5 minutes with SAP executives: supply chain & procurement
How has the supply chain and procurement industry evolved over the last year following the impact of COVID-19?
2020 has been defined by supply chain disruption. The impact of COVID-19 has accelerated trends that will not only lead to the diversification and localisation of supply chains, but also increase the need for digitalisation and end-to-end visibility. Now more than ever, procurement is uniquely positioned to be transformative and highly impactful for businesses as we enter a new era of data-driven intelligence.
A shift away from the traditional, linear supply chain to a broader supply network, coupled with dynamic partnerships driving innovation, will be key to gaining a 360-degree view of supply, improving cash flow, developing new products and pursuing sustainability initiatives. Breaking away from reactivity and focusing on proactivity will be essential in tackling new business challenges in a post-COVID-19 world. Network strategies, and making use of data-driven insights, will be important in avoiding repercussions from future shocks and shifts, replacing linearity with interconnectivity.
Over the next few months which technology do you see playing a vital role in the supply chain and procurement industry?
I foresee cloud-based solutions, particularly with regard to external workforce management, playing a vital role in lending businesses the flexibility they need to take steps toward recovery. Just as they always have, contingent labour and services providers deliver the depth of skills and expertise necessary to propel businesses forward. With the right sets of digital tools, organisations can achieve maximum visibility and value from these essential workers, ramping up and down efficiently as the new year unfolds.
Why is the adoption of data analytics important for procurement?
Procurement without data and analytics is simply spend. Procurement can and should play a strategic role within the business, but this can only be achieved with a strong analytical foundation. To drive true organisational change, procurement professionals should arm themselves with data and analytics. Knowing where and how money is being spent, as well as its impact, empowers procurement professionals to make a case for both systematic improvements and the change management required for success.
How can procurement analytics benefit supply chain functions?
The efficiencies gained through digital transformation and the automation of standard procurement functions have freed up procurement professionals to focus on more strategic activities. It can be argued that none are more strategic than data analysis. Digitisation produces massive amounts of data to help procurement professionals make informed decisions that positively impact their organisation’s financial outcomes. Utilising this data, procurement professionals can gain insights into how to drive benefits around cost savings, supplier consolidation and purchasing power.
What are the current trends in procurement analytics?
At the heart of automation is data. With a strong analytic foundation, businesses can get the most out of their digital transformation and truly leverage Artificial Intelligence (AI) and Machine Learning (ML). In a global economy, companies using these tools can deliver insights across their supply network. When this data is captured consistently across procurement operations, and ideally across multiple customers, it becomes more accessible and meaningful. Ultimately AI has the power to increase productivity across trading partners and across the spend horizon through the network effect.
IHS Markit/CIPS: UK Manufacturing PMI near-record high
UK manufacturing trends
For the UK manufacturing sector, growth of output and new orders were both reported by IHS Markit and CIPS as among the best seen over the past seven years, which in turn has led to a strong increase in employment. Despite this, the sector continues to face supply chain delays and input shortages, which resulted in increased purchasing costs and record selling price inflation.
UK Manufacturing IHS Markit/CIPS Purchasing Managers’ Index® (PMI®)
Seasonally adjusted, IHS Markit/CIPS Purchasing Managers’ Index® (PMI®) rose to 60.9 in April, which was an increase compared to March (58.9) and above the estimated 60.7 for April.
Increasing for the eleventh consecutive month, the latest readings are the highest since July 1994 (61.0). The output growth for April has been attributed to the loosening of lockdown restrictions, improving demands and a rise in backlogged work.
“The manufacturing sector was flooded with optimism in April as the PMI rose to its highest level since July 1994, bolstered by strong levels of new orders and the end of lockdown restrictions opened the gates to business. It was primarily the home market that fuelled this upsurge in activity though more work from the US, Europe and China demonstrated there were also improvements in the global economy. This boom largely benefited corporates as output growth at small-scale producers continued to lag behind,” said Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply.
In addition to expanding production, total new orders rose for its third consecutive month, which was attributed to a revival of domestic market conditions, stronger client confidence, parts of the economy reopening and improving global market conditions.
While new exports rose in April, the rate was reported as weaker in comparison to new orders. “Companies reported improved new work intakes from several trading partners, including mainland Europe, the US, China and South-East Asia. Large-sized manufacturers saw a substantial expansion in new export order intakes, compared to only a marginal rise at small-sized firms,” said IHS Markit/CIPS.
UK Manufacturing’s outlook
Remaining positive at the start of the second quarter, 66% of companies forecast that output will be higher in a year's time, which is attributed to expectations for less disruption related to COVID-19 and Brexit, economic recovery, improved client confidence and new product launches.
“Further loosening of COVID-19 restrictions at home and abroad led to another marked growth spurt at UK factories. The headline PMI rose to a near 27-year high, as output and new orders expanded at increased rates. The outlook for the sector is also increasingly positive, with two-thirds of manufacturers expecting output to be higher in one year’s time. Export growth remains relatively subdued, however, as small manufacturers struggle to export,” said Rob Dobson, Director at IHS Markit.
Adding to comments from IHS Markit and CIPS, , Managing Director of Freight and Logistics at Accenture Global said: “While today’s figures are positive overall, the worsening supply situation is still a concern, with rates of both input costs and selling price inflation running far above anything previously seen. Shipping delays and material shortages are driving huge backlogs of uncompleted work and the surge in manufacturing orders is leading to many firms struggling to boost operating capacity to keep up with demand. With business expectations becoming even more optimistic as the economy rebounds, the big question will be whether firms will be able to cope with the surging inflows of new orders.
“As ongoing supply chain issues are still at large, companies with wide international footprints should look to reassess their logistics strategies by running supply chain stress tests and simulations in order to respond quickly to upswings and variability in demand. A flexible and resilient supply chain will be a key way for businesses to remain both competitive and stable as we emerge from the pandemic”