The pandemic is one of the numerous factors contributing to the need for a more digital approach to supply chain optimization.
The digitalization of supply chains is increasingly on the radar of CFOs for various reasons, both pandemic-related and non. Improving procedures can aid cost management, compliance with new regulatory requirements, pricing strategy development, and keeping customers pleased by preventing supply outages.
Many companies have been digitizing their supply chain as part of a big integrated initiative that has resulted in cost savings and improved their ability to match and exceed client expectations.
Individuals are the true supply chain as 100% of the services are given by people helping others. Organizations are continually striving to better understand and predict client demand in the digitalization of this ‘people supply chain,’ then matching the proper people and capabilities to that.
Digitalization in Procurement
Businesses have witnessed how digitalization can save money on procurement in the short and long term. Everyone has been compelled to digitize in some form by COVID, and though all businesses desire their workforce to continue connecting face-to-face with customers when normality is restored, they need to do so cautiously.
Here are some things to think about if you’re looking to improve your digital presence in your supply chain optimization efforts.
It’s a Journey
When it comes to digitizing supply networks, we believe it is vital to consider the long term. To obtain a decent result, you need a vision for the end state and break it down into small, bite-sized portions.
That’s how many finance executives are approaching supply chain digitization, which is defined as the use of various electronic technologies to improve procedures throughout the supply chain, from procuring items to paying for them. It includes a variety of technologies, ranging from simple software that helps employees acquire products and services more efficiently to complex tools that help integrate and analyze supply chains, all of which have a variety of potential benefits.
The ideal aim might be supply chain 4.0, which includes the internet of things, advanced robots, and analytics in supply chain management. Sensors, networks, automation, and analysis would be used to improve performance and customer satisfaction dramatically.
Supply digitization can assist in overcoming the difficulties of global and regional supplier distribution and fulfill expanding customer demand for product and service delivery.
Most finance professionals and their organizations have yet to reach the towering heights of supply chain 4.0; many are still ascending the slopes with a few minor digitization attempts. However, according to a poll conducted by Lehigh University, most CFOs are searching for savings and cash flow improvements from their supply chain, and digitization is becoming a vital instrument for both.
Many of the operations that require digitization are closely tied to financial performance indicators, as these procedures frequently impact inventories, sales, cost of sales, or the ability to access information that would influence financial decisions.
Many CFOs in the study claimed they had accomplished some level of digital integration with a supplier, and 85 percent believe that digitizing procurement procedures will reduce the average time spent in collecting payment by three days or more, among other benefits. However, 85% of participants believed they needed to invest more in digital tools.
Aligning Demand with Costs
CFOs take on more responsibility for an organization’s strategic expense management as their function grows. Digitizing the procurement process helps better align business demand with predicted expenses during the budgeting cycle. It also strengthens procurement’s negotiating position with suppliers when it comes to tariffs and contracts.
Because third-party expenditure accounts for such a substantial percentage of a company’s cost base, the CFO must collaborate closely with procurement and supply chain operations to reduce expenses. By decreasing spending on suppliers, digitizing the supply chain process can significantly impact overall expenses. It can help minimize finance’s operational costs.
For example, digitization solutions by HubBroker can improve invoice and payment processing efficiency by allocating the majority of spending to preferred suppliers, allowing accounts payable staff to focus more on business outcomes like compliance and timely payment delivery. Payment analytics can also assist the finance department in identifying ideal terms for suppliers based on market standards to maximize cash flow.
Address Uncertainty & Changing Regulations
Increased uncertainty and a greater need for information have expedited CFOs’ moves toward supply chain digitization.
Many reporting requirements have shifted from monthly to daily, so investments in systems that quickly report such information have been critical to maintaining market confidence.
Regulations forcing businesses to pay within a certain time have also spurred supply chain digitization.
Most large businesses are rushing to digitize their invoicing and accounts payable and ensure delivery data quality to satisfy the criteria. One advantage has been that it has allowed employees to shift their focus from backward-looking payment processing to more forward-looking, win-win agreements with suppliers.
Logistics, Cost, and Pricing Wins
There are numerous alternatives to digitize areas like logistics and planning.
In logistics, for example, there are widely available technologies for digitizing transportation management processes and operations. This includes everything from transportation planning to international exports. These are crucial, high-value, low-risk solutions for digitizing high-volume, day-to-day activities.
Another alternative is to improve pricing methods by utilizing supply digitization. This aids in making informed purchase decisions and helps manage quantities to optimize money locked up in inventories.
See The Big Picture
The upfront expense of adopting the requisite technology is a significant obstacle in supply chain digitization.
While it may save expenses in the long run, continuous reinvestment is critical to a successful digitization plan. It’s hardly a ‘set and forget’ situation. You’ll require people with a variety of expertise. So, keep a medium-term perspective and continue to invest in technology to ensure that you continue to reap benefits, and collaborate with your suppliers to ensure that solutions work for everyone.
Another problem is ensuring that the software’s advertised benefits are genuine and not overstated from the start. In order to increase the chances of success in larger initiatives, it is critical to focus on a holistic approach to process and technological transformation. Do not undervalue the significance of cultural and behavioural changes; incorporate them into your strategies from the start. Build a solid business case with clear outcomes and agreed-upon expertise based on evidence.
HubBroker’s digitization solutions help streamline every aspect of your inbound and outbound supply chain. Contact us today to know how we can help digitize and connect your supply chain for more efficiency, insight and advantage.