In recent years, we have witnessed an increased attention to the shared economy, activity that relies mainly on digital platforms in order to facilitate transactions and grant temporary access to goods and services, changing the way society comprehends the concept of property.
As a consumer, you must have already used this type of service, when requesting a vehicle to travel or booking an apartment for a vacation, among other numerous examples. These changes are also felt by companies: within the digital age, there is an increase in the volume of Opex demands (expenses with services), to the detriment of Capex (capital expenses).
Along this line, organizations start to rent instead of buying equipment that will probably become obsolete soon due to technological advances, to lease a property instead of buying so it is possible to change the area of operation faster (a region that was previously interesting for the business may no longer be in a short time). To understand more about this issue, read our specific post on the topic.
This significant paradigm shift, viewed as a growing trend for the upcoming years, is being driven by digitally native companies, as they have more responsiveness in dynamic and complex environments, with their business models based on relationships with different partners and earning commission for each service provided (for example, a specific amount for each race requested in the transportation application). This scenario requires large and consolidated companies to adapt to this new reality.
Concepts and trends
The shared economy promotes a real revolution in the way we produce, consume and transport goods. For companies, it brings a series of possibilities in order to reduce operating costs, increasing productivity, among other benefits.
In general terms, it is linked to the possibility for people and companies to contract services for a fixed period of time instead of buying specific material. The sharing itself has already been adopted for some years (for example, competing airlines that use the same aircraft to provide their services). However, the current context has created favorable conditions for the expansion of this practice.
The best known examples are in the travel, car sharing, finance, personal and music / video streaming sectors. However, many sectors can take ownership of these concepts and apply them in their reality.
According to a report published in 2017 by the logistics company DHL, global revenues for this market are forecast to be around $ 300 billion by 2025. These numbers are expected to change as a result of the Covid-19 pandemic, but demonstrate the relevance of sharing today.
There are some elements that help explain the growth of the shared economy in recent years. Among them, the junction between technological development and economic, social and environmental trends (such as the global recession since 2008, the new generation of digital natives and concern for the environment).
Among the technological elements that promote the shared economy are:
- Connected mobile devices, such as cell phone, which allows the conduct of business transactions and infrastructure for digital payment in a secure manner;
- Verified profiles and online assessments, which guarantee reputation and credibility for the service provider;
- Use of platform-specific software and algorithms to drive the customer experience;
- Real-time mapping and location of the product to be delivered.
However, there are some challenges regarding the full implementation of business models of this type, such as the trust, transparency and responsibility that must be built between those involved, even in the online environment.
In addition, an important point concerns the protection of the workforce: as it is no longer fixed, but on demand, there is a risk of precarious conditions for the service provider (on this subject, see our article on ethics on supply chain management).
Shared economy in supply chains
In the context of supply chains, the connection between its various participants allows the adoption of new policies for rentals, transportation, storage and personnel management, helping to reduce costs and emissions of polluting gas.
In addition, supply chains become critical with the growing need to accelerate order’s schedules. As a solution, the implementation of multiple distribution centers and shared trucks is highlighted.
In this way, partners can store goods from your company, reducing the distances and size of cargoes to the delivery address. The reuse of resources and the shared shipment of orders also help to avoid waste, with the use of empty trucks on return trips.
Information agility also helps in this case, with real-time connectivity and order tracking. After delivering a shipment, for example, a driver can check if there are any demands to send last minute orders to its destination (being able to serve several customers up to the vehicle’s load limit).
Other suggestions for using the shared economy in supply chains are:
- To expedite the receipt of a material, the company can partner with third-party delivery services that guarantee delivery on the same day or as soon as possible;
- Find new and innovative ways to handle unsold inventory, such as renting it to other companies, and collect data to detect future trends and demand forecasts.
What about the indirect materials purchasing department?
Sales have a growing influence on business management, being responsible for monitoring suppliers, managing risks, identifying opportunities and continuously evaluating the supply chain to add value together with the different areas.
For buyers of indirect materials, there are some possibilities for sharing excess resources, tools and skills to maximize efficiency collectively:
- Identify new suppliers (prioritizing the most innovative ones) and find opportunities to share resources;
- Understand the ecosystem well and who is involved in it (companies selling products, competitors, carriers, among other actors) to share knowledge and innovations;
- Use technology to your advantage. The use of management software provides organizations with the necessary insights to adapt to the growing influence of the shared economy;
- Always check if these possibilities are in line with the company’s legal policy, avoiding problems with hiring this type of service;
- Train your team to assess business opportunities of this type and know how to mitigate possible risks that arise along the way (such as a delivery delay). The shared economy is founded on a process of intense technological change, but it needs to be accompanied by a change in people’s mentality;
- Consider outsourcing, that is, outsourcing some functions and activities to specialized companies, and share the responsibilities involved in the acquisition process.
Shared economy is a strong trend that is here to stay. This movement is being driven by new companies with new business models, requiring the adaptation of mature companies.
