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Climbing the Stairway to Value: Getting the Most Out of Your Supply Management Platform

August 3, 2023
Todd Goulet

When procurement leaders consider investing in technology, equally important to choosing the right supply management platform is adopting the right mindset. After all, innovative AI is useless if companies don’t know how to maximize its value to reap the benefits. Moreover, in these increasingly volatile times, the benefits are undeniable.  

According to SupplyChainBrain, the future of procurement is “being shaped by the rapid advancement of technology, driving digital automation in the supply chain.” SCB states, “Using technology to transform capabilities, talent pool and insights will help companies advance in the competitive business wars. Those that do will move closer to the greater goal of ongoing digital transformation of the supply chain in 2023 and beyond.”

But what does this transformation actually look like? How should procurement leaders begin? That’s where the concept of the stairway to value comes in. You can’t get to the top without first climbing the stairway, one step at a time. Ignoring a step along the way can trip you up, forcing you to start all over again. This is because, in some cases, companies spending billions on components try to shoe-horn everything into a supply management platform quickly, which often can’t handle that spend all at once with useful linkages. A smarter approach is to start small with the easy-to-follow steps below and then gradually increase the amount of spend you’re integrating and assessing over time, leading to a significant return on your technology investment.  

Step 1: Identify internal price variances. An AI-powered supply management platform can help you see where you’re paying different prices for parts in your supply chain. For example, if you pay one price for a part to one contract manufacturer and another price for the same part to another contract manufacturer, the platform will provide visibility even if the part numbers for the same parts vary between partners. A 2–4% price variance could lead to tens or hundreds of thousands of dollars of savings.  

Step 2: Expand to external price variances. Once you identify internal price variances, the platform can then expand its scope to monitor external price variances to ensure you aren’t paying more than the current market value. For example, if you’re paying $1.25 for a part from one supplier, advanced benchmarking and alternate parts optimization can show you the value of that part is actually $1.05. Complete supply visibility within and outside of your organization allows you to enhance your negotiation playbook, dramatically reducing costs for your company.  

Step 3: Mitigate risk. Despite how hard you try to prepare for unforeseen challenges, you can’t know everything, putting your company at greater risk. However, platforms can alleviate concerns by providing parts-level visibility into important information like end-of-life timing or single-sourcing before a person may be aware of problems, in addition to other potential risks, such as the financial health of the supplier and any geopolitical factors. Knowledge of risk empowers you to make the best possible decisions for your supply chain and can save you time and a headache by identifying suspect parts earlier, sending new requests for quotes to different vendors, and replacing parts swiftly.

Step 4: Add different divisions. If you have acquired companies or operate in other regions, you can be sure you’re paying different prices for parts. When multiple divisions of your company are brought together on one platform, you can more confidently and strategically allocate spend.

Step 5: Load new product information. After following each step, by the end of your journey, you will reach the top of the stairway to value. The final step toward transformation is being in a position to load new product data into the platform before the product is even made, getting quotes and comparing prices to previous versions and to market prices. This gives you a clear idea of what the new product will cost, as well as a major competitive edge.  

Ultimately, a smart AI supply management platform can constantly monitor price variance and increasing risk so you can strategically plan to optimize your spend instead of resorting to emergency tactical reviews and quick decisions that may alleviate the pain but continue to mask the deeper symptoms that still persist. Investment in a platform will provide you with immediate cost savings, more time to focus on priority projects, and confidence in a resilient supply chain. However, getting to that place requires a proactive mindset and willingness to act. Are you ready to take the first step?

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