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Supply Chain Nightmares? Itโ€™s Time to Optimize your Procurement Processes

Celonis
by Celonis
November 24, 2021
4 min read

Be afraid. Be very afraid. โ€˜Shipageddon: The Sequelโ€™ has taken supply chain nightmares to a whole new level.ย 

This modern-day horror series made its debut at the end of 2020, as Americaโ€™s last-mile delivery carriers struggled to cope with a huge surge in e-commerce demand in the lead up to the holiday season. But this year, as befits a big-budget follow-up, itโ€™s the entire global supply chain thatโ€™s causing panic and threatening Christmas for many โ€“ especially those expecting Santa to deliver new toys.ย 

โ€œIโ€™ve been doing this for 43 years and never seen it this bad. Everything that can go wrong is going wrong at the same time,โ€ Isaac Larian, founder and CEO of toymaker MGA Entertainment, told Bloomberg in October.ย 

โ€œThe supply chain is a disaster, and itโ€™s only getting worse,โ€ echoed Jay Foreman, CEO of Basic Fun, whose Care Bears were stranded in northern China.

But itโ€™s not just toys. Across the board, the shelves of many retailers are more bare than usual thanks to a whole range of factors largely resulting from the coronavirus pandemic. They include labor shortages, factory outages, the rising price of raw materials and shipping, and reduced production โ€“ especially of microprocessors (โ€˜chipageddonโ€™).ย 

And like a puppy, it seems this crisis isnโ€™t just for Christmas. According to Simon Geale, executive vice president of Procurement at Proxima, a supply-chain consultancy, the current problems will take a long time to fix. โ€œThe supply system is not optimized. Workforces are not optimized,โ€ he told Forbes. โ€œThe weaknesses that underpin our supply chains have been found out.โ€

โ€œBring me the head of Procurementโ€

As lockdowns have started to end in many parts of the world, life has begun to return to something approaching normality. But for a considerable number of businesses in a wide range of sectors, this is far from the truth, as they attempt to navigate the latest challenges of the supply chain meltdown. For Procurement organizations, that means demonstrating even more of the agility they showed last year at the onset of the pandemic.

โ€œStress levels have really gone up for Procurement departments, because they donโ€™t know where the gaps in supply are going to come next,โ€ says Divya Krishnan, director of product marketing at Celonis. โ€œIf your main supplier goes down and you only have backup suppliers in three or four locations, what happens if they go down too? The person whose head is likely to be on a stake is the procurement leader.โ€

At a time like this, if youโ€™re that Procurement leader, the last thing you need is for your processes to be letting you down. But weโ€™ve found that for many, this is sadly the reality. In theย  State of Business Execution Benchmarks Report 2021, we surveyed Procurement professionalsย around the world on how their departments are running and what could be holding them back. 39.3% said they were hindered by broken or inefficient processes. And 40.7% complained of a fragmented data landscape, often the result of trying to consolidate multiple ERPs.

Procurement E-book promotional Blog Image 1

Unsurprisingly, thereโ€™s a big gap between the companies executing Procurement processes at full capacity and the rest. For example, the average company spends upwards of $15 to process a single purchase order (PO), while the most efficient organizations spend just $1.35. Thatโ€™s particularly significant as Procurement departments find themselves under pressure to cut costs. And itโ€™s the same when it comes to reducing spend โ€” the average company influences 47% of its total spend, while top performers achieve 75%.ย 

โ€œThereโ€™s tremendous pressure on the Procurement function to reduce the total amount of spend going out of the organization, but at the same time they still have to give the business whatโ€™s needed to create the products that will drive top line revenue gains,โ€ says Krishnan. โ€Itโ€™s a very difficult balancing act.โ€

Enter Process Mining

How do you join the ranks of companies that are executing so much better than the rest?

The answer starts with process mining whichย  gives you a living, breathing, moving picture of your Procurement processes in real time โ€“ so you can see where the inefficiencies lie and take action automatically to fix them. Itโ€™s easily integrated with your existing systems and can be up and running in 40 days.

Leading companies are already reaping the benefits. Vodafone increased their โ€˜Perfect POโ€™ rate from 73% to 96% in a year and reduced the cost of each PO by 11%. And Chart Industries saved $6M in material purchase prices, while Zalando reduced maverick buying by 75%.

So why not join them?

Check outย our โ€˜Power up Procurementโ€™ ebook to find out how process mining could help you optimize your Procurement processes.

Celonis
Celonis
Author

Celonis believes that every company can unlock its full execution capacity. Powered by its market-leading process mining core, the Celonis Execution Management System provides a set of instruments and applications, the Celonis Studio as well as platform capabilities for business executives and users. The Celonis EMS offerings help companies manage every facet of execution management from analytics to strategy and planning, management, actions and automation.

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