For supply chains, there are multiple possibilities related to sharing: companies can hire services of this type, competitors can share resources and equipment to maximize efficiency, or even count on each other to supply specialized components, among others.
The GoShare business model is a case of success in this type of business. With it, you can hire drivers to help load, transport and unload materials in major cities in the United States.
It is important to note that these models are seen by experts as a complement to the current chains, not a substitute. In other words, they will help improve productivity, but they cannot be seen as the solution to all problems.
Another suggestion is to have a company specialized in the acquisition of indirect materials worldwide, such as Soluparts. Try our services by sending your requests for quotations.
The current economic scenario poses a number of challenges for organizations’ supply chains. In previous posts we discussed some trends related to the need to bring more agility to projects and processes, the insertion of advanced technologies in operations, among other topics.
In this post, we talk about how to make Supply Chain more ethical. Actors such as governments, activists, the media and the employees themselves are increasingly checking the social impacts of companies’ actions. Therefore, it is necessary to create strategies to manage the growing external and internal pressures.
Concepts and trends
Making business operations more ethical is a topic widely discussed by experts and professionals from different fields. Responsible business conduct must be assimilated by different areas of organizations, such as marketing, finance, logistics, among others.
Companies, even if focused on profit, also need to be concerned with the social impacts generated by their actions, that is, issues such as sustainability and interaction with their different audiences have become a priority agenda for everyone. There is also attention to the environmental issue, presented in our texts on sustainable purchases and circular economy.
Companies’ supply chains also become a sensitive issue. Because they are currently global and complex, it is common to see unethical actions taking place without the company’s knowledge, damaging the corporate image and generating, in many cases, legal problems.
Therefore, it is important to know what all the parties involved are doing, ensuring that everyone fulfills their responsibilities.
There are many recent cases that serve as an example of “unethical actions”: in recent years, we have seen on the news organizations that had industrial plants in developing countries being exposed for hiring labor in regimes similar to those of slavery, violating human rights, or for doing unfair and predatory business with small suppliers.
And this type of conduct is being questioned more and more. Today, buyers of indirect materials, for example, are better informed and ask the following questions of suppliers during the purchasing process:
- Do you trust your suppliers and supply chain partners? Do you keep your word about ethics and morals, regardless of possible additional costs?
- Does each link in the supply chain care for its workers with fair pay and workloads and ethical conduct at work?
- If unethical behavior is discovered, how will it be remedied? Will each partner in the supply chain work actively to ensure that it is corrected?
This way, strategies related to corporate social responsibility become a guide to address the following concerns:
- Elimination of child and slave labor;
- Safe and hygienic working conditions;
- Fair wages and working hours;
- Rules to combat bribery and corruption;
- Ethical purchasing.
There are a number of approaches that help mitigate the topics mentioned above. One is Fair Trade, an economic system based on fair trade relations for those involved, especially small producers and workers from peripheral countries.
The idea is to allow economic development and an increase in the well-being of all, unlike the traditional model focused on maximizing profit. Fair trade allows for more balanced exchanges between those involved, helping to reduce poverty and promoting awareness of socially responsible consumption.
Through a certification issued by the International Fair Trade Association, products that meet the criteria receive an identification seal. These products do not need to be necessarily related to the food sector. Know more about the subject.
How to develop ethical Supply Chains
Recent studies confirm the importance of adopting an ethical conduct in supply chains:
- According to Nielsen’s Global Corporate Sustainability Report, up to 66% of people are willing to pay more for products that have positive social and environmental impacts. Another report found out that customers were willing to pay an additional amount of up to 25% for “ethical” products which were made fairly;
- A study by the Association for Supply Chain Management (APICS) indicates that 83% of professionals in the field consider ethics to be an important element in their work;
- In addition, according to the APICS survey, 71% of companies have a code of conduct for their supply chains, but only half of them apply it;
- It was also observed that 70% of the interviewees have policies to understand the conditions of production of the materials, but only 43% understood the operations of their suppliers;
- Estimates by the Organization for Economic Cooperation and Development (OECD) indicate that companies gain value by adopting ethical measures. In response to these challenges, the institution has prepared a document with guidelines for organizations to promote ethical supply chains. For more information click here.
These surveys show how crucial it is for organizations to bring more transparency to policies and practices related to supply chains, making them more ethical and socially responsible.
To this end, professionals in the field must be attentive to the forms of hiring, working conditions, among other points, in addition to being able to identify misalignments in their ethics policies and take action towards them. To go deeper into the topic, also read our article on compliance.
Tips for ethical Supply Chain and Purchasing departments
The Purchasing department plays a strategic role in companies’ supply chains. By being attentive to the issues discussed in this post, it also has the opportunity to attract more value, by negotiating fairer agreements with small entrepreneurs or poor communities, for example.
Our suggestion is to offer more and more operations with this concern, focusing on:
- Implement contract codes and fair contracts with their different partners;
- Access information about your suppliers and their activities in order to check their behavior history. Click here for tips on how to manage your suppliers with excellence;
- Check national and international laws of the places where your company operates, avoiding legal problems related to unethical actions;
- Make your information available to the public by turning it more transparent;
- Use technology to your advantage, with the use of softwares to assist in the management of your acquisitions, with data on suppliers;
- Have a team trained with ethical thinking, able to conduct fair negotiations with all suppliers.
