That Moment When Technology Ruins Supplier Relationship Management (Part 1)

We are delighted to welcome this post from Gemma Howard-Sandy, consultant at cost management solutions firm Procuright

Could your time-saving Business Process Management (BPM) solution actually be slowing you and your team down and ruining your Supplier Relationship Management (SRM) all at the same time? The easy answer is No, but I think the reality is very different in some cases.

Technology is changing rapidly around us. In the past three years it seems to have progressed more so than in the previous 30. If you’ve walked into a bank recently or seen the news regarding the AI that’s set to aid surgeons, then that pretty much highlights where I’m coming from! So it’s no surprise that technology is transforming procurement too.

The Good, The Bad and The Tech

Technologies such as big data, AI, machine learning and blockchain are transforming business models and procurement alike. From integration with the supply chain to making whole departments more efficient (for example, finance).

Efficiency is key and with finance executives looking to automate back-end processes, to enhance efficiencies within the business, many are turning to technology. And why wouldn’t they? Along with potentially saving time for their own department, it should have a knock-on effect for procurement too and allow teams to focus on their core competencies.

That’s the theory at least.

Automation is significant for data visibility, accuracy and speed across all finance departments. However, there are significant inefficient anomalies occurring in companies as a direct result of technological advancements.

Firstly, even if a company has the all-singing, all-dancing version of a technological solution, it often doesn’t use and therefore benefit from it properly. Some implementations of tech don’t fit with existing processes and some will be unleashed under the supervision of poor management and without the necessary skill set to get the most out of it.

But above all, implementing the wrong technology could actually be creating problems and adding to the process for certain departments, particularly regarding indirect procurement.

HALT!

It’s possibly time to add a bit of perspective at this point; in theory, I’m a Millennial (I say in theory, purely because I sneak into that generational demographic by 4 days – at the lower end), which means that I’ve grown up with, and alongside, a lot of technology and therefore am far from adverse to it. So why the negative title and start I can hear you saying?

Infinite Vendors and Suppliers

Utilising big data, AI and machine learning results in being able to automate many previously labour -intensive business process tasks. Which is ideal when you consider an objective within procurement should be to make things simpler and faster; certainly in terms of transactions.

But this has also resulted in businesses being able to justify buying (too many) things from too many different suppliers. This may not be a problem for some businesses but for others, not observing the principles of supplier consolidation and the resultant or additional complexity within the supply chain ultimately costs companies money.

Understanding the types and costs of such complexity is important in order to identify and eliminate the causes of waste, expense and risk. But no amount of automation, AI, RPA, machine learning and BPM software can make up for fundamentally poor procurement practice.

There are obvious advantages, for some companies to consolidate vendor relationships, with new opportunities arising for lower purchasing prices. Additionally, fewer suppliers mean simplified process automation: an important metric for both business time and costs. Again, automation and technological processes can only successfully work alongside the best exercises and simply can’t be the most efficient version of itself if the beginning of the process isn’t efficient.

If technology is slowly but surely encouraging procurement to increase suppliers, due to the ease of certain back-end processes, is it also leading to one large incompatible problem in particular, namely, Supplier Relationship Management? Well ... we'll get onto that in Part 2 tomorrow.

 

Discuss this:

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.