NOTE: This is a post from our friends at Cerasis. They’re a top North American third party logistics company offering logistics solutions with a strong focus on LTL freight management.
Getting the raw materials needed to maintain production is one of the most important parts of the whole supply chain. If raw materials are unavailable, all subsequent processes are affected, which may result in increased costs to consumers and the respective companies as well. However, following these 10 practices can help you learn how to reduce spend in the procurement supply chain.
1) Use External Benchmarking Tools
Many suppliers and manufacturers may have existing, internal analytics tools, but using these tools for benchmarking processes may be ill-fated. Internal tools have a way of making the company appear better than it truly is. As a result, an external benchmarking tool, explains Olga Rissin of CHAINalytics, offers the benefits of reducing internal spend and accessing outside data, which further drives competitive advantage and lower spend in managing the procurement supply chain.
2) Cluster and Consolidate Shipments to Create More Predictable Demand for Suppliers and Carriers
Shippers face an ongoing problem of accommodating more shipments, on tighter schedules and at lower costs. This is comparable to the Holy Trinity of Manufacturing and Shipping (something we discussed earlier this year in previous posts on our blog). Manufacturers must work to consolidate incoming supplies and outgoing shipments to make their incoming and outgoing freight more attractive to major carriers. As a result, more shipments can be placed on “fast lanes,” reducing overall freight spend and duration of shipments.
3) Increase Lead Time for Carriers Wherever Possible
When shippers have access to additional lead time, even lead times as little as 24 hours, they may be able to better predict and manage the flow of freight, which results in better rates for the consumer and shipper. However, 48 to 72 hours would be an ideal lead time, reports Steve Raetz of Logistics Viewpoints. This does not mean shipping a product immediately. Instead, it simply means passing along information from the shipper to the carrier about expected shipments in the next few days.
4) Take Advantage of Cloud-Based Analytics for Better Warehouse Management and Forecasting
Cloud-based systems offer many benefits throughout the procurement supply chain, reports Procurious HQ. Procurement providers will use cloud technology to improve visibility throughout the supply chain and adapt to changes and unforeseen issues in real time.
5) Use Big Data Analytics to Ensure Real-Time Management of the Entire Supply Chain
According to Logistics Management, the majority of participants in a survey on the most impactful aspect of procurement practices over the next decade identified predictive analytics through Big Data. In addition, advancements in analytics processes and adaptability through various transportation management systems (TMSs) will make the use of Big Data seamless in the future procurement supply chains.
6) Consider Cyber Security Concerns in the Procurement Supply Chain
Cyber security is a major threat to the procurement supply chain. A cyber-security breach could result in the diversion of resources, including monetary information, to other areas, or supplies may be sent to incorrect locations or in inappropriate quantities. As a result, shippers and manufacturers must work to ensure existing e-procurement systems, including TMS platforms, actively work to identify threats to cyber security and mitigate risk.
7) Ensure All Procurement Activities Adhere to Counter-Terrorism Laws
Similar to cyber security, the physical threats from terrorism are real in the procurement supply chain. Suppliers must adhere to all counter-terrorism laws and measures, such as the requirements laid out in the Customs-Trade Partnership Against Terrorism (CTPAT). This entire part of procurement logistics can be simplified if all processes are handled automatically or subjected to the provisions under a dedicated transportation and logistics provider.
In other words, a 3PL may have existing agreements with U.S. Customs and Border Protection (CBP) to minimize import inspections or access “green light” programs that reduce delays in obtaining raw materials from overseas.
8) Plan for Natural Disasters by Diversifying Suppliers
Disasters are an inherent risk in the procurement supply chain. If the weather turns bad, obtaining raw materials may be impossible, and the effects of a single tropical storm can span many states. Rather than waiting for a disaster to strike, today’s supply chain professionals should focus on proactive planning, such as the assignment of alternate routes and diversification of vendors or suppliers, asserts John Manners-Bell of KoganPage. This will ensure all operations continue in the event of a natural disaster.
9) Create a Near-to-Consumer Means of Managing Parts Procurement
The procurement supply chain also includes the reverse logistics supply chain to an extent. Ultimately, parts in the manufacturing process may not function correctly, and replacement parts may be needed from a service parts center in the supply chain. Since the customer base has become increasingly wider, especially considering the far reach of Amazon, service parts centers should be located near consumers and manufacturing centers. This will help to ensure the procurement supply chain maintains maximum optimization.
10) Outsource Logistics Procurement Processes to Ensure Continued Excellence and Savings
Outsourcing procurement processes to the 3PL may be among the top ways to improve procurement in the coming years. According to Florian Dussler of Logistics Viewpoints, 3PLs allow for better rate negotiations and overall management of procurement needs. Meanwhile, a dedicated TMS offered by a 3PL, such as the Cerasis Rater, can simplify the outsourcing process even further.
The Big Picture
Your organization will have a better bottom line if you can reduce the costs associated with obtaining raw materials for your products. Ultimately, better profits translate into lower costs for consumers and growth of your business, so it is in your best interest to implement these 10 best practices for management of the procurement supply chain now.