The smooth operation of any manufacturing facility hinges on a well-oiled procure-to-pay process. This critical function ensures a steady flow of raw materials and components needed for production, keeping assembly lines running and products on track for delivery. Across various industries, from furniture manufacturing to automotive assembly, efficient procurement directly impacts a company's ability to meet production schedules, control costs, and maintain healthy supplier relationships.
However, managing the traditional procure-to-pay process can be a complex and time-consuming endeavor, often hampered by a lack of supply chain visibility. Imagine the frustration of:
Blind Spots in Supplier Inventory: Being unaware of potential stockouts on the supplier side leads to production delays and scrambling for alternative sources.
Inefficient Communication: Relying on a barrage of emails and phone calls to track order progress creates a fragmented picture and hinders proactive resolution of the issue. Poor communication and collaboration are among the chief obstacles to improving procure-to-pay processes, according to a report by the American Productivity & Quality Center. In a 2022 survey on supply chain priorities, the APQC reported that 46% of companies identified a lack of collaboration across functions and externally as an obstacle, and 34% blamed communication challenges.
Outdated Manual Processes: When it comes to procurement, the APQC says that as the size of the organization and typically the complexity of the purchasing process increases, manual procedures are often inefficient, requiring excess paperwork, increasing the possibility of error and redundancies while lengthening cycle times. The same issue crops up in three-way matching. Reconciling invoices with purchase orders can be cumbersome, but when the purchase order is handled manually, a laborious process is more challenging due to slow and inefficient communication and lack of supply-chain visibility.
These are just some of the challenges companies face clinging to outdated methods. Fortunately, digital-era solutions like ChainLink SRM are revolutionizing the procure-to-pay landscape, empowering manufacturers with the power of supply-chain visibility.
This article will examine the worlds of two procurement managers: Bart, who relies on traditional methods fraught with inefficiencies, and Abel, who leverages ChainLink SRM to achieve a streamlined and transparent procure-to-pay process. Through their contrasting experiences, we will explore the transformative power of supply chain visibility in the modern manufacturing landscape.
In the fast-paced world of manufacturing, efficiency reigns supreme. Nowhere is this more evident than in procurement, where timely acquisition of materials directly impacts production schedules and overall profitability. Meet two procurement managers facing the daily challenges of the procure-to-pay process, but with contrasting approaches:
Bart: A seasoned procurement manager at a well-established furniture manufacturer. Bart relies on the tried-and-true methods he has honed over the years –emails, phone calls, and spreadsheets. While this approach has served him well in the past, it can be cumbersome and lacks real-time visibility into the procurement process.
Abel: A forward-thinking procurement manager at a competing furniture manufacturer. Abel embraces the digital age, utilizing ChainLink SRM, a cutting-edge platform that streamlines the procure-to-pay process. This allows him to gain real-time insights, improve supplier communication, and optimize the procurement cycle.
As we dive deeper into their stories, we will see how Bart's reliance on traditional methods creates inefficiencies and frustrations while Abel leverages ChainLink SRM to achieve a smoother, more transparent procure-to-pay process.
The procure-to-pay process can be broken down into several key steps. Notice how Bart and Abel navigate these steps, highlighting the pain points of traditional methods (email and spreadsheets) contrasted with the power of supply-chain visibility offered by ChainLink SRM. Supplier inventory levels constantly fluctuate, and any procurement manager must stay on top of potential stockouts. Here's how Bart and Abel navigate this challenge:
Bart primarily relies on email and the occasional phone call to keep track of purchase order statuses. This can be slow and lead to blind spots, and he might not be aware of potential stockouts at his suppliers until it's too late, causing production delays and scrambling for alternative sources.
ChainLink SRM fosters improved communication and collaboration with suppliers and, in doing so, empowers Abel to proactively initiate conversations with suppliers in a process-driven environment using status update requests to easily monitor potential lead times for order fulfillment. Additionally, he can leverage tracking and log features within ChainLink SRM to track past purchase history and consumption rates, allowing for a more accurate understanding of supplier performance. Through these collaborative efforts, Abel can gain better visibility into potential supplier stockouts and adjust purchasing plans accordingly.
