The new financial year is the time for businesses to consider any unnecessary expenditure to ensure financial efficiency. However, as budgets reset, it also presents an opportunity to reassess and streamline supply chain operations.
Conscious buying is on the agenda for many businesses as consumers look to make more thoughtful purchasing decisions. In fact, research has shown that according to consumers, sustainable procurement results in as much as a 15 to 30% increase in brand value.
This is only putting more pressure on businesses to ensure that their suppliers are sustainable and are aligned with their values and own sustainability ambitions.
When it comes to meeting socially responsible commitments, for example, procurement can make or break a business’ sustainability trajectory, with up to 90% of a company’s carbon footprint linked to its supply chain. With so much pressure on businesses to be more socially responsible, procurement needs to take the lead on not only ensuring that expectations are met, but that purchasing processes also support the long-term growth of the company against established targets.
The case for more sustainable procurement is strong, but how can businesses reflect this priority in their supply chain? Following recent research from Amazon Business, which reveals that 49% of procurement professionals see the complexity of their supply chain as a major obstacle at work , here are some ways to spring clean your supply chain and align with sustainable growth ambitions for the new financial year.
Director and General Manager, Amazon Business UK.
1. What businesses don’t know will hurt them as AI raises the bar for reporting
The complexity of supply chains often leaves valuable purchasing data lying dormant across different tools and platforms. With so much data to manage, it is no wonder that businesses can struggle to keep tabs on inventory, spend, shipping routes and supply chain disruptions.
It is essential that procurement teams have visibility of where exactly their vulnerabilities lie and the impact they might have on the wider business. Put frankly, measurable progress towards sustainable procurement goals is not achievable without the right data, and the tools to make it seen.
AI can provide a major competitive advantage here with the ability to use large language models (LLMs) and cognitive analytics to recognize and predict patterns in purchasing data. Natural language processing (NLP) then allows procurement teams to interact with this data, ask it questions, and pull-out actionable insights.
For example, procurement leaders can use AI tools to estimate the carbon footprint of a product, helping to map its environmental impact and assess its performance against internal criteria for sustainable purchasing – unlocking a new level of data-driven decision making.
It is clear that there is appetite for AI innovation as 96% of procurement professionals have plans to invest in AI tools. By embracing advancements in real-time data analytics, businesses can have access to the data they need to stay one step ahead of changes in their supply chain.
2. A diverse supply chain is a strong supply chain
With pressure on businesses to be more sustainable in their purchasing, an overhauled supply chain should focus on diversifying supplier relationships and investing in partnerships with local and small businesses. In fact, achieving a broad supplier base is cited as a top priority for the majority of UK procurement leaders as a way to ensure resilience in supply and distribution.
By making sure the business is not reliant on a limited pool of suppliers, procurement teams can be more assured of the continued growth and performance of their department, in turn contributing to more reliable results for the business. A diverse supply chain also allows for greater flexibility in the long term, making it easier for businesses to adjust and refine their supplier base as goals and ambitions change.
With this in mind, variety can be an effective solution for managing a volatile global landscape. By encouraging businesses to prioritize more local suppliers and minimize transportation costs, a diverse supplier base also indirectly helps businesses to play a part in the circular economy and cut down on emissions.
3. Stay on track with universal standards and purchasing policies
Whilst a diverse supplier base can increase supply chain resiliency, managing a dispersed network might sound like an overwhelming logistical challenge, adding even more admin to procurement teams’ day-to-day system maintenance. This is where digital tools and platforms such as Amazon’s Business ‘Guided Buying’ feature are transforming the future of procurement, establishing a ‘one-stop shop’ for business purchasing that frees up time and capacity for time-stretched procurement teams.
By setting up simple policies across the organization, ‘Guided Buying’ helps employees identify which sellers are preferred by their organization, as well as sellers that might be restricted or blocked. Visual signposts make this a natural part of the decision-making process and takes the guessing game out of compliance.
Creating clear guidelines for business purchasing can also prove to be a significant time-saver for businesses as reporting requirements become tighter under new and developing regulations such as The Corporate Sustainability Reporting Directive (CSRD) (5). As social value weighting becomes a necessary part of managing bids and tenders, early adopters of purchasing policies will benefit from a more consistent and reliable track record of purchasing that aligns with social value ambitions.
The new financial year will no doubt present procurement teams with a fresh set of challenges and opportunities. By focusing on cleaning up their supply chain, improving supplier diversity and organizing internal processes, businesses can put themselves in the best position to proactively respond to these changes. Making an investment now in a transparent, resilient and data-forward procurement strategy, will pay off for businesses in the long term, unlocking savings in cost, sustainability, and efficiency.
We’ve listed the best Enterprise Resource Planning (ERP) software.
This article was produced as part of TechRadarPro’s Expert Insights channel where we feature the best and brightest minds in the technology industry today. The views expressed here are those of the author and are not necessarily those of TechRadarPro or Future plc. If you are interested in contributing find out more here: https://www.techradar.com/news/submit-your-story-to-techradar-pro
