Boost efficiency by bridging the gap between effective supply chain management and procurement

Making your procurement and supply chain work in harmony is a hard needle to thread—and it's not a new problem. McKinsey was still trying to solve this even back in 2012. Has anything changed after almost a decade? 

What is the gap between supply chain planning and procurement?

At the heart of this is one question: why don't two functions with similar goals and processes work more closely? Supply chain management and procurement both work with suppliers, and they're both focused on efficiencies. Yet most organizations, work separately, which is kind of inefficient if you think about it. But why?

According to McKinsey,

"Procurement and supply chain processes don't work hand-in-hand, but sequentially. At discrete intervals … the procurement function will launch a project to identify suppliers that are capable of delivering specific material requirements at the forecast volume and the required quality … At that point, procurement hands over much of the management of ongoing supplier relationship to the supply chain function. Procurement staff will continue to monitor the situation at arm’s length, … But the detailed management of orders and logistics is left to their supply chain colleagues."

Working sequentially like this can seemingly make sense for many organizations at face value, allowing for manageable workflows. On the face of it, this seems like the most efficient solution. But really, keeping both these functions in distinct lanes actually makes you less efficient.

The best way to look at this is to listen to the experts. As McKinsey suggests, "Working this way not only creates significant inefficiencies, but also ignores important opportunities to reduce costs and to add value for companies and for their suppliers."

Create a unified procurement and supply chain strategy?

This means that procurement only ever has half the picture if they're kept distinct from one another. So when reviewing suppliers, they may make incorrect assumptions about what works for your organization or what the supplier can handle—placing unnecessary strain on supply chains and creating inefficiencies or blockages. Or, more simply, they don't know what your supply chain team needs.

In their analysis, McKinsey suggests six ways to close this gap and help create opportunities to grow collaboration between these teams, reduce risks and supercharge supplier relationships. According to McKinsey, organizations need to focus on bringing their demand planning, inventory planning lead-time optimization, product lifecycle management, footprint design, and capacity planning closer together. You can read more about the benefits of doing this in the article. 

This is exciting stuff but leaves one question unanswered. How? 

How do you bring procurement and supply chain management together?

It's easy to say that the solution to a problem is working together. But doing it isn't always so straightforward. 

For many public sector organizations, procurement and supply chain management are very distinct entities. They are probably using different systems, which means they are looking at different data—or at least the same data through different lenses. So how do you put them both on the same page?

“Just use the same system” would seem to be the likely answer, but they probably use different systems for a reason. This means, for most organizations, you need to bring these systems together to give the teams the bigger picture while still keeping them separate. That's not easy.

But doing this will provide them with a way to interrogate the different data sets at once to get better insights into how they can work together and where opportunities for efficiencies lie.

Modern ERPs, working in the cloud, let public sector organizations integrate all their third-party applications. They create collaborative environments for work to happen. So teams can share data without the hassle of speaking to different systems or manual loads and so on. This single source of truth lets you find greater efficiencies and insights instantly. So no one has only half the story ever again.

Unit4 ERP bridges your procurement/supply chain planning gap

Build more innovative supply chain and procurement solutions instantly. Our ERP solutions deliver unrivaled connectivity and integrations, all designed specifically for public sector organizations. And to get there, you no longer need to rip out and replace systems or run two distinct systems, as Unit4 ERP bridges the gap between procurement and supply chain management to create a single place where work happens, giving you best of breed solution approach for both.