What can you do as a consumer?
It’s our role, as consumers, to be aware of the important issues raised in this text. Businesses are increasingly oriented towards the satisfaction of their customers, and they are increasingly informed and engaged in social and environmental issues.
Therefore, keep an eye on the news on the subject and purchase products from companies that conduct ethical business and respectfully treat their suppliers and employees. External and internal pressures are also an important way for companies to change companies, and today there are different mechanisms for dialoguing with them (such as social media).
To learn more about new-age trends in supply chains and indirect material purchases, follow Soluparts’ blog.
When buying a new appliance, for example, how do you deal with the old equipment? Do you have any concerns about its reuse? In addition, do you imagine what happens to the waste generated by it?
Many experts argue that this model of buying and generating waste will not work in the long run. That is, it will be necessary to create ideas focused on rethinking and redesigning the products and their components.
Among the many possibilities, the concept of Circular Economy (CE) gains relevance in academic studies and in the practices of organizations. Follow this post to learn more about this important subject and see how it can be applied in the context of supply chains, the purchasing department and your personal life.
Concepts and trends
According to a study developed by Ellen Macarthur Foundation, one of the main organizations on the subject, the concept of circular economy brings an alternative to the economic model “extract, produce and waste”, which shows signs of exhaustion. In this context, it is essential to think of ways to separate economic activity from the production of finite resources and reduce the generation of waste.
The circular economy is based on three main principles: eliminate waste and pollution, keep products and materials in use and regenerate natural systems. In addition, it can be applied at different scales – for small and large companies, those operating locally or globally, among others.
The case studies produced by the Foundation indicate four basic elements for the consolidation of a circular economy:
- Development of circular design skills to facilitate reuse, recycling and the use of materials at different stages of production. Circular design can be understood as a new mindset for the creation of products and services, focusing mainly on creative solutions that generate competitiveness for companies and the regeneration of the planet. The diagram below shows the different stages of circular design:
Image credit: RSA Great Recovery.
- Creation of innovative business models, from different areas, which have the circular economy as a central element, replacing the existing options and capturing future opportunities. These models can be created by companies that already have market shares, as well as entrepreneurs, inspiring the development of new initiatives;
- Use of materials in multiple reverse cycles and their return to the industrial production system, involving the logistics of the delivery chain, separation, storage, management of possible risks from the adoption of this model, power generation, among other points;
- Establishment of enabling conditions and favorable systemic conditions, such as collaboration, financial incentives, creation of environmental laws, among others.
Elements and challenges to adopt the Circular Economy concept
Bringing the discussion to a supply chain perspective, there is a concern to switch its orientation, previously focused on costs, turning it to the value generated by the investments made. As a consequence, it’s possible to observe an increase in the search for sustainable models, innovation and less impact on the environment and society, that is, other advantages acquired in addition to possible savings in the short term.
The concern is already felt in the daily lives of companies: according to a survey by Gartner consultancy published this year, half of the professionals in this area believe that the search for a circular economy model will increase over the next two years.
To this end, supply chains need to adapt to the CE model, monitoring the environmental and economic impacts in real time of their decisions, monitoring the use of reusable materials, using and sharing data with everyone involved to improve processes and setting standards and rules to be adopted.
It is important to note that there are challenges to be faced in implementing the concepts of sustainability and circular economy in supply chains. According to research carried out by PwC consultancy, the main three are:
- the alignment between performance and incentives for results;
- measurement and monitoring;
- the development of a strategy and its clear communication
What is the role of the purchasing department?
The concept of circular economy involves the adoption of a series of measures in order to eliminate the production of waste. This is a complex task, as it involves the engagement of many parties involved in the production process.
The purchasing department of a company, responsible for the purchase of indirect materials, can contribute through some actions:
- Certification check: make sure your suppliers are aware of these important issues and what they are doing to reduce the impact of waste generation in the supply chain. Choose those that already manage to reuse produced materials or that use renewable energy.
- Check the need for purchases: always keep in touch with the area responsible for the company’s stock and see if there is any similar material already available in the warehouses. This avoids the unnecessary purchase of materials and the disposal of parts that are stored for a long time, making them unusable. Find out more in our inventory management text.
- Reuse of parts: this tip cannot be applied in all contexts, but, if the possibility exists, evaluate with the maintenance sector and consider the purchase of previously used parts. This way, they save more time in the production cycle.
Check other tips in the post on sustainable purchases.
How can you, as a consumer, contribute?
Being aware of these changes in the ways of production, use and disposal of a product is important nowadays. Follow trends related to circular economy and sustainable practices and purchase goods from companies that are concerned with these issues and engaged in finding possible solutions.
As mentioned, there are many variables and parts involved in a transition to circular and sustainable models.
