Effective Supplier Management in Manufacturing

Industry Challenges

Despite growing demand, manufacturing companies face significant and growing supply chain disruptions: labor shortages, container shortages, port congestion and backlog, logistical issues, heightened regulations, and increasing fuel prices are just a few of them.  While they cannot control most of these issues, embarking on a digitalization strategy might significantly improve critical elements of their supply chain.

The supply chain environments that manufacturers deal with are complex, involving processes that are based on agreements and blanket orders with inherent ordering rules and conditions around pricing, shipping, deliveries, as well as processes with mandated supply chain rules, special delivery scheduling and conditions. These types of environments involve orders with hundreds of line items, partial shipments per line and multiple receiving and invoices per line, as well as processes that include intermediate warehouses and/or 3PL, QA, MRB, 4WM and returns, import via sea or air freight, and more.

In such environments, companies invest a significant amount of time and effort ensuring that suppliers comply with their business rules and policies, following up on order fulfillment, supply chain execution and on-time delivery, validating invoices, handling invoice reconciliation processes, validating payments, handling a significant number of errors and discrepancies, and preventing fraud.  Additionally, complex environments often involve multiple geographies and the associated differing rules, regulations, and cultures, as well as the presence of multiple applications and ERP systems.

Efficient Automation

Automating these processes could offload most of the manual work, streamlining process execution, speeding up responsiveness, shortening cycle times, and elevating end-to-end efficiencies across the entire set of procure-to-pay processes. 

Assuming existing ERP systems and P2P processes remain intact, such a solution could support improved supplier relations and satisfaction, ensure massive savings, and overall contribute to greater competitiveness.  This type of technology should have the ability to automatically governs P2P processes and verify that both suppliers and buyers perform the required tasks, in accordance with required rules and policies.  Supplier responses should be monitored, and real time guidance should be provided to them so that they execute their form submission and responses accurately and in a timely fashion. 

For this type of technology to be effective, it must be able to automatically mandate required actions and provides relevant notifications, alerts and escalation procedures specifically aligned with the Buyer's business rules and policies, customized to the specific position and role of the recipient.  It should also be able to automatically follow up on open issues that fall within the governed processes, reconcile invoices, and validate any transaction and document type that a supplier sends to the customer, including attachments, PO confirmation, and Shipping Notifications.

It should also automatically identify and correct errors in documents, based on predefined business rules and business policies of the buyer, and validate invoices based on associated documents, using advanced AI-based algorithms. 

Suppliers should be allowed to use such a technology with minimal disruption to their business.  In other words, they should be allowed to continue interacting with their customers through mechanisms they are accustomed to using and should be able to reap the benefits of greater transparency, discrepancy resolution, and faster payment.

Summary

To maintain their competitive edge in an environment characterized by ever-increasing complexity, manufacturers should investigate the benefits associated with the digitalization of procurement processes and supplier relations. 

The intelligent automation of procure-to-pay processes, involving process governance, compliance management and enforcement, audit and validation, dispute resolution, and discrepancy management could help organizations gain visibility into, and control over procurement and supply chain processes, reduce process cycle time, and remove errors.

The implementation of such capabilities with minimal disruption to existing systems and processes will further enhance their ROI.