How Can OEMs Benefit from e-Procurement in UAE
How Can OEMs Benefit from e-Procurement in UAE
e-procurement in UAE is not an isolated scenario; today’s world is running on digital wheels. Every industry is employing its digital skills to reap improved performance. The opportunities are immense.
However, despite continuous evolution, OEMs are slow to adapt to digital tools and techniques. It is because of the over-reliance on traditional skills and methods. As a result, the cycle from indirect procurement to the final delivery to customers, consumes 80% of the time of sourcing teams.
Cutting corners has become the pandemic-enforced trend to maximize profits in a business. At this time, digitalization in the supply chain can be a worthy step. It offers multiple advantages and underlines significant growth in the figures. To best understand its influence, let us unearth some key benefits.
Solving the Challenges in Supply Chain
The world is still recovering from the impacts of the COVID-19 pandemic. If we talk about the manufacturing sector, the virus has piled up on the challenges it was already facing. The COVID-19 induced lockdown dealt a heavy blow to the UAE economy, with businesses, and their supply chain all bearing the brunt. The International Monetary Fund (IMF) projected a 6.6% contraction in the GDP last year. It was mainly due to the impact of COVID-19 on key performance sectors and the fall in oil prices.
Sourcing the raw materials took the backseat, which resulted in a dip in manufactured products. Subsequently, the supplies to the end-users also got hampered. The dampening of business activities posed several challenges for the businesses to overcome.
To resolve the challenges, making a move in the right direction is imminent. With digitalization, businesses can adhere to the COVID-19 guidelines while conducting their business activities. Digital supply chain solutions are the most basic and foremost available methods to revive the lull operational activity.
Aligning with the Economic Growth
The UAE government announced a financial stimulus package to the tune of AED 100 Billion, among other measures to dilute the impact of the lockdown. However, the revival is not as instantaneous as the losses.
The IMF painted a brighter picture of the UAE’s economic recovery with a 3.1% growth, better than its 1.3% projection in October 2020. The positive outlook is a result of the combined efforts of the country and its citizens. OEMs can expedite their transition from traditional competencies to modern ones like adoption of a P2P software solution and supply chain digitization initiatives. Procurement automation, also known as P2P automation is integral to OEMs in UAE to stay on the course to recovery.
Taking a Step Towards Procurement 4.0
Since we live in Industry 4.0 era, we can find the production chain going ostensibly digital in its entirety. The ability to get a bird’s-eye view of your complete production link hands a better chance to minimize losses and maximize productivity. Businesses can acquire the necessary information on their logistics, such as the position of trucks, containers, and even pallets. All this at the click of a button.
To promote digital supply chain transformation, the UAE government is already taking steps under its Smart Government initiative to become a paperless government by 2021. The government is inviting the bid for tenders via electronic mode to facilitate a seamless procure-to-pay solution. Through this, suppliers can monitor their purchase orders and also submit digital invoices. This e-Procurement solution aims at digitizing and automating the complete process.
As digitalization is inevitable, OEMs must deploy it in their operational activities to make progress. e-procurement will enable easy management of complex supply chain processes. It will also allow businesses to use their people’s talent in other critical areas that require human involvement.
Experiencing Improved Decision-Making
Data is the key to gaining visibility into the supply chain. It is enabling digital supply chain solutions to divulge critical information to improve your decision-making capabilities and optimize business growth. With procurement automation in place, businesses can effectively monitor key performance indicators. On its basis, they can identify the improvement areas.
Cost-optimization is a must during this period of economic rebound. P2P automation offers this across the whole supply chain management processes. Digitalization’s other advantages are transparency, more visibility, a safe and neat collection of data, and cost-efficiency. All in all, businesses can streamline their processes and manage them effectively.
The Now and the Next for CPOs of OEMs in UAE
Digital supply chain transformation in the UAE is imminent, as the economy branches out to new-age non-oil verticals. However, it should not be in parts. For OEMs in the UAE to benefit from the adoption of e-procurement, CPOs have to take a unified view of the different but interlinked silos of the supply chain. Therefore, CPOs in UAE need to replace multiple solutions for different procurement functions with an integrated procurement automation system and consolidate supplier base management functions into one centralized control tower.
CPOs and the E-Commerce Boom in Indirect Material Sourcing
CPOs and the E-Commerce Boom in Indirect Material Sourcing
Indirect material sourcing has long been riddled with uncontrolled expenditure, non-compliance, and counterfeit products. Traditionally, these risks have made CPOs of large enterprises opt for a direct approach when dealing with suppliers.
