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Management Series: operations

Supply Chain Agility - The contribution of information technology

Part V: The visible (and invisible) contribution of information technology

Author(s): Dr Canan Kocabasoglu-Hillmer - Cass Business School;

In this final part of our blog, we examine how information technology can strengthen the link between strategic sourcing and supply chain agility. The use of information technology can both free up procurement professionals' time from transactional activities and, indirectly, help them recognise the strategic aspects of some procurement activities that feed into strategic sourcing.

With respect to the first point: Procurement professionals can be inundated with multiple tasks that are part of the purchasing process; from purchasing market research and supplier search, to supplier selection, to shipments tracking and invoice processing. All of these activities have a transactional component and some are purely transactional and thus can be automated. Interestingly, our research showed that a large number of companies used information technology to streamline the procurement process but only for a very small subset of activities. More specifically, while online platforms were utilised for activities such as purchasing market research and supplier search or request for information from suppliers by a high proportion of companies we surveyed, using them for activities such as order distribution and invoice processing was much less prevalent. In short, while there are several transactional activities under the responsibility of procurement that could be switched to an online platform, the transition is still incomplete for a number of companies. This results in procurement professionals' time being run by activities that are necessary but not value adding.

As for the second point; preparing to move procurement processes online can force companies to re-examine these processes. Some of the aforementioned activities have a strategic component to them and if carried out with that consideration will have a high return. For example, having a good understanding of the strategic goals of the organisation and their implications on future procurement activities result in purchasing market research and supplier search with clear goals and well defined parameters. Similarly, translating the future aspirations of a company into well defined set of procurement criteria lends to clear targets in supplier selection and enables companies to communicate their expectations from the suppliers in an unambiguous way (as well as how the buying organisation will reciprocate above and beyond the payment for goods and services purchased) via clear guidelines in request for information. The activities can be used quite effectively to communicate to suppliers where to company is going and what the suppliers' role will be on this journey. In this context, it is true that you get what you ask for.

These are very exciting times: Purchasing is getting to be recognised for its value beyond cost reduction. A reformulation of strategic sourcing to fit this new role can provide significant opportunities for companies, especially if their goal is to increase the agility of their supply chain and information technologies are an important tool in reaching this goal.

These articles were originally produced for the Procurement Leaders Network. Visit their website at www.procurementleaders.com

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