However, it is important that we do our part, reducing the waste generated and discarded in the environment and encouraging producers to adopt measures to help solve this problem. For example, we must adopt practices for recycling and reusing materials and correctly disposing of products such as household appliances, batteries, among other devices that are harmful to the environment.
Keep following Soluparts blog to learn about global trends regarding supply chains and best practices needed for purchasing departments in the new era.
To go deeper into the topic of circular economy and contribute even more to this new system visit the website of The Great Recovery Project.
The current economic scenario requires faster responses from both companies and their employees. Aspects such as late deliveries of indirect material, for example, can generate a series of problems within the operations chain, impacting productivity and, consequently, financial return.
In order to try to respond to these demands, the Agile methodology becomes fundamental. In this text, we talk about the main concepts of agile mindset and give some tips on how to implement it in the purchasing sector.
What is the Agile mindset?
There are many cases that can exemplify the moment we live in: considering the field of technology, for example, extensive communication networks have been developed that allow instantaneous interaction between individuals in different parts of the world. Regarding the economy, we have seen supply chains become global, influencing and changing processes that involve a number of actors (suppliers, buyers, logistics companies, among others).
There are many experts and academics who seek to conceptualize what we live in the modern world. An example is the term VUCA, created by the US military to define scenarios and contexts of war, which has come to be used as a business strategy as well – long story short, VUCA is an acronym composed by the first letter of the words: Volatility, Uncertainty, Complexity and Ambiguity.
More recently, in order to expand this concept, the term MUVUCA was also introduced, with the addition of two new elements: Meaningful (all actions are guided by a purpose as a result of the search for a meaning for life and the world) and Universal (concern about the global impact of what we do).
In order to find a way to follow up a reality in constant change, the agile methodology emerges: coming from the Information Technology sector, it seeks to reduce the rigidity of traditional organizations’ processes and procedures, encouraging smaller and faster deliveries, constant reviews and collaborative work. Read our Agile Supply Chain article to understand more about it.
What are the agile principles?
Even though it emerged in the IT area, the set of principles and processes that make up the agile methodology started to be used by different types of departments and organizations. In the purchasing area it is also incorporated as an alternative to the traditional model of acquisitions.
It is important to emphasize that the adoption of agile thinking is not an easy task, it requires organizational changes and the willingness of employees to change. The use of this methodology also depends a lot on the context, but there are some topics that can be applied in all situations:
1- Consumer / customer satisfaction is the main element: highest priority, with a focus on deliveries happening correctly and in a short time. This customer or consumer can be thought of in many contexts: in the case of purchasing indirect materials, for example, it refers to the company that needs a spare part to continue its production.
2- Change as an opportunity: this new way of dealing with challenges is extremely important, regardless of the context in which the change occurs, helping to increase the competitive advantages and the satisfaction of the clients served. The focus now is on solving a problem and not on the problem itself.
3- Speed and value go together: in short periods of time, high value-added deliveries must be made, whether the value is tangible or intangible. These deliverables can be products or services resulting from a process or project, which must be regularly revisited with updates. Here, “value” can be understood as the customer’s view (or expectation) of benefits and sacrifices in relation to what is offered.
4- Collaboration overcoming conflict: members of a project must develop the team mentality, in order to guarantee the transparency of communication and the shared commitment to guarantee success.
5- Power to people: projects are built and led by people and teams engaged. That is, they must be given the tools and working conditions necessary to succeed and complete the assigned tasks. Soluparts already understands and applies this concept since its creation, reflecting it in our purpose: Empowering Buyers, a maxim that reinforces the company’s focus on customer satisfaction.
7- Demonstrable values and results must guide each project: deliveries that meet or exceed expectations in terms of precision and value (tangible and intangible) become useful references for future initiatives and projects.
8- Keeping activities stable and sustainable: while delivering value is a priority, processes must be developed and optimized from a sustainable perspective to ensure that everyone is involved in a stable manner, without surprises that hinder decision-making.
9- Continuous improvement ensures agility: processes must be increasingly efficient through regular changes.
10- Simplicity is an essential element: maximizing returns using the least possible resources.
11- Self-managed teams are more successful: better results come from agile teams that are able to organize themselves.
12- There is always room for improvement: reassessing processes and making necessary changes to bring more efficiency and effectiveness are always welcome.
The twelve principles shown above, are based on the Agile Manifesto, which is the basis of mentality and all agile methodologies around the world. These principles were designed and coined by the Agile Alliance, a global non-profit organization committed to supporting people who explore and apply agile values, principles and practices to make the development of solutions and projects more effective, humane and sustainable.
This alliance was created by a group of 17 developers who, at a meeting in Utah, USA, from February 11 to 13, 2001, developed the Manifesto for Agile Software Development. Read more about the Manifesto and its principles on the alliance’s official website.
Agile thinking in the purchasing department
Unlike traditional models, most commonly focused on cost reduction, Agile thinking in purchasing seeks to generate value by supporting the organization’s objectives and business needs. Considering some crucial aspects of the procurement sector, it is possible to raise the main differences between the traditional and Agile forms of purchasing:
Instead of fixed and extensive planning and documentation, with the Agile methodology, a more responsive, objective and iterative position is valued, attentive to the real needs of the moment. Thus, identifying priorities becomes very important for purchasing employees.
