Do Manufacturing Technologies Favor Buyers?

Tools, such as e-sourcing and online spend management, are maturing and enabling companies to operate more efficiently

Kevin Brooks
Kevin Brooks

Buyer-supplier relationships across the supply chain are tricky. There is always some level of mutual dependency, but the relationship is often defined by the capabilities—and limitations—of the supplier, with issues such as inventory levels and delivery-time constraints affecting all sides.

Today, this relationship is evolving, in part because new technologies are fundamentally changing the way trading partners communicate and collaborate. Tools that first appeared more than a decade ago, such as e-sourcing and online spend management, are maturing and now enable companies to operate much more efficiently. These technologies are also bringing more transparency to supplier relationships and bringing pressure on all parties to enhance their capabilities.

For now, buyers appear to be the primary beneficiaries of this shift. e-Sourcing and spend management technologies drive compliance and greater visibility into supplier operations and market conditions. In this new environment, buyers are less likely to be tied to a single source of supply as tools such as e-sourcing open up new competitive pricing scenarios and buyers continuously search for the best supplier. It isn’t all bad news for suppliers, however. Yes, there is a new level of competition among suppliers and greater scrutiny before contracts are awarded, but winning suppliers benefit from a more transparent competitive landscape, stronger alignment with their customer’s expectations and fine-tuned operational capabilities that help in winning the next deal.

Beyond the maturing of existing technologies, there are three emerging technology trends that are shaping this new environment.

1. Contract Management

Contracts are evolving drastically due to technology transformations in the manufacturing industry. Instead of relying on outdated faxing services, procurement teams use contract management solutions to organize tracking, audits and supplier communications. This allows deals to be traced—in one organized place—from beginning to end, from bids to invoice receipts. Compliance controls provide easy access to review supplier services, especially helpful in an industry with ever-changing regulations. These tools also allow procurement management to sort through old contracts and buy history, eliminating organizational blunders and ensuring efficient communication.

2. Data Management

Not only do data management tools provide insight into current supplier operations, they provide a window into the operations of future suppliers. Procurement can get insight into factors that predict a supplier’s overall performance, such as pricing, financial data and insurance levels. These tools allow procurement teams to put intelligent limits on spend while still addressing supply chain priorities. Sophisticated data management tools can be treated as a type of risk assessment, setting expectations for sell-side performance. Procurement leaders are able to make informed decisions about supplier selection and reduce their exposure to risk in contracts, using competition to their advantage.

3. Performance Evaluations

Performance evaluations are becoming more popular for improving buyer-supplier relations. Just as employee performance evaluations aim to create transparency, and add a certain level of respect and professionalism, supplier evaluations set standards for products and processes, allowing procurement teams to create operations for improving supply chain spend. Automatic invoice screening and approval tools create a new level of supplier transparency and reduce the likelihood of incidents, such as the Pentagon’s 2007 embarrassment at spending nearly $1 million to ship two $0.19 washers. Expanded analytics allow buyers access to past supplier performance reviews, which encourages transparent and compliant transaction processes.

As emerging manufacturing and supply chain technologies become more prevalent, the traditional buyer-supplier relationship is changing. Trends in sourcing technology are setting new standards for sell-side organizations and changing the dynamic of the industry, creating an increasingly competitive market among suppliers. As manufacturing industry technologies continue to evolve, so will the relationship between buy and sell sides—are you prepared?