analysis

Let digital shake things up in supply chains

Some of the gains will be immediate, including on the all important bottom line

By Dan Quinn, Special to Gulf News
12:51 January 8, 2018

In recent years, many organisations have undertaken a strategy of digital transformation.

This transformation is to step-change many processes for businesses in order to take advantage of embedding faster, more collaborative and (much) more analytical ways of working to better understand and serve customers for a competitive advantage.

By leveraging this, businesses across the Middle East can enhance their customers’ experience and, in turn, their profitability. There is the potential to significantly reduce inefficiencies across an entire supply chain. Take, for example, e-commerce.

By improving the efficiency of a supply chain beyond brick-and-mortar retailers, wholesalers and manufacturers, they are able to collectively obtain a larger profit than each working in silos. By boosting the supply chain at every touchpoint, companies can reduce the overall cost as well as the opportunity loss, and crucially achieve a greater customer satisfaction rate.

And how is this achieved? A first stop when looking at an organisation’s cost structure should be the spend with third-party suppliers. On average, 60 per cent of a company’s costs are made up of spend on third-party suppliers of materials, goods and services.

In turn, these suppliers have suppliers of their own, and so on and so forth. Essentially, this means that almost everything you own or buy is impacted by procurement and supply chain management.

A digital transformation is making it easier than ever before for a procurement function to effectively play a significant role in optimising business and its supply chain, while delivering tangible cost savings. According to The Hackett Group’s recent study, digital transformation reduces strategic sourcing costs and cycle times by 30 per cent and reduces data-collection errors, leading to cost savings.

Automation also helps category managers obtain deeper spend reductions in specific areas and identify fresh opportunities for savings. It helps organisations identify sources of additional value, i.e., through its third-party suppliers, and retain it within the organisation. This translates into added value to customers.

So, with a better supply chain, determined through strategic procurement technologies, consumers reap the benefits, from manufacturing to processing. And to the physical delivery of the product resulting in a higher quality item and with faster delivery times. This is especially important as consumer demands continue to increase, aided through digital platforms that cater to a “right here, right now” mindset — a demand driven supply chain.

Technology enables productivity in a supply chain and this means that technologies enable businesses to do a lot more with less. If technology is at the heart of productivity, then the procurement function are the lungs of it. Procurement manages the acquisition of assets and the management of the supply chain in meeting mission requirements.

Due to this, there has been a great deal of innovation in procurement technologies that drive value in both public and private sectors. In particular, these digital innovations increase transparency and productivity while engaging healthy competition.

The Middle East is witnessing business innovation and advancement through digital technologies. Strategic procurement tools provide organisation’s with an opportunity to streamline processes and increase efficiency that add value to their businesses.

Automation is at the heart of the digital imperative. Digital innovation comes in all shapes and sizes, and those that are proven to impact the bottom-line such as those that increase the productivity of an entire supply chain have the greatest influence in positively contributing towards the growing economy. Forward thinking organisations that make strategic IT investments considerably strengthen their business outlook by opening up the opportunity for happier customers at a lower cost.

The writer is Senior Vice-President at BravoSolution MENA/Tejari.