The focus should be on elaborate more collaborative terms and built stronger relationships with suppliers, having as a result the gaining of shared success (questioning the competitiveness and rigidity present in traditional format contracts). Learn more about the topic.
They have to be iterative and responsive, in other words, suppliers can be changed after a round of work, as required by changing circumstances. On this topic, see the article we have specifically prepared on the application of agile methodology in the context of supply chains.
4 steps to make your purchasing department more agile, today
Below are some ways to make your purchasing process more agile:
1- Daily meetings at the beginning of the work day: lasting between 15 and 30 minutes, these meetings help to establish the day’s tasks, encouraging collaboration between team members to solve possible problems. In many companies, to encourage agility, it is proposed that participants remain standing;
2- Apply the notion of sprints, which would be small projects or project fragments, sequences of iterative work (with repetition of actions) in order to have a more compartmentalized notion of the whole, speeding up possible reevaluations and changes in the acquisition path;
3- Definition of priorities: in the face of frequent changes within the company, establishing priorities and regularly reviewing them helps to streamline the purchasing process;
4- of software that helps in Agile management: technology can help centralize data related to a purchase, in addition to facilitating communication and alignment between dispersed teams. There are a series of programs aimed at the application of Agile methodology in companies.
In this article, we show how Agile methodology can help a lot to optimize the projects and processes of purchasing departments. Even though the method was originated to meet the demands of software development, many business areas have adopted these guidelines, resulting in more effectiveness and efficiency. Responding quickly to market changes has become a competitive advantage.
The purchasing department has a lot to learn from Agile, but for that it is necessary to be sure that its organizational culture and professionals in the area are flexible and resilient. To help you optimize your purchasing department, we suggest the following readings:
Another way to streamline the activities of your purchasing department is to count on a company specialized in the search for spare parts (MRO) from more than 15000 brands anywhere in the world, such as Soluparts.
The current economic context, filled with quick transformations, brings a number of challenges to supply chains. Issues such as slowbalization and the effects of the covid-19 pandemic, for example, impact an entire global distribution network for products and materials.
Given this scenario, managers and teams from different areas involved in supply chains need to develop the ability to quickly respond to demands, in addition to managing the new risks and uncertainties that arise. In this sense, an interesting path for companies is the use of agile methodologies in supply chains.
But what are agile supply chains?
According to an article published by Forbes magazine, agile thinking came from software developers, and consists in an alternative project management technique that designs processes by dividing them into small parts. This way, as soon as each small fragment of a project is finalized, it can be tested, validated and even implemented.
This methodology also allows new technologies developed and launched on the market to be immediately incorporated into a project under development. Also, when the dynamic world scenario implies some change in customer behavior, it is possible to redesign the product quickly and create new, refined versions to meet these trends.
Another strong feature of this methodology is the so called iteration (repetition of an action, in this case, testing and additions to the solution), flexibility and collaboration between team members. In addition, the team has more autonomy to make decisions related to its projects, without necessarily needing approvals from people in higher positions in the organization’s hierarchy.
However, considering the reality of supply chains, according to a report produced by Gartner, there is still no consensus on the use of the agile concept.
In short, different notions are shared between academics, researchers and companies, but all argue that the focus should be on breaking traditional paradigms and developing the agile mindset to manage changes in demand and the supply of materials which are necessary for operations – such as the indirect ones.
The following aspects are considered critical to making a supply chain or any other sector agile:
- Responsiveness: identify and respond quickly to possible changes;
- Adaptability: adjust processes within the chain according to changes in the scenario;
- Coordination: knowing how to organize this complex network, composed of different agents and stages;
- Speed: being able to act quickly in various situations;
- Flexibility: changing the format of the chain, without resulting in additional expenses or loss of inventory, to meet an unusual situation;
- Balance: knowing how to balance supply capacities and the needs of those who need the material.
6 Tips for developing an agile supply chain
To be able to implement this change in supply chains, the company needs to be aware of a few important points:
1. Define agile according to your reality:
Being clear about what agile means for your supply chain reality is crucial. Teams must come together and articulate the concept based on the six characteristics mentioned above (responsiveness, adaptability, coordination, speed, flexibility and balance). This step is necessary to determine the level of importance of each one of them for the company, the maturity of the existing concepts and the necessary actions to improve them.
2. Define agile according to your reality:
Based on the definition, focus on establishing a program to make the supply chain agile from end to end, defining investments, choosing what critical areas to be prioritized and actions that can be replicated, involving the areas that participate in the chain (such as the purchasing sector).
3. Focus your transformation on people:
One of the most critical aspects, which must be worked on by everyone. A change of mentality and the development of new skills need to occur in order to make the employees able to develop and adopt new processes and frameworks. The involvement of all team members is crucial for the successful implementation of the agile mindset, rewarding efficiency and tolerating mistakes during the learning process.