With rising costs, potentially unregulated products, and the COVID19 pandemic-led supply chain disruptions in the UAE, a CPO’s job is becoming increasingly stressful. It is especially true for CPOs of large manufacturing enterprises across the Middle-East and North Africa (MENA) geographies where the pandemic has impacted 60% of freight capacity and multimodal logistics.
Integrated Solutions for Procurement
With the e-commerce boom taking over B2B marketplaces, CPOs are welcoming procurement automation solutions with open arms. These new generation P2P software solutions offer scalability, reliability, and risk assessment — all under the same roof.
Besides providing attribute-rich catalogs of pre-vetted, high-quality vendors of indirect materials, these B2B e-commerce solutions offer a dynamic range of functions. Some of these functions are customization, user-friendly interfaces and search options, real-time pricing, and industry benchmark comparisons. With their AI and ML capabilities, these systems can even generate analytics on KPIs such as price spread and per-category spend.
Benefits of E-Commerce for CPOs
B2B e-commerce offers a series of features that are beneficial across the p2p procurement process. They have multiple payment options available in AED, language translation assistance to Arabic, and easy refunds & return policies.
They also offer filtration of vendors based on their proximity to the manufacturing unit, quick logistics, and competitive shipping rates throughout the emirates. Let’s take a look at some of the key benefits e-commerce systems offer to CPOs.
Agility
B2B e-commerce solutions give enterprises quick and easy access to a robust e-catalog of indirect materials, akin to a B2C e-commerce experience. The products and services are structured and itemized based on several attributes and filtered by a configurable list of business rules. This includes but is not limited to compliances, ratings & reviews, technical specs, availability, and shipping rates. These automated systems have rapid TATs across the p2p pathway and endow the CPOs with greater transparency and market awareness channels to make better decisions.
For instance, the global procurement head of an automotive OEM has said that e-commerce adoption for indirect material sourcing has increased their price competitiveness. “It has expanded our knowledge,” he explained, adding that their enterprise is now planning to digitize their direct material sourcing as well.
Cost Savings
Typically, enterprises spend 15% to 30% of their revenue on indirect material sourcing. It is usually valid for enterprises with fragmented spending structures and limited internal resources for procurements. The human capital spent on the traditional procurement process is perhaps the highest. CPOs spend countless hours in monotonous transactional activities that leave them with little to no time for any value-addition work to the enterprise.
However, with digital procurement automation solutions, operational costs in UAE can be reduced up to 40%. More importantly, they offload CPOs with hours of repetitive work. It unlocks critical free time for CPOs to spend on supply chain management and optimization of the p2p procurement process.
Technology Integration
For large manufacturing enterprises, the integration of an e-commerce marketplace with their existing ERP is the deciding feature of pre-investment. By entangling itself with the enterprise’s p2p procurement process, the e-commerce solution automatizes and simplifies a vital link of the digital supply chain. It enables the system to intelligently monitor inventory, issue purchase orders, execute payments, track deliveries, and receive stock. It also minimizes the hassles of negotiations, contract management, and price comparisons.
Some of the advanced digital procurement systems offered by digital supply chain solutions enterprises can seamlessly integrate with ERPs like SAP, Jagger, and Oracle. These systems successfully streamline the accounting, reporting, and controlling of the procurement process, thus building end-to-end supply chain visibility.
Data Cleaning & Management
A global market study indicates that almost 63% of the items listed in a conventional procurement catalog have incomplete or duplicate information. However, with digital supply chain solutions, CPOs can assess their MRO master data quality using the system’s native AI and ML capabilities. These data analytics tools can also learn user behavior over time and generate optimized results that promote operational excellence.
Reports on purchase, fulfillment data, including buying history, spend limits, and wish lists, make it convenient for procurement teams to increase their work efficiency.
What CPOs Need to Know
With increasing demand, the scale of high-quality suppliers of indirect materials is rapidly growing on B2B e-commerce solutions. Some experts predict that by the end of 2021, 60% of the large enterprises will be using digital procurement methods for indirect material sourcing. It is also aligned with the government’s vision to digitize UAE’s economy in the coming years.
With a rationalized and automated procurement solution in place, the role of the CPO is shifting from being a negotiator to that of a creator. The present-day CPO discovers new marketplaces, innovates new procurement strategies, and collaborates with suppliers. The CPO also draws new digital blueprints for quick approvals and reviews, and smoothens the enterprise’s upstream supply chain operations.
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