Inadequate transparency between procurement and suppliers: a business risk

Date Posted: 10/02/2020 Category:
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Inadequate transparency between procurement and suppliers: a business risk

Date Posted: 10/02/2020 Category:

A new study from Harvard Business Review reveals that 60% of business executives consider insufficient transparency between their procurement and finance functions and their suppliers to be a significant risk to their business.

The survey of 779 executives also found that nearly a quarter (24%) conceded that their firms fail to assess supplier business practices effectively.

The chief reasons cited were reliance on manual data entry processes, which were time-consuming and prone to multiple human errors, and incomplete data. 

A similar proportion (23%) reported that their suppliers were not linked to their firms’ electronic purchase-to-pay systems.

26% of respondents said that better transparency in their procurement and finance functions had the potential to achieve cost reductions of between 11% and 20%.

60% reported that they will intensify their efforts to cultivate a culture of transparency within the coming 12 months.

The report also found that procurement and finance teams themselves want greater transparency to aid their efforts to make internal cost reductions, improve decision-making and ensure ethical practices across the supply network.

One expert cited in the report – Guillaume Roels, who is Professor of Global Technology and Innovation at Insead Business School – noted that creating visibility does not happen in one fell swoop.

He added that it does not come for free and it’s necessary to work hard to achieve it.

Manual data entry and the inability to access precise, cross-functional data in real time feature prominently in the report as obstacles to greater visibility and better decision-making.

Automation through enterprise software solutions can help overcome this problem, the study reports, but much attention must be given to automating the correct processes and bringing supply chain partners on board with them.

Professor Roels went on to explain that many supply chain partners are relatively small firms with limited technical resources and may be wary of entrusting their information to a centralised data management system.

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