Automating supply chain management processes has been benefiting businesses as more of them switch to the technology-focused platform. When organizations do not switch to automation, they face the risk of falling into the direct procurement trap, which is a constant cycle of delay and setbacks that can damage a company’s current and future success. There are ways to avoid and deal with procurement challenges that already exist to avoid costly mistakes. Here are some important tips to be aware of.
Differences between Direct and Indirect Procurement
Indirect goods management software providers provide simple processes and reduced costs for purchasing and requisitioning operations; however, the value is limited in industries in which indirect spending is less than direct procurement spending. It is the act of buying services or supplies that is necessary to manage the daily activities of the supply chain. Without it, companies would be unable to operate affectively.
The direct procurement process is more complex than indirect procurement as it entails multinational suppliers, longer lead times, and a strong reliance on logistics services. It is the act of acquiring raw materials and goods for production in large amounts and frequently. It also requires lengthy and thorough collaboration—if the system fails, companies are unable to manufacture their products and gain revenue.
Ways to Avoid the Direct Procurement Trap
The direct procurement method requires special software that is more involved than indirect procurement. By automating this process, a single platform can manage the supply chain, enabling clarity and control of planning, logistics, and communication. Without direct procurement automation, the process can cause serious inefficiencies that hurt a business’s bottom line. Here are some ways to avoid the trap.
Streamline Logistics Services
Streamlining the extensive amount of data involved in logistics services ensures the supplier is packing, producing, and shipping orders correctly. It also ensures that all goods are delivered in the most efficient, secure, and compliant way as possible. The direct procurement move demands extensive connectivity and collaboration between multiple departments within an organization as well as the supply chain partners. Automating this process allows all parties to have full visibility into the forecasting process, target service levels, procurement collaboration process flow, and shipment processes.
Support a Global Supply Chain Environment
Being able to extend the business reach to the global market means companies must manage their procurement and sourcing procedures to match. An indirect order is sent directly to a company’s doorstep, but direct procurement requires delivering final goods to customers. This is a much more elaborate and time-sensitive activity. Automation helps manage the complexities that escalate across the geographical range of business partners.
Procurement Professionals Should Work with Stakeholders
Professionals managing the procurement process should team up with key stakeholders within their organization or company, such as the commercial or finance departments. This allows for mutual understanding of the latest process and the information required. It also makes the entire process more time- and resource-efficient.
Look to Lean Supply Solutions for Your Supply Chain Needs
If you want to learn more about direct procurement in SAP, Lean Supply Solutions has you covered. We are a third-party logistics (3PL) order fulfillment company in Toronto that believes in the Lean Methodology, a proven philosophy focused on eliminating any operations, equipment, or resources that are not capable of adding value to clients’ supply chains. We strive to make sure the right products are made available to the right customers at the right time, and we aspire to always offer consistent, accurate, and quality solutions. To learn more, contact us at (905) 482-2590.
Reverse logistics has been around for a long time but has only recently become a more popular method of supply chain management. When compared to traditional logistics, it provides many benefits to businesses and adds value for customers. For those seeking more information about the benefits of a reverse logistics management program in comparison to forward logistics, here are some valuable points to consider.
Reverse logistics encompasses recapturing the value of products, parts, and materials that have been returned from the end consumer in order to get them back into the marketplace as quickly as possible. Reverse logistics management usually involves returns, recalls, repairs and refurbishment, repackaging for restock or resale, recycling, and disposal. By optimizing logistics processes, companies can experience long-term benefits and reduce the percentage of their revenues spent on returns. If the reverse supply chain process is streamlined, businesses can maximize asset recovery rates and reduce costs. The different types of reverse logistics include:
- Movement of capital equipment and products to the next emergency response
- Removal of packaging and containers from the response area
- Destruction of spoiled food products and expired pharmaceuticals
- Return of rejected goods to suppliers
- Movement of extra or over-supplied products to other organizations.
Traditional or forward logistics deals with the flow of products from the factory to the consumer. The different types of forward supply chain management include direct order fulfillment, hub services, pick-and-pack services, and shipping. With forward logistics shipping, a sales forecast is used to project the requirement. When a certain amount of product is required, that quantity will be shipped to the distribution centre and then to the retail stores from there. At every level of this method of supply chain management, advanced shipping notices will assist the information as the products flow.
Benefits of Reverse vs. Forward Logistics
Reverse logistics, or “green logistics,” is growing in popularity as the better option between the two. Shippers do not initiate reverse logistics activity based on planning and decisions of the firm but in response to customer actions. Here are some ways reverse logistics are reaping benefits for businesses:
- Provides a second return on investment from the equipment
- Increases public perception due to its environmentally-friendly properties
- Encourages competition in manufacturing
- Reduces risks to the business by protecting data
- Increases product lifecycles, supply chain complexity, maintainable practices and consumer preferences
- Leads to productivity and growth
- Allows for added value from used or returned goods instead of wasting manpower, time, and costs of raw materials originally involved
- Improved customer satisfaction and loyalty by focusing on faulty goods and repairs.
Look to Lean Supply Solutions for Your Supply Chain Needs
If you want to learn more about the importance of reverse and forward logistics, Lean Supply Solutions has you covered. As a third-party logistics (3PL) order-fulfillment company in Toronto, we base our operations around the Lean Methodology, a proven philosophy focused on eliminating any operations, equipment, or resources that are not capable of adding value to clients’ supply chains. By striving to ensure that the right products are provided to the right customers at the right time, Lean Supply Solutions is able to offer consistent, accurate, and quality results.
To learn more about the Lean Methodology, outsourcing to Lean Supply Solutions, or to ask any questions, contact us at 905-482-2590.