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.