track delivery schedules, and monitor performance metrics all in one place, using suppliers' preferred communication methods.
- Have 100% supplier adoption: Without 100% adoption of a system, manual entry would still be required. The ideal system would track and allow the use of email for supplier communication instead of requiring a complex vendor portal. This would ensure 100% supplier adoption and improved supplier relationships.
- Easy setup: Procurement teams are busy, the ideal system should be easy to use and easy to setup with minimal onboarding required.
- Streamline purchase order management: The ideal system would allow automated order follow up and eliminate the need for manual data entry and time-consuming follow-up emails.
- Integrate seamlessly with existing systems: It should work effortlessly with an ERP or scheduling system, so a company doesn’t have to change their entire workflow.
- Offer actionable insights: The system would generate vendor scorecards for each supplier, tracking key performance metrics and identifying areas for improvement, ultimately reducing the risk of future delays and reducing cash tied up in unnecessary safety stock.
- Provide real-time updates: Procurement teams would receive instant notifications regarding order changes and updates, so they can stay informed and manage exceptions proactively.
- Owned by procurement: The system should be controlled and managed by the procurement team, bypassing the complexity and approval requirements often associated with ERPs, and enabling a more efficient and agile procurement process.
- Foster collaboration: The system should encourage communication and collaboration between procurement teams, stakeholders, and suppliers to improve visibility and decision making at all levels of the organization. It should be a breath of fresh air for suppliers to use, not a chore.
- Enable proactive issue resolution: Identify and address potential problems before they escalate, minimizing the impact on the supply chain and reducing delays.
A solution designed for manufacturing procurement teams
The features above became the road map we used to build Factor. Vecna Robotics, a provider of AI-powered robotics for the material handling industry, was one of the first companies to benefit from this new procurement solution.
Vecna turned to Factor to help manage variable lead times and get accurate delivery timelines from suppliers. Vecna Robotics tracks ETAs on an average of 150-200 direct materials line items per month. Before implementing Factor, Vecna's small manufacturing and purchasing team struggled to proactively follow up with suppliers on every line item of every purchase order. This led to inaccurate forecasts, delays, and customer dissatisfaction.
Using Factor, Vendors can provide updates using their preferred method, including email. Vecna was easily able to onboard their vendors, automated vendor follow up, and start collecting data.
Using Factor, Vecna Robotics has seen:
- A 5x increase in the frequency of updates from vendors
- More accurate and actionable ETAs, moving from vague updates like "Q4" to specific dates such as "10/5"
- 100% vendor adoption, including those who previously did not provide updates
- Data-driven decision-making, enabling better planning for future orders
- More time for the team to focus on strengthening vendor relationships and sourcing new vendors
If your company struggles with order follow up, lack of supply chain visibility, and doesn’t keep detailed vendor scorecards, we’d love to see if we can help. Hundreds of companies like Thermo Fisher Scientific, Zipline, and Chandler Industries are now seeing the benefits of using Factor to streamline and optimize their supply chain and we believe proactive vendor followup, full supply chain visibility and data driven vendor selection are here to stay.