How Automation Can Help Mitigate Supplier Risk
In an age of economic uncertainty, geopolitical unrest and emerging cybersecurity threats, risk management has become a critical boardroom priority. Today, global businesses are not only accountable for the factors that impact them directly, they’re also responsible for those that impact their suppliers. According to the Deloitte Global Chief Procurement Officer Survey 2019, chief procurement officers are more concerned than ever about safeguarding their organizations from external risk.
Unfortunately, too many organizations manage vendor qualification, contract and procurement processes manually or through technology that’s too complicated for sourcing teams to use regularly. A McKinsey & Company report found that 56 percent of source-to-pay tasks could be “fully or largely automated using currently available technologies.”
Automation has the potential to decrease overall risk by reducing the “human factor” in supplier management while allowing sourcing employees to focus on critical tasks and projects.
Right Information, Right Time
In addition to putting risk mitigation at the forefront, automating supplier-related processes benefits businesses in the following four ways:
1. Increased Visibility and Transparency
Traditional manual processes, like using spreadsheets, document management systems and physical paperwork can cause problems. They increase the likelihood of human error due to inaccuracies, missed deadlines or security oversights, and decrease businesses’ visibility into their supply chains. Automated procurement ensures complete and transparent supplier management across the organization by providing access to the right information at the right time.
Companies also can use automated processes to efficiently manage their suppliers and contracts, identify financially beneficial supplier partnerships and maintain constant visibility into their supply chains. This kind of transparency in the supplier management process is incredibly important because it allows organizations to automatically maintain accurate information and prepare for new and changing regulations. Ultimately, automation tools enable companies to keep tabs on compliance, while driving productivity and cross-collaboration.
2. Streamlined Vendor Qualification/Onboarding
A strong and successful supplier relationship is built on an effective onboarding process. In most cases — especially in larger global organizations — vendor onboarding is handled by various teams while supplier information may be stored in multiple, siloed systems. As a result, there is no standardized approach for onboarding, leading to disorganization, information gaps and increased risk.
Onboarding processes must be consistent across all vendors to verify that they meet internal standards. Vendors should continually be re-evaluated across the same criteria on a regular basis so there’s never a lapse in ensuring that all vendors meet internal guidelines.
Automating this process and taking a strategic approach to vendor onboarding helps save time, reduce risk and improve overall communications and compliance. It also ensures that all suppliers meet (and continue to meet) established criteria and are verified against third-party sources.
3.Keeping Pace with Compliance, Regulation
With a higher demand for transparency,
consumers are paying more attention to how corporations conduct business and with whom. The growing number of new government directives, regulations and corporate policies require that procurement have immediate access to accurate compliance data and analytics that gives them visibility into every supplier.
Today, many corporations use systems and data that are dependent on the department’s internal compliance knowledge and corporate standards for vendor vetting and registration. As global regulations and penalties mount, however, it is clear that this siloed structure is no longer viable. These regulations, coupled with consumer calls for transparency, have resulted in a push for businesses to adopt automated, centralized systems for vendor compliance that pull data from a single, master source.
4.Uncovering Opportunities to Reduce Spend
Automation technology gives sourcing teams easier access to the historical data they need to make informed decisions about purchasing, allowing them to uncover opportunities for savings and future-proof their business during times of economic uncertainty.
Adding a procurement solution to help automate the enterprise supply chain enables companies to oversee their processes and ensure they remain compliant with current regulations. By gaining deeper insight into their supply and demand trends, companies can better anticipate their own needs. For example, retailers can minimize instances of overstocks and out-of-stocks, decreasing revenues lost to excess inventory, heavy discounts or customers going to competitors.
For business leaders in 2020, managing supplier-related risks may seem daunting. But with the right technology and automation strategy, supply chain and procurement teams will be better equipped than ever.
Stan Garber is president and co-founder of Scout RFP, which provides sourcing and procurement software.