Tag Archives: Supply Chain Outsourcing

The Importance of Procurement

In any organization, the procurement department plays a vital role in the successful development of a product. The procurement department, whether related to the fast-moving consumer goods industry or retail, generally refers to the procurement of raw materials. However, the procurement department can be associated either with business continuity activities such as inventory purchasing or for business support like that done for the Information technology department. It is therefore evident that this resource needs effective management. This is where category management comes into play.

According to a study, companies that have successful category management programs have a mean lead supplier time of only 6 days vis a vis the normal time of 14 days.

Some key points associated with the global markets that are to be noted here are:

-Transportation and logistics activities account for 10-12% of global GDP.

-The United States is ranked tenth in terms of trade logistics performance.

-According to 50% of respondents, the transformative capabilities of technologies such as advanced software and AI have a significant impact on their performance.

-It is expected that by 2024, more than 60% of G2000 manufacturing organizations will use advanced technologies such as AI to cut costs by up to 20%.

What are Category Management and Category Intelligence?

Category management is a strategic approach to acquiring raw materials for manufacturing. While sourcing is all about making the right purchasing decisions, category intelligence assists an organization in making the right purchasing “yes” or “no” decisions. This not only aids in resource optimization but also cost reduction.

The term “category intelligence” is not new, but it is surprising that even after the introduction of best practices for category intelligence, category managers have failed to maintain effective category intelligence documents.

The image below illustrates four broad areas that an effective category intelligence system affects.

Category Intelligence in Supply Chain Management

Category Intelligence in Supply Chain Management

The Role of a Category Intelligence Manager

This is a specialized role in which a category manager is responsible for a specific function or category of goods or services, such as the purchasing department or stock maintenance units. The role could include a variety of responsibilities ranging from procurement to strategic sourcing, as well as developing a sourcing plan and reporting.

In general, these functions are becoming more specialized, with category managers increasingly requiring specialized degrees in their respective domains.

Process of Category Intelligence

Identifying opportunities, translating trends, understanding the factors, providing guidance, and understanding stakeholder needs are all steps in the category intelligence process. These are explained in greater detail below:

Process of Category Intelligence

Process of Category Intelligence

-Identifying Opportunities: This step helps to cut down the cost, reduce the risk of competitors and increase the efficiency of the organization.

-Translate major trends and industry events: The second most important step is to translate these events into an actionable strategy that can be broadly put into categories.

-Understand the underlying drivers: All the underlying factors must be understood completely to understand what will be their business impact.

-Timely Guidance: Time-to-time guidance is provided to reduce the risk in the long-term sustainability of the business.

-Understand evolving business needs and stakeholder demands: This is done to ensure that the strategies and approaches are fitting well.

How category intelligence helps

Intelligent procurement or having an effective category intelligence system can help an organization in several ways. Also known as intelligent procurement, it simply means managing all aspects of vendor spending in one central digital place so that one can have a holistic view of their spending.

-Access to market intelligence:

Sourcing managers will have to keep track of multiple sources of information in order to be on top of things. For example, procurement of food grains requires one to not only be up to date with the prices but also the prices in different markets, the supply and demand dynamics, and the cost implications of various decisions.

-In supplier selection:

Finding the right supplier for an organization can be a challenging task as it requires risk evaluation as well as things such as how reliable a supplier is. This can consume a considerable time as the search for the right supplier entail testing their services as well as making a decision on the long-term reliability of the supplier for an organization.

-Curbing excess spending:

A quick response to changing market dynamics is one of the core tests to check the effectiveness of an efficient procurement department. An effective category intelligence system helps curb any excessive spending by the procurement department by providing correct information and helping in making effective predictions and decisions.

According to a study random, unplanned buying can account for 30-45% of all indirect purchases while in the case of smaller organizations it can account for almost 80-90% of the indirect purchase.

Category intelligence reports empower the procurement department to better negotiate the pricing and terms of agreement with its suppliers.

-Assessing supplier performance:

Getting past data or historical information about the suppliers and establishing benchmarks to assess the performance of suppliers is a difficult challenge for any organization.

A good category intelligence system envisages correcting this situation by not only providing access to data but also benchmarking and forecasting. A good category intelligence report aids in listing KPIs and benchmarking data thereby assisting in effective supplier management.

-Tracking multiple sources of data:

Effective category intelligence helps in tracking multiple sources of data from several marketplaces thereby ensuring ease in information handling. Having an on-demand intelligence system helps with access to previously unknown sources of information such as market size, market potential, and supplier coverage for businesses seeking to grow. Such an intelligence system helps a company in taking care of decisions at a local as well as a global level.