4. Use technology to your advantage:
Consider it as a means to achieve this method, but not the focus. That is, do not prioritize acquiring and adopting the most advanced technology on the market without first focusing on people, processes and data.
5. Sustainability is essential:
Take ownership of the concept to develop socially and environmentally responsible chains, another important trend of the new century. Sustainability has been consolidated as a relevant element of competition, a requirement for regulatory restrictions and an opportunity for the development of more sustainable communities.
Therefore, it is a challenge for everyone to think about how sustainability can assist in the improvement of agile chains. For example, for the procurement sector, there are a number of advantages to making sustainable purchases.
6. Develop contracts with agile suppliers:
Until recent years, under a supply chain perspective, risk has always been treated as something to be avoided. Today, it is seen as part of the process, along with the strategy of having ready solutions to deal with different crisis scenarios. One of the strategies to mitigate them is the so-called redundancy – also known as having a series of suppliers available to fulfill an order.
In the agile context, it is important to have relationships with suppliers who accept to have more flexibility to serve in a constantly changing market and also to define contracts more aligned to this reality (such as smart contracts, made entirely online, generating reliability for transactions of this type).
Talking about contracts that serve you more flexibly, learn more about the annual option offered by Soluparts.
According to Mark Hermans, director of PwC, issues such as geopolitical tensions, changes in trade agreements and climate change, combined with the constant drive to reduce costs and improve productivity, will promote an increase in risks, uncertainties and pressures for performance.
Under this perspective, supply chains must, more than ever, be quick to respond to these changes. Faced with a world in constant transformation, the implementation of an agile mindset for supply chains becomes essential.
Several authors and courses on the subject focus on agile methodologies, which are many, Scrum, Lean, Kanban and Smart, among others, but experts on the subject say that before adopting or adapting one of these methodologies to their specific context, it is necessary to first break the way of traditional thinking and working so that the whole team develops an agile mindset, otherwise the implementation of the methodology, no matter what it may be, may not be successful. And it is in this change of mentality and paradigm that we focus on this article.
In order to measure the success of this initiative, it is important to collect, organize, analyze and monitor data and information (learn more about how to do this) of the following aspects: concern with the time to fulfill an order, costs involved, flexibility and compliance with deliveries.
It is also necessary to be careful with: the management of the people involved, who need to adopt an agile mentality in their routine; the definition of processes, being open to possible changes when necessary; and the use of data to plan activities and improvements to be carried out, with the support of technological resources.
Follow the trends about the future of supply chains on Soluparts blog.
The supply chain plays a crucial role within a company, and for the proper functioning of the company, inventory management in the supply chain is a fundamental part. Many experts who discuss this topic reinforce this statement: for the Supply Chain Digital, portal, the clear adoption of actions that positively impact the process of requesting, organizing and using inventory is essential for the long-term growth of organizations.
In general terms, inventory management (or control) refers to the action of monitoring your organization’s assets and classifying them according to their weight, dimensions, quantity and location, in order to reduce costs to maintain an inventory, which helps the purchasing department know when to restock products and buy materials for their operations.
In this article, we will show examples and techniques to help you have a more efficient management of your spare parts inventory. Inventory control involves complex decision processes (what to buy, when to buy, cut excesses and meet demands), and by mastering them, waste and unnecessary expenses are eliminated.
The importance of stock management
As part of supply chains, inventory management helps organize and control supplier purchases.
Maintaining effective inventory management is important to ensure that you have enough of a certain indirect material to meet possible demands (e.g. maintaining a machine of your operation). If not done properly, your productivity will be impacted, which will compromise your competitive potential.
In addition, among the ways in which inventory management can help an organization, we can highlight:
- Avoiding dead stock: it reduces the chances that indirect materials can no longer be used (because they have become irrelevant or have been poorly stored, for example).
- Saving on storage costs: as in many cases it is a variable cost, that is, it changes according to the amount of materials stored, when you keep these materials, your costs go up.
- Helping with the cash flow: storage directly affects your sales and expenses, and consequently, how much money is in the purchasing department’s cash flow. In this way, an inventory management system helps you control these important variables.
Stock management techniques
There are different ways and techniques for stock management, which can be adapted to the reality of each company and avoid problems in the sector. We list some of them below, relevant to the storage of parts:
1. Standardize stock levels
Setting the minimum quantity of materials that must not be missing is essential. This can be done in conjunction with the areas that use these parts, considering delivery times, storage conditions and other variables that involve the acquisition and delivery of these materials.
2. First in, first out (FIFO)
The first material to enter the stock must be the first one to leave, which prevents it from expiring in the warehouse or becoming obsolete.
3. Relationship Management
A good relationship with your suppliers is essential to solve any possible problems – such as replacing something in a more agile way, returning a barely used part, negotiating order quantities – through an agile and clear negotiation.
4. Contingency plan
Problems happen, even when trying to avoid them. Therefore, one should prepare as much as possible, keeping in mind the questions: what are the possible risks we have (for example, the delay in sending an order) and how to react to them? What steps to take and how do they impact the business?
