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Strategic Approach to Direct Procurement

Outsourced manufacturing is the norm today, often involving thousands of suppliers and sites. Direct procurement departments are being tasked with more responsibilities than ever as they assess suppliers and strive to acquire materials at the optimal cost. This can involve dozens of time-sensitive steps and millions of data points to correlate and track each day. With profit margins on the line, the stakes keep getting higher.

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Traditional Approach: Tactical, Manual, Inefficient

Traditionally, direct procurement has been viewed as tactical. All companies must acquire materials to manufacture finished goods, but this activity typically provides no real differentiation or competitive value. The usual process relies on siloed internal technology, such as enterprise resource planning (ERP) systems, to manage the data and primarily manual steps to move the process forward.

However, manufacturing has grown exponentially more complex, lead times are now tighter and competitive pressure is much greater. These dynamics present an opportunity to use direct procurement strategically. Yet outdated technology and manual processes can’t handle the scope and scale of what companies need to realize direct procurement’s full value.

A New Strategy and New Technology for Today’s Complexities

The level of agility required to capture growth opportunities—plus resiliency to manage today’s risks—requires a new way of thinking about direct procurement and its potential. Direct procurement teams should be able to orchestrate everything from onboarding thousands of suppliers in multiple tiers to collaborating with trading partners across all ecosystems. This includes ensuring that all parties can stay in sync on purchase order details, match purchase orders to shipments, receipts and invoices and manage inventory risk at any stage.

Leveraging these capabilities, you can empower your teams to see and manage beyond the enterprise and drive maximal value from direct procurement. New technology is required to support this strategy by equipping them with access to a large trading partner network to get the data they need along with integrated, purpose-built software applications for start-to-finish process orchestration.

The Right Technology for Competitive Advantage

No matter where you are in your direct procurement journey, choosing the right enabling technology is crucial for achieving competitive advantage. E2open brings all essential direct procurement functions together on a single operating platform connected to a global trading partner network to provide the data, applications and artificial intelligence (AI) required to transition your direct procurement processes and resources from tactical to strategic. With these broad and deep capabilities on one operating platform that grows with you as your business needs mature, you meet today’s requirements while equipping your organization for future success.

Essentials of Strategic Direct Procurement

Transforming your company’s direct procurement processes from tactical to strategic requires an evaluation of where your department is today and where you want to be in the future. E2open provides essentials to help guide you on your journey:

  • Visibility: Gain end-to-end visibility through the entire supply network, including long-tail partners. This includes visibility into finished-goods inventory, components and materials held by suppliers at every tier so you can proactively manage shortages and excesses.

  • Alignment: Proactively align supply with demand through early collaboration with multiple tiers of suppliers. Close collaboration also helps you optimize the use of supplier and contractor rebates so you can reduce the cost of goods.

  • Efficiency: Establish more effective processes by streamlining labor-intensive workflows to increase productivity and drive new efficiencies. For instance, you can easily set up an audit-ready, paperless workflow complete with validated, electronically signed and archived electronic invoices with compliance in over 50 countries. Another example is enabling trading partners to create carton-level shipment details on purchase orders, print their own labels and conduct four-way matching with ease.

  • Cost-Effectiveness: Achieve economies of scale and enhance profitability through the centralized purchasing of raw materials and products on the behalf of partners. You can reduce shipping time and cost by drop-shipping directly to customers, warehouses, plants, contract manufacturers and co-packers with orchestrated workflows among all parties. By easily viewing changes to bills of materials, related costs and cost forecasts, you can look for opportunities to enhance margins.

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