Since 2020 and the arrival of the COVID-19 pandemic, we’ve all experienced how an unexpected event can have long-lasting impacts on operations worldwide. One of the biggest ongoing impacts of the pandemic has been its effects on manufacturers’ ability to access parts for the equipment they manufacture and/or maintain. Global supply chains are being re-ordered in response to the pandemic’s disruptions as companies look to re-shore or near-shore their supplies and national governments worldwide are increasingly a part of this strategic process.
In light of these dramatic alterations to global supply chains, DigiKey, a distributor of automation technologies and related components, recently hosted an online discussion about why it’s important for manufacturers to make procurement a more strategic aspect of their operations.
To highlight the difference between strategic and day-to-day procurement activities, Heather Fulara, senior director of the Interconnect and Electromechanical Business Unit at DigiKey, said that making procurement a strategic activity involves a close partnering with suppliers.
“We're partnering—whether that’s with our customers partnering with us a distributor or us partnering with our suppliers—to make sure we're well covered as lead times adjust and supply chains are disrupted,” said Fulara. “Some of the more strategic work that we do is making sure that we're finding more ways to get data digitally from our supplier partners and making sure that we're automating processes so that we can focus on more of the strategic work needed to find solutions for our suppliers and for our customers.”
Margaret Cunha, senior director of global supply chains at DigiKey, added that it’s been tough for a lot of procurement professionals to be more strategic because strategic procurement is not just about direct cost savings. It involves all the elements associated with placing an order.
“It's not just getting the right part or the right part at the right time,” she said. “It's the right part, the right price and at the right time so that you're not carrying too much inventory or not having enough inventory so that if anything goes wrong at any key moment, your lines will always be running.”
Data-driven procurement
Amid all the supply chain changes being made as part of global reshoring programs, the risk of supply chain disruptions remains paramount. Even after the dust has settled from the current supply shifts, procurement professionals will still be dealing with some level of supply chain uncertainty. That’s why Cunha stressed that a key aspect of procurement’s evolving work is to be more digitally connected.
“The procurement team needs to make decisions really quickly, but they need the right data and understand what to do with it,” she said, noting that digital tools such as electronic data interchange and APIs (application programming interfaces) are key aspects to the digitalization of procurement.
"Getting the procurement team to become more strategic really ties to having a digital plan and a strategic digital focus,” she said.
Nathan Pray, manager of the B2B Digital Technology Office at DigiKey, noted that in a digital operation “it's easy to get overwhelmed by data. So, you have to understand the questions you're trying to answer and the processes you're trying to improve first. If you're not sure what decisions you need to be making or what processes you're trying to improve, all those data are an overwhelming amount of information that can just grind you to a halt.”
Once procurement has strategically determined its priorities and, in the process, identified the required data sources, Pray said the nest step lies in assessing how to digitize those data points so that procurement can make decisions faster.
In a digitally disconnected procurement operation, “it's easy to miss something like a non-cancelable order or a non-returnable product, but that's an important piece of information when you're making a purchasing decision,” said Pray.
To make sure you make the best choices and eliminate some of the noise in the procurement process, Pray said a data-driven procurement process helps you understand where you're at right now and provides the ability to focus on “the two or three key data points that really mean something” to your business.
Fulara added that involving your partners in your digital procurement strategy is key to integrating the data you’re all gathering into the decision-making process that makes up your day-to-day procurement process. This level of data integration among partners can free up more time for other strategic priorities you need to safeguard against—such as cyberattacks or another pandemic.
Automating procurement
Automation is no longer just about production. Front office tasks, such as procurement, are getting automated as well. But what aspects of procurement should manufacturers look to automate first?
Pray said, from a distributor perspective, it’s important for them to automate the process of providing price and availability information to their manufacturing industry customers. “I don't know how many people really, truly enjoy going from website to website, copying and pasting pricing and quantity information into a spreadsheet to do comparables,” he said. “That’s a process that's well-handled by computers. So that's where most people should start because it's really where your biggest [procurement] pain points are.”
This recommendation from Pray about automating the pricing and availability aspects of procurement stems from experience with customers wanting updates on their orders and back orders. With these procurement processes automated between the distributor and customer, Pray said it’s easier to manage post order follow-ups by sharing information from the current location of the order to when it’s expected to be delivered—all the way into receiving.
He noted that, in this way, distributors like DigiKey are in much the same place as their customers when it comes to procuring supplies. “We're looking for the same things,” he said. “Once we've placed an order, we want to know when that order is going to hit our warehouse and how quickly we can get it turned around for sale.”
What’s DigiKey doing?
Considering that distributors have a lot in common with their customers when it comes to procurement, many manufacturers are interested to know what distributors are doing to protect against the multitude of issues that can impact the supply chains they depend on.
“We’re always engaging with our suppliers, because we needed to understand what lists [of products and components] could be impacted and by how much so that we can move as quickly as possible…and adjust our inventory levels so that we can weather the storm,” said Fulara.
To provide a non-emergency example of how DigiKey deals with these supply chain impacts, Fulara offered an example of a hypothetical new European standard that requires compliance within six months. In such cases, “our customers need to understand where the SKUs they are sourcing fall within these new requirements,” she said. “We make sure the information is included on the SKU page and that we are marketing that appropriately online…and safeguarding our inventory” to deal with any scenario.
“I think everyone is really more aware today because of the pandemic that anything can be impacted,” said Cunha. “That’s why we're looking at where the items we need are manufactured, where are there alternates and what could the impact be based on raw materials, transit or labor issues from a procurement perspective. That’s why we offer alternates on our parametric search…so that engineers using that front end can have as many options as possible so that when they hand that order off to procurement, they're not stuck.”
Fulara added that DigiKey always monitors its websites to “see what types of products are being searched for so that we can lean into the right products that our customers are looking for to make sure that we have the broadest portfolio that we can to hedge against any types of situation.”