5. Regular Auditing
Even with technological systems for control, it is important to adopt the custom of physically checking which parts are stored (many organizations do this audit once a year). There are also options to perform spot checks or check cycles for each product.
6. Use strategic supply matrix
Prioritize the storage of materials according to their relevance in company operations. The following proportion of space used is suggested: 80% for the most important products (category A), 15% for less important products (category B) and 5% for obsolete products (category C).
Tip: see our Strategic Sourcing content and download our Strategic Sourcing matrix.
Even though it is a complex activity, predicting demands can help in stock control. Therefore, look for specific information (such as forecasts of spare parts demands with the maintenance area) and more general information about the company (sales in previous years, market trends, annual growth rate, among other data).
8. Last in, first out (LIFO)
It defines that the last material purchased is the first to be used. Ideal for cases of companies whose spare parts storage has a high turnover, avoiding additional expenses in storage and their devaluation.
9. Just in time
Keep the minimum reserve for the demand and replace it before the material leaves the warehouse. It demands a rigorous control and an accurate forecast, but it can be a good option for organizations with calculated launches, with a certain quantity in an exact period of the year. For purchasing materials that will be stocked, define an annual contract, which guarantees the prices quoted for one year, this will help to reduce costs and increase productivity.
10. Safety Stock
An emergency fund, i.e. an extra quantity of certain reserved material if the normal stock limit is reached. It is a good option to avoid problems such as interruption of supply from your supply chain, if your goods are damaged or other unforeseen circumstances.
11. New order point
Define the level at which the spare parts need to be replaced, considering the safety point, which corresponds to the ideal quantity of material stocked for the fulfillment of all commitments assumed by the organization, and the ideal time to receive the order, without running unforeseen risks (and always in dialogue with its suppliers).
In this article, we discussed the importance of maintaining efficient storage management in the supply chain in your organization, by helping in the adequate supply of indirect materials, which avoids shortages that can compromise operations or excesses that generate unforeseen expenses or waste.
To have this efficient management, in addition to the techniques already mentioned, it is essential to have adequate softwares and a computerized control system, combined with periodic physical counts – relevant to know what is in your inventory at any time, which allows to detect and update possible changes and define an action plan for requests.
The main tip is: in the most convenient format for your organization, keep the updated and organized data about your storage.
We also saw the importance of a good relationship with quality suppliers for an effective management. A late delivery can damage days of production, which creates unnecessary losses.
In this case, a good option is to count on a company like Soluparts, specialized in negotiating with the main suppliers in the world, and obtaining better commercial conditions in the purchase of indirect materials. Talk to one of our specialists for more information.
It is widely known that there are a number of technologies that will change the way we work in the supply chain. According to a report prepared in 2020 by Gartner, immersive experiences are a technological trend that withhold potential to radically change the sector, with new models and processes able to amplify human capabilities.
In this post, we’ll discuss the benefits of immersive experiences in supply-chain management, which are already recognized by many companies, as well as the challenges and barriers to its full implementation and development.
What are immersive experiences?
An immersive experience can be defined as a situation in which a person has the perception of being in a virtual location, that is, in an environment different from what one is actually experiencing. For it to be realistic, it must involve the senses of sight, touch and hearing.
We can summarize the main types of immersive experiences as follows:
Virtual Reality (VR):
The virtual environment completely replaces the physical, with no interaction with the real world. Example: a computer game that uses special glasses and headphones. These equipment make the player, represented by a character, immerse in the virtual world of this experience. What makes all this realistic is the control the participant has over his avatar.
Another example is the simulator used in driving classes for motor vehicles and piloting aircraft and helicopters. When using this machine, the student has the feeling of driving a vehicle or on board an airplane, allowing him to test the commands learned.
Augmented Reality (AR):
Its technology corresponds to the superimposition of virtual content with a live broadcast image of the real world. It is useful for providing additional information while completing tasks in the real world.
An example is to receive guidance or even test a specific product during your purchase, such as trying on clothes in a virtual mirror. This technology can also be used in the projection of instructions to repair the car in front of the hood, for example, making it easier to follow them.
Mixed Reality (RM):
As the name implies, it is the combination of RV and RA. It can be considered, in a way, an advanced form of AR, since the technology allows users to fully interact with virtual items superimposed on the real world. In the example of repairing a car, mentioned above, instead of changing and controlling the images and information projected on the computer, it would be possible to interact with the projection itself.
Creating an immersive experience
Creating an immersive experience is complex and requires highly qualified professionals. But there are three factors or components, fundamental to this creation:
- An electronic device (such as a smartphone, pair of 3D glasses, headphones or a virtual work environment);
- The ability to create or expand the virtual world as the user interacts with this reality;
- The possibility of superimposing aspects of the virtual world to the user’s view of the real world.
In addition to in-depth knowledge of technology and equipment, having accurate information about the user’s profile and the context in which the experience will be applied are essential. For applications in the logistics area, for example, it is important to know in depth the challenges of the field and implement it gradually, creating and testing simpler versions of the application before developing its final version.
