By Gaurav Baheti, Founder & CEO of Procol
We have now witnessed a major change in our economy, with the functions becoming more interconnected. The supply chains are now required to work in tandem with all the required functions. This has resulted in a more connected and co-dependent network. All functions now work in perfect harmony with the various small and large components. The delivery and sourcing systems have both become increasingly dynamic. For the ecosystem to function in a seamless manner, there needs to be perfect alignment between the procurement and the fulfillment networks.
When there is coordination between these two departments, the organizations will be able to deliver a better output and also reduce the overall costs. They would also be able to improve customer satisfaction in the long run.
How Have Procurement and Fulfillment Evolved Over The Past Decade?
During the earlier times, the sole aim of procurement was to source the available goods and services at the best possible price. On the other hand, the function of fulfillment was to store, pack, and deliver these goods to the corresponding customers. Both these functions have traditionally operated on an independent basis without any communication or accountability. With the advent of modernization and its impact on the supply chains, the approach of both these functions had to become more integrated.
The outcomes of fulfillment are directly impacted by the procurement decisions. These mainly include delivery, order accuracy, and inventory availability. The procurement strategies must also be informed by the fulfillment insights, which include delivery performance and demand patterns. The operations have now transformed from being independent to following a more collaborative approach. It also helps organizations become more competitive.
Meeting The Expectations of The Customers
Customer expectations have now increased at an unprecedented rate. One of the main functions of the alignment between the procurement and the fulfillment networks is to meet the customer expectations. The entry of global players into the mainframe has resulted in the delivery experiences becoming more transparent, reliable, and rapid.
Delivery experiences such as same-day and next-day delivery are becoming the new normal. To meet the delivery expectations of the customers, the procurement networks must ensure that the right materials are acquired at the right time. As the fulfillment teams have better visibility of the inventory and the order volumes, the procurement teams need to have closer coordination with them.
In case of failure to achieve this coordination, the companies can also face delayed shipments, dissatisfaction among the customers, and the risk of stock outs.
Maintaining An Optimal Level of Inventory
Another function of this coordination is to ensure a complete optimization of the inventory. A company can incur significant losses both in the case of under stocking and overstocking of inventory. When both these functions operate in an independent manner, the companies can end up purchasing an excess of inventory. The outdated forecasts can also lead to increased costs of holding and potential obsolescence.
How Do Companies Respond To The Changing Conditions of Demand and Supply?
Sometimes, companies might face an unexpected surge in orders. Similarly, they can sometimes face disruptions to supply chain operations. They must fully adapt to the changes and respond in the best possible manner. If there is perfect coordination between the procurement and the fulfillment teams in such situations, they will be able to make decisions in a more efficient manner.
If the procurement team can gauge a potential spike in the orders, the fulfillment teams will be able to respond to this change by looking for alternate suppliers. If there is a delay from the supplier’s end, the fulfillment teams will be in a position to adjust the delivery timeline and also readjust the inventory to mitigate the impact. In the long run, the entire supply chain will be able to become more resilient and better prepared for potential disruptions in demand and supply.
Making Use Of The Latest Technology
The gap between the procurement and the fulfillment networks can be bridged by making use of the latest technology. The supply chain platforms are now becoming more integrated with the use of cloud-based systems. They also make use of advanced analytics, which enables a seamless sharing of data and a seamless collaboration between these two functions.
The enterprises are also able to get increased visibility with the help of real-time dashboards. They are able to get insights into the order status, performance of the suppliers, and the level of inventory. Various processes, such as the purchase order creation and the processing of orders, are streamlined with the help of automation tools. This also helps reduce the scope for manual delays and errors. By making use of predictive analysis, the companies are able to forecast the patterns of demand and also identify the potential challenges. This helps both the procurement and the fulfillment teams to achieve a more proactive level of planning.
Are These Functions Prone To Challenges?
The coordination between these two areas comes with its own set of challenges. The employees might feel resistant towards this change, and they might want to operate within their traditional systems. Therefore, the companies need to come up with engaging and comprehensive training programs.
The leaders need to convince their teams to invest in the right tools required to train the employees and help them achieve their full potential. This improved performance will help increase the output of the company in the long run. Therefore, it has become imperative to up skill the employees to help achieve the organizational goals.
The Road Ahead
The modern supply chains are heavily dependent on the coordination between the procurement and fulfillment channels. To deliver an enriching experience to the customers, companies must ensure their smooth functioning. In this way, they will be able to increase their relevance and also optimize their daily operations.
The adoption of the latest technology can also help companies achieve this coordination. They also end up making the whole supply chain more resilient in the long run. This coordination will no longer be limited to being a strategic advantage, but it will become mandatory for all organizations to adapt to this change.
Author :
Gaurav Baheti, Founder & CEO of Procol
