Stem the flow

Value is the name of the game in procurement right now, especially when it comes to digitisation. Here we take a look at some of the tools that can help to prevent value leakage in your supply chain  

Digitisation creates many opportunities to generate value in the supply chain. Automation frees manpower to work on strategy and category optimisation, while collaborative tools facilitate exchange and interaction between the business and various third parties. That’s the tip of the iceberg.

Little however is said of how digital tools can prevent value leaking from the business – and by value, we mean more than just cash, though that too is of paramount importance. Here we take a look at how emergent technologies can prevent value leakage and provide the perfect complement to value creation.

Automated management:

Value leakage is still one of the main untapped sources of procurement impact. Advanced compliance management tools will act as an ever-vigilant watchdog, scanning every procurement transaction, both from structured and unstructured sources to identify and quantify the leakages, and actively drive their resolution. 

Advanced compliance management will be especially useful in the case of large, high-value outsourcing contracts, which are often governed by complex legal frameworks and dozens of individual service line agreements and KPIs. Future systems will automatically extract all these conditions from contracts through machine reading and match them against continuous streams of invoices, supplier activity, and performance data. 

“Future workflow solutions will embed these performance management features to manage group, category, and individual performance on a real-time basis”

Category managers, buyers, and business owners will then be alerted about compliance breaches and their business impact. The value at stake here is huge, considering the level of leakage of the life of a typical contract, and the high level of manual effort currently applied to contract governance.

Supplier performance scorecards

Supplier performance management systems will be integrated with the supplier x-ray capabilities described above. Such systems deliver real-time insights on supplier performance, gaps, along with anticipated cost, quality, or delivery-time issues. Similarly, they link to automated scope and service level monitoring systems and offer integrated claims management functionality. This information will allow category managers to act quickly and decisively when problems occur, and will give them the tools they need to encourage—or force—suppliers to improve.

Procurement performance scorecards: 

Measuring the performance of the procurement organisation—as a whole and on an individual category level—will benefit from significant improvement using digital tools. Systems like the category strategy workflow portal described above will log all the activities of the strategic sourcing team, and savings ideas will be tracked in parallel.  This information will allow the CPO to oversee and manage progress and results, even down to a category manager’s task level if required. Future workflow solutions will embed these performance management features to manage group, category, and individual performance on a real-time basis.