-Time-saving:

Category intelligence systems not only help in cost savings for a firm but also saves considerable man hours required for gathering and processing data.

Magistral’s Services on Category Intelligence:

Our Category Intelligence services help clients stay on top of indirect categories like Marketing Services, Professional Services, Travel and Lodging, MRO, Information Technology, HR, Transportation, and Utilities, among others. Our insights help corporations build the right category strategy with significant cost benefits.

Our major service offerings are:

-Demand and Market Supply Analysis:

In this analysis, we make category landscape reports, create the demand drivers, identify major players and analyze through Porter’s 5 Force model of analysis.

-Pricing Movements and Forecast:

In Pricing movements, we study the various pricing strategies and perform primary research to obtain quotations and RFPs.

-Major Players and Profiles:

Major company profiles are identified and SWOT analysis is done on them to manage the risk of the companies.

-Negotiation Strategy:

In this analysis of pricing is done and also competitive analysis is taken care of.

-Newsletters:

In this service, newsletters are made, also the developments across the categories are tracked proactively.

-Custom Intelligence:

Here, we provide custom direct and indirect sourcing.

-Impact Assessments:

In this, all the events are assessed like Geo-political events, Natural disasters.

-Category Dashboards:

It is created to have a comprehensive view of category and impacting factors.

About Magistral Consulting

Magistral Consulting has helped multiple companies to reduce operations costs through its offerings in Procurement and Supply Chain.

About the Author

The article is Authored by Marketing Department of Magistral Consulting. For any business inquiries, you could reach out to prabhash.choudhary@magistralconsulting.com

Introduction

Transportation Analytics in a supply chain refers to the movement of products from one point to another. It starts at the beginning of the supply chain when supplies arrive at the warehouse and goes to the end-user when the customer’s order is delivered right to their door. Because of its importance, warehouse managers should investigate transportation in their supply chains. In the end, this is the only method to cut total expenses in a scenario where transportation can account for up to 60% of total operational costs or a significant amount of a company’s supply chain costs. Few activities in the supply chain have as much of an impact on business as transportation selection. Delivery techniques ensure that deliveries to and from the business go smoothly and reach their destinations on time. Because transportation is crucial to the company’s performance, it is critical to incorporate it into the supply chain management strategy. Transportation is regarded as one of the three essential components of supply chain management because of its importance.

Transportation analytics rapidly power mobility information and insights, altering transportation planning by making vital data collection and understanding more accessible, faster, cheaper, and safer. Cities, transit agencies, transportation departments, and other entities increasingly turn to transportation analytics to solve challenges, prioritize investments, and gain stakeholder support.

The transportation analytics market was worth USD 15.65 billion in 2021 and is predicted to grow to USD 77.33 billion by 2029, with a CAGR of 22.10 percent from 2022 to 2029. Because of its ability to simplify commercial and personal transportation, Predictive Analytics accounts for the most prominent type of segment in the corresponding industry.

Usage of Transportation Analytics

Big data is heavily used in supply chain management to evaluate operational hazards, improve communication, secure proprietary data, and improve supply chain accessibility. This data is used by industries in a variety of ways, including predictive analytics and the creation of more efficient cloud-based platforms.

Usage of Transportation Analytics

Usage of Transportation Analytics

Predictive Analytics

Data mining, statistics, and machine learning are used in predictive analytics to assess future supply demands, inventory, and customer behavior. Companies use predictive analytics and machine learning to forecast future physical hazards in the supply chain and financial, customer, and other operational risks.

Cloud-Based Platforms

Cloud technology will be critical in the future of transportation and supply chain management. It can help lower costs by reducing the influence of physical/geographic barriers, merging, and replacing various in-person processes, mitigating some of the consequences of market swings, and consolidating and replacing various in-person processes. Optimized data, on the other hand, is critical to the success of cloud-based platforms. Data must be effectively recorded, transmitted, and used to profit from cloud technology fully.

Cloud storage has its own set of security concerns. As more businesses and industries migrate to the cloud, fraudsters will find the technology increasingly appealing. In addition to the protections provided by cloud providers, businesses should always examine what security measures are needed. Larger companies also often use many cloud providers across their operations. Companies must have solid policies for preferred vendors, best practices, and the involvement of internal IT teams in this situation.

Role of Transportation Analytics Professionals

The growth of e-commerce has led to higher expectations on speed, agility, and visibility. Manufacturers, merchants, and consumers have pushed transportation and warehousing companies to develop quickly to meet ever-increasing service demands. Transportation management is evolving thanks to supply chain technology fueled by data and analytics—these practical tools aid businesses in being more educated, efficient, and long-lasting.

