Expert Series Top 4 Challenges in Supply Chain Management

Transcription

1 Top 4 Challenges in Supply Chain Management

2 Top 4 Challenges in Supply Chain Management A healthy supply chain relies on the efficient exchange of accurate information between a buyer and their suppliers. ABOUT THE AUTHOR Andy Mulholland is a Mechanical Engineer with more than 20 years experience working across asset intensive industries. Prior to his role at ABB, Andy worked in a number of engineering roles designing, constructing and commissioning coalfired and cogeneration power plant and equipment for the energy sector across Australia, New Zealand and SE Asia. Andy has also designed heavy process equipment for the mining and oil and gas clients in Australia. Since joining ABB in 2001, Andy has helped establish Axis and currently holds the role of Vice President Product Management. A healthy supply chain relies on the efficient exchange of accurate information between a buyer and their suppliers. However, for asset-intensive organizations, even the most fundamental types of communications orders, shipment advice, status notifications and invoices can be thwarted by outmoded, error-prone methods. Too often, the buyer falls back onto the lowest common denominator to communicate with a broad range of suppliers: hard copy, faxed and ed documents. While internal processes and transactions may be fully automated, that automation stops when placing and tracking orders outside the organization. Buyers and suppliers both re-enter information received from their counterparts into their own systems of record, and this process can significantly complicate supplier management and raise costs for all parties. The team of industry experts at ABB has identified the following top challenges related to supplier management: Improving efficiency Maintaining accuracy Enforcing governance Spending on contract 1. Improving Efficiency Because of the high number of suppliers an asset-intensive organization relies on, the default mode for supplier communication is primarily paper-based. Those suppliers can have vastly different IT infrastructures and levels of technical sophistication. To work around system incompatibilities, buyers and suppliers exchange faxes or on orders, receipt notifications, invoices, requests for quotes, shipment notifications, and virtually every other form of communication. Troubleshooting a delayed order or confirming shipment status also requires multiple phone calls or s. Personnel on both ends of the transaction must re-key data into their own enterprise systems for their own tracking purposes. The resulting inefficiency not only prolongs the order fulfilment cycle, it also drives up the cost of each transaction by requiring more hands-on, labor-intensive intervention. 2 Top 4 Challenges in Supply Chain Management Expert Series

3 In response, more organizations are collaborating electronically to automate communication and transactions with suppliers, bridging the disparities between their business systems. This B2B approach dramatically reduces the manual involvement and personnel hours required to monitor and complete transactions. The Australian Defence Force (ADF) implemented the Axis B2B platform more than 10 years ago to replace paper processes and automate both the exchange and tracking of request for quote, purchase order, invoice, and expediting documents, creating a fully auditable electronic record of each transaction. ADF realized a savings of 1.5 hours per transaction while suppliers achieved a significant reduction in response times and more accurate payment of invoices. 2. Maintaining Accuracy Accuracy and efficiency are closely related but distinct priorities in the area of supply chain management. The process of re-keying order and invoice information increases the potential for error with each keystroke. Additionally, master data alignment (product codes, pricing and description) is a complex process when managing manually. In a paper-centric, form-driven environment, buyers may not identify an error or discrepancy until the order arrives on-site or worse still when the order does not arrive at all. Identifying and correcting the error leads to longer delays and higher costs delays in receiving parts and materials can bring work to a halt and reduce the availability of critical assets. The Axis B2B Platform helps eliminate these errors and increases data accuracy through the exchange of transactions electronically. Each party can use its existing back-office systems and data formats (in other words, speak its own language), while communicating with its counterparts in a seamless and integrated way. Each year, Xstrata Copper processes more than 135,000 purchase orders and 200,000 invoices. Previously, 98% of that traffic went by fax and traditional post. Through the use of the Axis B2B Platform, Xstrata Copper Queensland automated the exchange of procure-to-pay documents with suppliers, thereby realizing a significant drop in invoice mismatch and an increase in order fulfilment accuracy. 3. Enforcing Governance A comprehensive, verifiable audit trail from the initial order through the supplier s receipt of payment is imperative to evaluate supplier performance. As a result, an organization may find it hard to document whether a supplier has met its contractual obligations. With traditional paper-based communication, companies have virtually no visibility into their suppliers ability to meet order commitments. It is also difficult to identify a potential delay and find a suitable alternative until late in the process. A shared platform for buyer and supplier collaboration creates a single version of the truth that enables organizations to enforce contract terms at each phase of a transaction. It also sets the stage for tighter collaboration with suppliers. Buyers and suppliers can work together to resolve issues as they arise through the use of order acknowledgements, expediting and transaction monitoring. Buyers can also gain a more accurate picture of supplier performance because they have a documented, time-stamped history of all supplier activity against a purchase order. Visibility of supplier performance is extremely important when the reliance on parts and services affects asset availability. Organizations such as Australia s OneSteel use the Axis B2B platform across both buy side and sell side processes, servicing their manufacturing and distribution businesses. The delivery of large tonnage steel shipments by truck to client site involves very narrow delivery windows. Without a booking time-slot, trucks are turned away costing time and money to both parties. Timely communication of shipment contents and expected arrival time onsite to clients is imperative to OneSteel s business. Using Axis, OneSteel is notified automatically if their shipment advice transactions cannot be delivered to clients within 10 minutes, allowing alternative delivery notification to be instigated. This monitoring means OneSteel can react quickly to maintain a high level of customer service and audit capability as well as report on their own performance to their clients. Expert Series Top 4 Challenges in Supply Chain Management 3

4 Top 4 Challenges in Supply Chain Management 4. Spending on Contract Procurement leakage occurs when purchasing officers buy off-contract, often from unapproved suppliers, or deviate from agreed contract terms. A significant effort is usually expended in developing strategic sourcing agreements and establishing contracts with suppliers. The promised return of which is negotiated savings across spend on contract. Once negotiated it is important to make it easy for buyers to access and use these contracts. For many purchases, particularly services and goods that are not held in inventory, buyers do not always know whether pricing and specification aligns with contract terms. Without a synchronized view of contract and item information that buyers and suppliers can share, it is difficult for organizations to prevent procurement leakage. The Axis B2B platform incorporates an online procurement catalog capable of consolidating goods and services product information across all suppliers. The catalog solution provides a single, easy to use interface accessible by any buyer within the organization. Buyers can search and quickly find the needed products, compare prices across multiple suppliers, rate and review suppliers to their peers, and integrate their purchases to the ERP through punch-out and shopping cart technology. Suppliers are also given the ability to maintain their own catalog data, with an approval step by buyer category managers prior to publishing to end users. The result is that purchasing officers can complete transactions with greater flexibility yet still within contract scope. Given that significant customers often get rebates based on purchasing on-contract, this solution helps ensure those benefits are realized. About ABB ABB provides industry leading software and deep domain expertise to help the world s most asset intensive industries such as energy, utilities and mining solve their biggest challenges, from plant level, to regional network scale, to global fleet-wide operations. Our enterprise software portfolio offers an unparalleled range of solutions for asset performance management, operations and workforce management, network control and energy portfolio management to help customers reach new levels of efficiency, reliability, safety and sustainability. We are constantly researching and incorporating the latest technology innovations in areas such as mobility, analytics and cloud computing. We provide unmatched capabilities to integrate information technologies (IT) and operational technologies (OT) to provide complete solutions to our customers business problems. 4 Top 4 Challenges in Supply Chain Management Expert Series

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