Value Creation In Procurement

By Amandeep Singh Bhan

Here is the biggest supply chain paradox. Any consignment remains stationary for 80 per cent of the time in the supply chain journey.  When a consignment remains motionless, it appears not in the market where the end customer is waiting to access it, but in different warehouses and data management systems.  This is the Keynesian “unintended accumulation of inventories” that has negative consequences on cash flow, cash conversion cycles, and inflation of warehousing real estate rentals and logistics. It also results in wastage of utility and lost sales opportunities.

Ease of doing business through the lens of procurement agility in the supply chain
One of the chief reasons behind this inertia is to be found in the digital divide facing procurement. Typically procurement organisations that operate with offline processes take anywhere between two to three hours to complete a procurement transaction, whereas those that operate with digital procurement platforms take three to five minutes.

Coming out of the pandemic procurement organisations in India will have to assume a much bigger role in value engineering than being caught up in routine tasks. These include: collaboration across the end-to-end value chain; enabling low-cost innovation; and ensuring faster completion of industrial projects.

End-to-end collaboration across value chain
There are several industries where more than 50per cent of the total value of the goods is sourced from suppliers. Procurement organisations will have to ensure seamless integration of their data systems of their own end-to-end processes with those of suppliers and customers to ensure smooth and transparent flow of value. A case study on the value that can be unlocked through such collaboration is the COWIN platform for Covid-19 vaccination which is serving as an integrated digital public good for vaccine makers, hospitals, cold chains, and logistics partners involved in the exercise.

Enabling low-cost innovation by sourcing mission critical components
Procurement organisations will have to leverage sourcing of components and sub-assemblies to make low-cost innovation a reality. The rollout of low-cost innovative goods has the potential to invite the interest of large OEMs to make in India for the rest of the world. A great example of such affordable innovation is the low cost air ventilator recently developed by the IIT Kanpur consortium; a life-saving product for patients in the face of Covid-19.

Enabling agile infrastructure creation at scale
Thirty-five per cent of infrastructure projects in India incur cost overruns. Securing on-time procurement of materials, machine tools, and consumables will be critical to ensuring ontime completion of infra project targets.

A major success story that should inspire EPC companies to embrace digital transformation of procurement to fast track infra projects is the fast completion of 217 projects over the last year under the auspices of the National Infrastructure Pipeline.

The future of supply chain and procurement in India
Procurement systems create a favourable feedback loop that percolates to the downstream supply chain by enabling faster go-to-market. Ease of procurement will be integral to unlocking demand at all levels in the supply chain for enabling faster rebound of economic growth.