Role of Transportation Analytics Professionals

Role of Transportation Analytics Professionals

Monitoring

Technology has catapulted the business beyond simple track-and-trace data into a new world of supply chain visibility in just a few years. Customers can now not only follow their items as they travel, but they may also receive text or email notifications when delivery vehicles are stationary for an extended period. The same information can show whether delivery is within a mile of its destination, allowing receiving facility managers to plan and avoid surprises. This increased awareness has ramifications that go beyond on-time delivery. Companies will be able to carry less inventory due to this data because they can precisely pinpoint their products’ locations and when they are needed. Over time, this could result in significant cost reductions. Data is also allowing for more personalization and control in the transportation industry. Internet of Things (IoT) sensors in trailers now allow drivers and dispatchers to watch and report on temperature, humidity, movement, and other vital elements in real-time, allowing them to intervene before a problem arises.

 

Fleet Management Systems

The use of fleet management technologies is also helping to improve transportation efficiency. Vehicles communicate with systems regularly, getting information such as how long they have been on the road, where they are going, and which route would be the most efficient. These solutions cut down on idle time for drivers, improve fuel efficiency, increase safety, and cut down on paperwork. This continuous connectivity between trucks and warehouses or manufacturing facilities also allows for increased flexibility and real-time responses to unanticipated incidents. By increasing transparency in the transportation business, digital freight platforms enable enterprises to think beyond today’s shipment. Thanks to technology, shippers may see regional trends, individual lane cost information, and driver preferences, while carriers can get specifics like loading/unloading durations and lane history data. All this information can aid in lowering operating costs without compromising service.

Vehicle-to-Vehicle Communication

Finally, data will play a part in one of the most intriguing breakthroughs in transportation: platooning, in conjunction with other technologies. Platooning is a method of transporting three or four trucks through the lengthy segments of the highways. The lead vehicle requires a driver, while the other tracks follow a digital tether a short distance apart. All vehicles respond with near-zero reaction time because the lead vehicle controls its speed, direction, and braking. When the platoon is within range of a destination, it pulls over to a designated parking lot, where each truck is greeted by a driver who will guide it to its delivery location. Because only one driver will be needed for every three or four trucks on the road, this application will save money on driver labor. It has the potential to improve traffic safety by reducing human error and accelerating reaction times. The technique also reduces vehicle distance, boosting the road network’s ability. Platooning is also good for the environment. Vehicles that travel at a constant, controlled speed emit less CO2 and consume less fuel. Tests have already shown that this technology can save a three-truck platoon up to 11% on gasoline expenditures.

Magistral’s services on Transportation Analytics

Magistral’s services support a strong customer focus and guarantee that goods are delivered on time to customers, regardless of location. They also optimize routes and safeguard profit margins without losing delivery timeliness. They also understand and negotiate a more complex logistics landscape, with more options than ever. Other services include:

Carrier Profiles: It includes pricing, suitability, specialization, and other important parameters while deciding on the type of transportation.

Dashboards and Visualization: KPIs development and tracking help in measuring the performance of the overall business.

Logistics Management: This step includes fleet optimization, last-mile delivery, and process management. All these services help in the acquirement and storage of the goods.

Data Science: This is done to identify areas of improvement for delivery and quality while reducing costs.

Contract Management: This helps in the preparation of contracts, bid management, vendor shortlisting, and negotiations.

About Magistral Consulting

Magistral Consulting has helped multiple companies to reduce operations costs through its offerings in Procurement and Supply Chain.

About the Author

The article is Authored by the Marketing Department of Magistral Consulting. For any business inquiries, you could reach out to prabhash.choudhary@magistralconsulting.com

 

A Brief Introduction

Consumer and market insight report and analyze consumer behavior, information, and feedback. The comprehension and analysis of these insights assist adjustments to customer support systems and business development. Companies collect feedback using customer surveys, statistics, reviews, and focus groups to understand the underlying attitudes underlying consumer behavior and decision-making processes.

There is no formal definition of consumer and market insight, but it may be summed up as any measurement that can be utilized to observe and understand what customers think and feel. It might be their eye movements when viewing your page, how long they spend on it, how much they order, which options they choose, etc.; the list is endless. While certain information may be utilized alone to make a specific determination, marketers often use a variety of consumer insights to make their decisions.