When suppliers run low on inventory their capacity to produce more materials quickly matters a great deal. If any business is able to meet its own customer demands, it must have enough visibility to know whether or not a supplier has the capacity to fulfill a purchase order.
Reliance on manual outreach for sourcing new suppliers can have several drawbacks for procurement managers like Bart. Bart experiences limited visibility into supplier capacity because he relies solely on manual purchase order follow-up with suppliers, which has no tracking.
On the other hand, Abel can use ChainLink SRM to send a status update request to his supplier when he starts to wonder about whether or not the supplier will fulfill the order on time. With the tracking features in ChainLink SRM, Abel can see when the request was delivered and opened, guaranteeing that the supplier notifies the buyer if there is a production capacity problem which will delay the fulfillment of the order. Bart simply does not have this option.
According to the APQC, “Automation and technology are often key drivers of increased efficiencies and productivity for organizations seeking to improve process performance. Online or e-procurement automates labor-intensive ordering and payment processes. Organizations use e-procurement to consolidate spending and decrease costs and errors related to human labor. Given these benefits, the percentage of POs approved electronically is a key performance indicator regarding procurement efficiency.”
Managing purchase orders can be a significant hurdle for procurement managers like Bart, especially when relying on e-mail to send purchase orders. Bart generates purchase orders in a separate system and then emails them to suppliers for approval. This reliance on email creates a lack of visibility into whether Bart’s supplier received the purchase order. Often, purchase orders can be lost due to the overwhelming amount of email people receive daily. This creates additional work for Bart as he must manually track down purchase order confirmations and delivery information.
However, by using ChainLink SRM, Abel uses technology to make the procure-to-pay process more efficient. Abel can save time using standardized document forms across his entire supply chain. Then he sends the document via a collaborative, integrated workflow with automated routing to different department queues for his supplier so that mission-critical business information always goes to the right person as quickly as possible. In addition to being more efficient and providing visibility to the buyer, this approach to sending and receiving purchase orders removes the risk of errors associated with manual data entry on the supplier side.
Manual supplier outreach can make it difficult to assess a supplier's past performance on factors like quality control, on-time delivery, and responsiveness because data is not consolidated in a single place where it can be processed. This can lead to unidentified risks associated with choosing an unreliable supplier.
Because Bart does not use modern B2B collaboration technology to enhance visibility into his supply chain, Bart has no idea which suppliers are producing lower quality materials. The only metric Bart has to look at is a manually collected spreadsheet containing price information. So, he keeps engaging with a supplier that is consistently shipping lower quality materials for Bart’s company’s final product, which consequently harms the reputation of Bart’s company in the eyes of the customer.
Abel is using modern B2B collaboration technology, which gives him visibility through collaboration. He can configure supplier scorecards to see which suppliers have a lower performance score over time as a result of the data collected through ChainLink SRM. As a result, Abel’s company can work with its suppliers to improve their quality or cease doing business with problem suppliers.
Keeping tabs on the status of purchase orders is vital for any procurement manager. However, the approach can differ significantly depending on the methods used.
Bart already suffers from limited visibility into order status as he relies on a barrage of emails and phone calls to suppliers chasing down updates on order fulfillment and potential delays. When it comes to receiving shipping notifications, Bart has no way to know with certainty when his order will show up on the receiving dock. Bart would like to implement an Advance Shipping Notice throughout his supply chain, but this simply is not possible with his current technology.
On the other hand, Abel enjoys enhanced collaboration throughout the order lifecycle. Utilizing ChainLink SRM's to support and enforce a mature procure-2-pay process, he gains visibility at multiple stages of order fulfillment. Once a supplier receives and reviews the purchase order, they can electronically confirm acceptance through a purchase order acknowledgment within ChainLink SRM which commits the supplier to filling an order by the requested delivery date. Also, utilization of an Advance Shipping Notice is required and tied to each unique purchase order. All of this is in addition to the order status update requests that we have already discussed.
Managing the receiving process and ensuring accurate records are crucial for smooth inventory management and potential cost savings. Here's how Bart and Abel handle this stage:
Bart's team relies on manual processes to record received goods, verify quantities against purchase orders, and potentially reconcile discrepancies. This manual process can be time-consuming and prone to errors. Additionally, Bart's current system might not integrate seamlessly with other departments like receiving or warehousing. This can lead to data silos, making it difficult to track the complete lifecycle of an order and identify potential cost-saving opportunities.
