Manufacturers’ preparation for coronavirus
This week, major manufacturers are finding themselves out of stock on crucial production materials due to the coronavirus. Not only is there pressure for them to offset the immediate financial impact, there’s also urgency to show steps are being taken to protect their supply chains from future trade disruptions.
The big question being raised in boardrooms across the globe is, ‘could our supply chain have been better prepared for this?’ In the past, the honest answer to this question for many companies would have been, ‘no’. Very few procurement teams would tell you they have the resources to fully vet and certify a network of contingent suppliers while also managing a current supplier network that demands their full attention.
But digital sourcing has flipped the script and given procurement teams unprecedented ability to plan for and minimize the impact of trade disruptions. Leveraging AI and big data, even a small team can now quickly extend their global supplier base and establish contingent sources ready to step in on short notice. It’s hard to overstate the impact of this new capability. If leadership can drive forward their agenda for growth with total confidence in the resilience of their supply chain, it’s a tremendous competitive advantage.
When trade disruptions inevitably occur in the future, some manufacturers will always fall into a defensive strategy to absorb the impact. But those that have invested in a more advanced sourcing strategy and procurement infrastructure will have a far better set of options to choose from. They will also have far more operational agility to pivot without losing momentum, allowing them to outpace less agile competitors.
In one sense, the business case for digitization in procurement comes down to simple math. If you were to double your procurement staff, the team could devote twice as much time to vetting twice as many suppliers which is virtually certain to result in savings on material costs. But what if AI could help your existing team identify nearly 200 times as many suppliers within a matter of seconds?
First and foremost, this unlocks immediate cost savings throughout the direct and indirect spend. Recently a tier-1 auto parts manufacturer leveraged digital sourcing to qualify 20 previously unknown suppliers and secure a 19% material cost reduction. This success story describes how the extra capacity and capability helped their team execute a strategic sourcing project that traditionally would have taken months in just a matter of weeks.
But in addition to the rapid cost reduction, the productivity gains open a whole new range of possibilities for how the procurement function can support the company’s objectives and strategy. Whether you want to beat a competitor to market and quickly establish suppliers for a new product, or develop a network of alternate sources for a plant opening in a new geography, or just drive more competition within your existing supplier base: digital sourcing has become a proven solution.
For manufacturers, implementing digital sourcing responds to both the immediate impact of coronavirus and the question of how to prepare for the next trade disruption. It’s a project that will achieve the cost relief needed today, while also delivering the organization valuable new capabilities that will position the company for success in the future.
Request a Digital Sourcing Pilot
Contact Proudfoot to initiate a pilot and see digital sourcing in action for a material or component within your procurement spend. You will gain a new network of potential suppliers and your team will gain hands-on experience with a leading-edge AI capability to help you assess the potential impact of procurement digitization for your organization.