Procurement as Part of Your Automation Strategy

Since 2020 and the arrival of the COVID-19 pandemic, we’ve all experienced how an  unexpected event can have long-lasting impacts on operations worldwide. One of the  biggest ongoing impacts of the pandemic has been its effects on manufacturers’ ability to  access parts for the equipment they manufacture and/or maintain. Global supply chains are  being re-ordered in response to the pandemic’s disruptions as companies look to re-shore  or near-shore their supplies and national governments worldwide are increasingly a part of  this strategic process.

In light of these dramatic alterations to global supply chains, DigiKey, a distributor of  automation technologies and related components, recently hosted an online discussion  about why it’s important for manufacturers to make procurement a more strategic aspect of  their operations.

To highlight the difference between strategic and day-to-day procurement activities,  Heather Fulara, senior director of the Interconnect and Electromechanical Business Unit at  DigiKey, said that making procurement a strategic activity involves a close partnering with  suppliers.

“We're partnering—whether that’s with our customers partnering with us a distributor or  us partnering with our suppliers—to make sure we're well covered as lead times adjust and  supply chains are disrupted,” said Fulara. “Some of the more strategic work that we do is  making sure that we're finding more ways to get data digitally from our supplier partners  and making sure that we're automating processes so that we can focus on more of the  strategic work needed to find solutions for our suppliers and for our customers.”

Margaret Cunha, senior director of global supply chains at DigiKey, added that it’s been  tough for a lot of procurement professionals to be more strategic because strategic  procurement is not just about direct cost savings. It involves all the elements associated  with placing an order. 

“It's not just getting the right part or the right part at the right time,” she said. “It's the right part, the right price and at the right time so that you're not carrying too much inventory or not having enough inventory so that if anything goes wrong at any key moment, your lines  will always be running.” 

Data-driven procurement

Amid all the supply chain changes being made as part of global reshoring programs, the risk  of supply chain disruptions remains paramount. Even after the dust has settled from the  current supply shifts, procurement professionals will still be dealing with some level of  supply chain uncertainty. That’s why Cunha stressed that a key aspect of procurement’s  evolving work is to be more digitally connected. 

“The procurement team needs to make decisions really quickly, but they need the right data  and understand what to do with it,” she said, noting that digital tools such as electronic data  interchange and APIs (application programming interfaces) are key aspects to the  digitalization of procurement.

"Getting the procurement team to become more strategic really ties to having a digital plan  and a strategic digital focus,” she said. 

Nathan Pray, manager of the B2B Digital Technology Office at DigiKey, noted that in a digital  operation “it's easy to get overwhelmed by data. So, you have to understand the questions  you're trying to answer and the processes you're trying to improve first. If you're not sure  what decisions you need to be making or what processes you're trying to improve, all those  data are an overwhelming amount of information that can just grind you to a halt.”

Once procurement has strategically determined its priorities and, in the process, identified  the required data sources, Pray said the nest step lies in assessing how to digitize those  data points so that procurement can make decisions faster.

In a digitally disconnected procurement operation, “it's easy to miss something like a non-cancelable order or a non-returnable product, but that's an important piece of information  when you're making a purchasing decision,” said Pray. 

To make sure you make the best choices and eliminate some of the noise in the  procurement process, Pray said a data-driven procurement process helps you understand  where you're at right now and provides the ability to focus on “the two or three key data  points that really mean something” to your business.

Fulara added that involving your partners in your digital procurement strategy is key to  integrating the data you’re all gathering into the decision-making process that makes up  your day-to-day procurement process. This level of data integration among partners can  free up more time for other strategic priorities you need to safeguard against—such as  cyberattacks or another pandemic.

Automating procurement

Automation is no longer just about production. Front office tasks, such as procurement, are  getting automated as well. But what aspects of procurement should manufacturers look to  automate first?

Pray said, from a distributor perspective, it’s important for them to automate the process of  providing price and availability information to their manufacturing industry customers. “I don't know how many people really, truly enjoy going from website to website, copying  and pasting pricing and quantity information into a spreadsheet to do comparables,” he  said. “That’s a process that's well-handled by computers. So that's where most people  should start because it's really where your biggest [procurement] pain points are.”

This recommendation from Pray about automating the pricing and availability aspects of  procurement stems from experience with customers wanting updates on their orders and  back orders. With these procurement processes automated between the distributor and  customer, Pray said it’s easier to manage post order follow-ups by sharing information from  the current location of the order to when it’s expected to be delivered—all the way into  receiving. 

He noted that, in this way, distributors like DigiKey are in much the same place as their  customers when it comes to procuring supplies. “We're looking for the same things,” he  said. “Once we've placed an order, we want to know when that order is going to hit our  warehouse and how quickly we can get it turned around for sale.”

What’s DigiKey doing?

Considering that distributors have a lot in common with their customers when it comes to  procurement, many manufacturers are interested to know what distributors are doing to  protect against the multitude of issues that can impact the supply chains they depend on.

“We’re always engaging with our suppliers, because we needed to understand what lists [of  products and components] could be impacted and by how much so that we can move as  quickly as possible…and adjust our inventory levels so that we can weather the storm,” said  Fulara. 

To provide a non-emergency example of how DigiKey deals with these supply chain  impacts, Fulara offered an example of a hypothetical new European standard that requires  compliance within six months. In such cases, “our customers need to understand where the  SKUs they are sourcing fall within these new requirements,” she said. “We make sure the  information is included on the SKU page and that we are marketing that appropriately  online…and safeguarding our inventory” to deal with any scenario.

“I think everyone is really more aware today because of the pandemic that anything can be  impacted,” said Cunha. “That’s why we're looking at where the items we need are  manufactured, where are there alternates and what could the impact be based on raw  materials, transit or labor issues from a procurement perspective. That’s why we offer  alternates on our parametric search…so that engineers using that front end can have as  many options as possible so that when they hand that order off to procurement, they're not  stuck.”

Fulara added that DigiKey always monitors its websites to “see what types of products are  being searched for so that we can lean into the right products that our customers are  looking for to make sure that we have the broadest portfolio that we can to hedge against  any types of situation.”