Conversely, Abel uses ChainLink SRM to integrate with receiving functions, allowing Abel's team to electronically record incoming goods and verify quantities against the corresponding PO within the platform. This minimizes manual data entry and reduces the risk of errors. By linking all stages of the procure-to-pay process within ChainLink SRM, Abel benefits from improved supply chain visibility. He can easily track orders from initial request to final receipt, facilitating better inventory management and potentially identifying areas for cost optimization.
Maintaining clear visibility throughout the supply chain is paramount for efficient operations and cost optimization in today's competitive business landscape. While Bart grapples with the limitations of “flying blind” with traditional methods, Abel leverages the power of supply-chain visibility offered by ChainLink SRM to achieve significant benefits. Here's a summary of the advantages gained by embracing this digital-era solution:
Improved Efficiency: Streamlined workflows, automatically routed activities, and real-time communication significantly reduce manual effort and processing times. This allows procurement teams to focus on strategic initiatives and value-added activities.
Improved decision-making: Real-time access to data across the procurement process allows informed choices regarding sourcing, inventory management, and supplier relationships.
Proactive risk mitigation: Early identification of potential disruptions or delays in the supply chain empowers procurement teams to take proactive measures and minimize their impact.
Streamlined communication and collaboration: Enhanced visibility fosters closer collaboration with suppliers, leading to smoother order tracking, communication, and potential cost savings.
Cost savings: ChainLink SRM introduces a level of automation that reduces errors and streamlines processes, contributing to overall cost reduction. Automating repetitive tasks like purchase order generation, data entry, and communication with suppliers can significantly reduce procurement teams' administrative overhead. This allows them to focus on strategic initiatives like supplier relationship management and cost optimization.
Enhanced Supplier Relationships: Clear and more efficient communication improves collaboration and stronger relationships with suppliers. ChainLink SRM's platform facilitates a more transparent environment, building vendor trust and loyalty.
Benefits for Suppliers: While ChainLink SRM offers overall cost savings, it's important to observe that some of these benefits also extend to suppliers. For instance, streamlined communication and faster invoice processing can improve suppliers' cash flow. According to the American Productivity & Quality Center, a lot is on the table for those companies looking to reduce procurement-related process costs. The APQC found that top-performing companies spend about $278 less per purchase order to perform the Procurement Process Group ($75.82 vs. $354). An organization that handles 1 million purchase orders annually would result in a difference of about $278 million per year in expenses between top and bottom-performing organizations. Not surprisingly, leveraging technology is a typical driver for those organizations looking to identify bottlenecks, redundancies, incomplete handoffs, missing process documentation, and opportunities to streamline activities.
By leveraging ChainLink SRM's capabilities, manufacturers like Abel gain a significant competitive edge in today's dynamic marketplace. The power of supply-chain visibility transforms the procure-to-pay process from a cumbersome task to a strategic advantage.
To learn more about supply chain visibility and how it can help give your business a strategic advantage, check out our other articles.
In the competitive manufacturing world, a well-oiled procure-to-pay process is no longer a luxury; it's a necessity. As we've seen through Bart and Abel's contrasting experiences, traditional methods struggle to keep pace with the demands of supply-chain visibility and efficient communication.
ChainLink SRM, a digital-era solution, offers a compelling alternative. It empowers manufacturers with real-time, collaborative insights throughout the procure-to-pay process. ChainLink SRM also fosters more robust supplier relationships through improved communication and transparency. This collaborative environment lays the foundation for a mutually beneficial partnership between manufacturers and suppliers.
If ChainLink SRM Sounds like a good fit for your company, please contact us! We would love to talk with you!
David is the Chief Operations Officer and Director of Business Development at TTP Solutions LLC. Since 2019, David has been the driving force behind sales, marketing, and organizational development. David holds a B.B.A. in Entrepreneurship and a B.A. in Spanish from Middle Tennessee State University. He has a passion for helping others to solve problems creatively. Husband to KerrieAnn, David loves photography, hiking, traveling, and reading.