Once a reliable and cost-effective system, the global supply chain fell into chaos at the turn of the decade, driving procurement teams into a state of near-constant crisis. Since then, manufacturers have faced unprecedented production delays, inventory issues, unreliable suppliers, increased costs, and demand fluctuation. Industry leaders have defined this as the era of the VUCA (volatility, uncertainty, complexity, and ambiguity) supply chain.
Fortunately, manufacturers have already adapted procurement strategies to overcome these challenges. Here are four of the best practices for manufacturing procurement.
1. Bring procurement strategy to the C-Suite
Traditionally, procurement strategy has been decided and carried out from the bottom up, with employees following the mandate to reduce costs as much as possible. However, in the VUCA supply chain, this linear and reactive approach could hurt companies more than it helps.
Suppliers are facing many challenges, which can impact manufacturers’ lead times, material quality, and even product access. That introduces a near-infinite number of variables to consider in evaluating supplier relationships. Evolving regulations surrounding sustainability, human rights, and transport make evaluation more challenging as well.
The most successful companies have made procurement strategy part of the C-suite agenda to stay ahead of regulations and challenges. This ensures procurement strategy aligns with overall business goals, procurement teams have resources properly allocated to their efforts, and companies can mitigate risks that might disrupt revenue projections.
2. Strengthen supplier relationships
With procurement strategy becoming an overall part of business strategy, ensuring you work with the right suppliers is critical to long-term success and mitigating risk. Procurement teams must deepen relationships with existing suppliers and carefully screen incoming vendors to ensure the companies share the same values. When getting to know suppliers better, make sure to do the following:
- Set baseline expectations for each party to ensure both are on the same page.
- Find out what the long-term goals of the supplier are.
- Ask about any investments they’re making into their business and operations.
- Get insight into their risk management strategy.
- Request documentation about how they source their materials and the vendors they work with.
3. Investigate supply chains
Unfortunately, it’s no longer enough to rely on the provided information. Aligning with suppliers takes more than asking questions and relationship building; it requires thorough investigation. Moving forward, a crucial part of procurement strategy should involve assessing every aspect of a supply chain network, including shipping logistics, quality control checks, and ethical considerations around material sourcing and labor. Ideally, procurement teams should be able to map their entire supply chain from source to arrival at their facility.
Many players in the industry are also increasing transparency to facilitate supply chain security. Tapping into these networks can alleviate much of the burden of investigation. For companies that don’t have the contacts or resources to conduct thorough due diligence, third-party supply chain consultants leverage their expertise to conduct the investigation themselves.
4. Invest in the right supply chain management technology
Building the kind of supply chain maps and databases that support modern procurement strategies requires investing in some of the latest state-of-the-art tools. Next generation supply chain management softwares can include features specifically for supply chain mapping, providing end-to-end visibility. Newer tools like AI can use predictive analytics in demand forecasting to avoid bottlenecks and support supplier performance monitoring. As more of the industry adopts the technology, blockchain helps ensure transparent record-keeping for transactions and product information.
Supplier relations are critical to succeeding in the VUCA supply chain era. Master Fluid Solutions®, in addition to its 70+-year history of cutting fluid innovation, is dedicated to transparency, quality, and being a reliable partner for the good of the manufacturing industry. If you’re looking for a new metalworking fluids supplier, get in touch with the Master team today.