Immersive experiences in supply chain
According to a study developed by Deloitte, since its creation, in the mid-1950s, Virtual Reality has been developing rapidly in recent years, ceasing to be a niche technology. However, these innovations, which promote the improvement of equipment and synchronization of human and virtual activities, have not yet reached operational maturity for large-scale implementation, encountering difficulties related to a broader application for industries and users.
In the case of VR, we can mention some uses: for example, in tracking goods within stocks, the glasses that use the “inside-out” technology (with cameras and sensors attached to the device itself) are able to determine the position and orientation of the surrounding environment with great precision. In this way, the employee who uses this device is able to work in the stock, and even move goods through the control of robots, without being in person at the warehouse (see a video on this case).
There are still barriers related to computational power, price, security and user perception. However, companies in the field of development of more advanced hardware and softwares are making heavy investments in order to reduce these difficulties.
The study in question also raises some benefits of using immersive experiences in supply chains:
1. Less processes and faster product design time:
Teams around the world can work together on the design of products and processes through immersive experiences. In addition, there’s no need to produce a physical prototype, so experimentation costs are reduced. In the design of a production line, for example, it’s possible to produce virtual simulations of its different stages before implementing it. Consequently, you learn collaboratively what the processes are and get insights on how to optimize it.
2. Visualization of complex data and reducing the risk of operational problems:
The adoption of RV and RA also becomes an option for obtaining and digitizing information, along with other existing technologies, reducing the possibility of technical difficulties (such as the loss of a batch of products) to happen in stages of the supply chain.
In addition, when using 3D technologies, the organization is increasingly supported by data (of different types and levels of complexity) to plan its activities and processes. For example, when testing AR technology in inventories, it becomes easier to access information about the position of a particular product, optimizing the search process. In addition, the use of printed checklists of the selected materials is eliminated, giving greater control of the stock.
3. Increase in training efficiency:
Studies show the efficiency in applying virtual reality and augmented reality to the learning processes, offering important tools for teaching the best practices related to decision making (simulating real situations that require action) and learning procedures from attempt and error with low risk. Also, shared visualization and interaction through avatars and simulations in real time bring a series of insights to optimize supply chains. We can mention the realization of training simulating high risk scenarios, allowing the teams to identify, prioritize and analyze variables, reducing the risks of the task in the real world.
It’s important to note that there must be criteria for the evaluation and implementation of this type of technology, meaning, an understanding of how it will be used and will connect with existing systems. In addition, it is suggested that the company carry out small pilots to validate applications that can have immediate benefits and scalability.
You should also be aware of issues such as:
- Functional implementation (which areas and functions should be prioritized);
- The existence of technological infrastructure and a specialized team in this field, in a way that everything works correctly – this is an important point, since few professionals in the market dominate this type of technology;
- Information security and regulations (whether new laws will be drafted or current ones, such as intellectual property, will be adapted to the virtual environment);
- The operation of these devices and the perception of their users (in order to avoid health problems).
Cases of VR and AR applied to Supply-Chain Management
There are several cases of success involving companies that are already using this technology applied to supply chain:
- Automotive companies, such as FIAT, offer virtual test drives and make changes to the design of their cars from immersive experiences (video);
- As mentioned earlier, logistics’ teams use equipment to facilitate the location and access to information about a material in the warehouse (video 1 and video 2);
- Companies from different branches already use these technologies to train teams, by simulating situations (video);
- Tests have also been carried out to simulate the supply of markets using VR and robots, avoiding risks to employee’s health (video).
In addition to these examples, there are numbers that reinforce the relevance of this technology: according to projections released in 2019, the global market for Virtual Reality and Augmented Reality is expected to generate approximately US $ 100 billion (R $ 376 billion) in 2020. This figure probably suffered changes in the face of the Covid-19 pandemic, but reveals an unquestionable importance of VR and AR.
Challenges of immersive experience
Although these experiments are more frequent in some areas (such as entertainment), they can bring a series of benefits to different industries and even reduce costs in the long run. Also, there are some crucial elements that strongly impact the implementation of immersive experience in companies, being the cultural factor one of the most important of them, since the assimilation of disruptive technologies takes time to happen, and can only be seen, in many cases, in the long run. It is alleged that VR and AR came “before their time”, as there is still a lot of difficulty and resistance to use.
Experts who analyze changes in technological paradigms say that people respond in different ways to the need to learn to deal with disruptive technologies: while there are early adopters, who use new technology without difficulty, there are also laggards, which resist the change and only adopt the use when they are obliged (sometimes, because they have great difficulties in understanding it).
Thus, it is important that the implementation of these solutions is aligned with the company’s operational need, the budget available for its implementation and maintenance and the company’s reality (considering the cultural dimension). In other words, do not adopt it only because it’s something trendy to have.
In addition to the technologies related to the immersive experience, several others have influenced the global supply chain. To learn about these other trends and their applications, follow Soluparts Blog.
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