Consumer marketing insights are also crucial when testing new initiatives within your company. You may learn from consumer insights how placement on the page, product details, SEO, and many other aspects affect your sales. Businesses employ consumer insights to understand their audience’s thoughts and feelings more deeply. Companies may better understand their customers’ needs and wants, and, more crucially, the reasons behind those needs and wants, by studying human behavior, which is likely to boost revenue and brand value thus.

Sector concentrating the more spending on market research 2020, by sector

Sector concentrating the more spending on market research 2020, by sector

Consumers today have virtually limitless store options and complete freedom over how they assess and interact with media and companies. In the wake of the COVID-19 epidemic, research has revealed that 81 % of consumers would continue reorganizing their spending this year, while 46 % of customers have experienced new expenditure restraints.

Benefits of Consumer and Market Insight

Consumer and market insight has the power to create or destroy a marketing plan. This dependency on data monitoring has only increased across all businesses considering the COVID-19 outbreak. Businesses and consumers are switching to a digital-dominant strategy enabling more precise insight measurement. Consumer insight may help determine the characteristics your consumers are seeking and find demands that your rivals are still not meeting. Social media and search engine trends might be helpful in this regard. To stay informed about what your target audience is searching for, you may set up alerts for movements and rivals.

This takes us to a further advantage of consumer insights: They provide a detailed picture of how you may compare your company to others’ businesses in ways other than sales and revenue. You can see how you compare to your rivals on various business-related terms regarding search engine rankings. 71% of consumers expect companies to deliver personalized interactions. 3/4 will switch if the customer doesn’t like the experience, so it’s vital to keep care of the customer experience.

Build effective category strategies that increase sales and promote sustainable growth by utilizing solid, impartial, and contextualized insights. Make quick judgments based on proactive information and forward-looking insights to stay one step ahead of the competition. Data and information make it easy to mitigate risk and identify strategic priorities.

How to get Consumer and Market Insight

Utilize social media analytics

According to a research survey, only 1.9 % of marketing executives said their businesses have the skills to use marketing analytics. With the popularity of social media as a tool for marketing, companies may communicate directly with their customers and discover their precise attitudes and responses to their offerings. Nowadays, many social media platforms have survey and questionnaire tools that can also give valuable information about consumer attitudes or behaviors. YouTube analytics, google trend and analytics, and google audience retention tools are the best source of collecting marketing insight.

Getting Consumer and Market Insight

Getting Consumer and Market Insight

Conduct surveys

Getting direct customer input is a terrific method to learn about the industry. Many businesses opt to do this by sending out feedback forms as soon as a client connects with or purchases their product or service. They may follow up later to obtain a more comprehensive customer experience analysis.

Access to public data

Because of the internet, businesses now have access to an infinite quantity of data, much of which is public information. When deciding on their marketing strategies, companies might utilize information about consumer buying patterns, financial situations, and the condition of their respective industries or economies.

Conduct market research

Focus groups are typically gathered as part of market research, a traditional method for businesses to collect data for market insights. These test subjects’ responses might offer valuable information about how the broader public might react to a particular product, service, or marketing campaign.

Customer feedback

Asking clients for feedback is one of the simplest methods to obtain consumer insights. However, there is a need for this. To guarantee that their customers feel comfortable sharing, brands must develop trust.

The impact of global consumers has changed

The transition of consumers to digital has increased significantly. Gen Z customers have created applications to discover extra food and purchase more goods online. People are preferably buying more on online sales or in big billion deals.

73% of Indian consumers return the product after shipment, so the company’s return policy should be easy to attract the customer and create trust. Myntra had 8 million orders during its end-of-reason sale in which 5 million buyers bought 4,636 brands. In the sale, 10 shirts were sold every second, 3 pairs of jeans were sold every second, and 17 sarees were sold every second, which signifies consumer behavior. Sales influence consumer behavior, those not in need also buy something.

44 % were undecided or made three or more assertions that they disagree with near shopping sustainability. A 23 % rise in expenditure across six or more categories was forecast by consumers worldwide. In the six months starting in April 2021 and concluding in September, 24 % of consumers worldwide do not anticipate increasing their expenditure in any category.

How to use Consumer and Market Insight

Set your goal

A list of questions and objectives is often where research starts. Determine the data type needed to finish your analysis before asking for input. Data on consumer demographics, corporate reputation, brand awareness, product issues, market rivals, and customer service initiatives may be included in the objectives for consumer insights.

Choose the research methodology

The research techniques you choose will depend on the information and results you are looking for. Data on consumer demographics and public relations may be found through focus groups and customer surveys. In customer evaluations and surveys, suggestions, and issues with goods, features, and customer service may come up. Pick the best approach to serve your research’s objectives and produce the most satisfactory outcomes.

