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4 Ways Procurement Contributes to the Collaborative Supply Chain

The crucial role that procurement plays in today’s global supply chains and how to maximize it across the enterprise.

The word “collaboration” is thrown around a lot in business circles these days. Defined as “the action of working with someone to produce or create something,” collaboration facilitates people-to-people connections, improves accuracy, helps companies cut costs; and improves overall productivity.

Across the global supply chain, collaboration ensures that multiple entities can work in tandem—often across state and country lines—in an effort to get products from the point of raw material to the ultimate end user. Achieving that level of supply chain nirvana isn’t always easy, especially when multiple departments and organizations have to get on the same page and work toward similar goals.

“Supply chains have become more complex due to globalization, expanded consumer channels, and increased government regulations,” Mike Burnette, managing director of the Global Supply Chain Institute at the University of Tennessee, Knoxville, writes in End-to-End Supply Chain Collaboration Best Practices. “Simultaneously, the business need for cost savings has continued to increase. Traditional, internal sources of savings may appear to have dried up. Increased expectations for customer service and satisfaction have created a higher standard of supply chain performance.”

Working in Tandem
Pointing to logistics, procurement, and operations as the three key components of the supply chain function, Burnette notes that long-term partnerships with suppliers focused on fulfilling end-customer needs, supported by metrics that drive the right behavior; a synchronized and aligned supply chain operation; and deep visibility across the supply chain all contribute to the smooth-running of a modern-day supply chain.

For example, he says procurement should strive for full alignment with operations and logistics. “It is much more likely that you will achieve best practice performance in each supply chain function if all three areas have aligned objectives and are working toward a common goal of providing outstanding customer service with world class efficiency.”

Action Steps
Here are four ways procurement can help their organizations develop more collaborative supply chains:

  • Make sure operations, procurement, and logistics can speak the language of the C-suite. Procurement, for example, should have a seat at the table when setting overall corporate strategy and focus its conversations on how to be an integral player in not only driving down cost and working capital, but also supporting top-line revenue growth with outstanding customer service. “The involvement of corporate procurement has been a growing trend,” Burnette notes, adding that one best practice is to have a dedicated procurement function within the logistics function. “This preserves the use of good procurement practices while also keeping the business closely involved in the process.”
  • Don’t overlook the importance of freight negotiations. Procurement is often responsible for negotiating the method of component materials delivery and whether it will be freight prepaid or collect. “In other words, will the firm or the supplier be responsible for inbound transportation?” Burnette asks. “If internally controlled, logistics must supply and schedule the transportation assets for on-time pick-up and on-time delivery.”
  • Factor package design into the procurement process. “Package design for materials coming from a supplier can be a critical factor in the efficiency of warehousing and transportation operations, and even manufacturing operations,” Burnette points out. “It could also impact the organization’s sustainability efforts.” He says package design should be negotiated by procurement, with heavy input from logistics and manufacturing.
  • Make sure suppliers can meet the requirement for advanced shipping notices. ASNs notify the distribution center of a pending delivery, and are usually sent in an electronic data interchange (EDI) transmission. “Suppliers use ASNs to list the contents of a shipment as well as additional detailed information describing the shipment’s composition and configuration,” Burnett writes. “By transmitting the ASN before delivery, receiving cost can be reduced and accuracy improved.”

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