Conduct research

Install data gathering technologies to compile information from sales processes and website visits or assemble participants and ask them to share their perspectives. Customers who respond to surveys and provide feedback frequently receive rewards from businesses. To gather information for analysis and determine consumer happiness, solicit and record consumer insights.

Analyze the result

You may find and visualize common issues, trends, and causes that arise among your customers by analyzing the outcomes of the data you collected. Create a graph or written report to summarize customer data and examine patterns like demographics, consumer behaviors, and product issues. Improvements and modifications that address frequent difficulties and feedback can be made using knowledge of the reasons and reactions that occur most frequently.

Apply changes

Consumer insight and market research are primarily used to develop and improve products that better fulfill the demands of consumers. Product development and marketing teams build solutions and work to answer customer complaints after collecting and evaluating the data. The organization’s understanding of customer service is demonstrated using these enhancements.

Why Magistral Consulting?

-Customer insight: Utilize tools like social media sentiment analysis, U&A insights, N.P.S. tracking, bespoke surveys, and more to stay current on consumer trends, requirements, and purchasing patterns to identify focus areas and create successful marketing plans.

-Market expansion: Receive timely, essential insights and evaluations of markets and regions to aid in partner selection, local market intelligence, understanding of shifting legal and regulatory environments, and developing successful ready strategies.

-Updated information: Proactively updates on recent and pertinent developments in your markets and categories will help you find new opportunities for innovation and growth.

-Expert insight: A comprehensive understanding of your company’s possibilities and difficulties by combining data from internal, external, and third parties. We have expertly selected insights on markets, categories, rivals, and consumers to assist your commercial and marketing teams in making more informed strategic decisions.

-Custom tools: You may create world-class category growth strategies fast and easily using pre-built templates and unique tools.

About Magistral Consulting

Magistral Consulting has helped multiple companies to reduce operations costs through its offerings in Procurement and Supply Chain.

About the Author

The article is Authored by the Marketing Department of Magistral Consulting. For any business inquiries, you could reach out to prabhash.choudhary@magistralconsulting.com

Introduction

Inventory management helps the company to decide which and how many goods to order at a particular time. It is the process of purchasing, storing, and selling the stocks of a company. This means managing the process of inventory management from start to end, such as storing raw materials as well as finished goods, keeping them in a warehouse, and finally processing finished goods. It tracks inventory right from purchase to the sale of goods.

In short, it means having the right number of stocks, at the right place and at the right time.

A company’s inventory is the most valuable asset. In retail, manufacturing, industries, and other inventory-intensive sectors, a company’s raw materials, and its finished products are the core of its business. Inventory can also be viewed as a liability due to the possibility of spoilage, theft, damage, or changes in demand. It must be insured, and if it isn’t sold, it must be cleared at a discount.

The Objectives of Inventory management

To gain a better understanding of inventory management it is important that we understand what are the objectives which it seeks to achieve first. Given below are the key objectives of effective inventory management.

Objectives of Inventory Management

Objectives of Inventory Management

-Material availability: The main goal here is to ensure that all types of items are accessible whenever the production department needs them so that production is not hampered due to their unavailability.

-Improved customer service: Having the finished product available at all points of time so that even varying demands of the customers are met satisfactorily goes a long way in ensuring great customer service.

-Avoid waste: When there is no inventory management system in place, it is common for items to be wasted. In addition, theft can also be a major preventable complaint.

-Maintaining sufficient stock levels: Effective inventory management ensures that stocks are available at all points of time to the production department as well as the fact that retailers do not run out of stocks thereby ensuring efficient delivery.

-Cost-effectiveness: Cutting down on costs in terms of inventory hoarding ensures cost-effectiveness for the company.

-Cost value of inventories reduce: Regularly purchasing the stocks in bulk, can help in negotiations and getting discounts on the inventories.

-Optimizing product sales: It helps to determine the volume of the product sales. It helps in understanding the present condition as well as future consumption of the goods.

The Types of Inventories

Inventory has different classifications under different stages of the supply chain. Typically, there are four types:

-Raw materials: This refers to the raw materials which are then turned into finished goods. There are two types of raw materials:
    -Direct materials: These are used directly in finished goods, such as leather used in making belts.
    -Indirect materials: These are part of the overhead or factory costs, such as glue, tape, and oil, which can be considered indirect materials for the factory.

-Work-In-Process: The inventory that is being used by businesses to create the final goods, whether its direct or indirect inventory, is called Work-In-Process (WIP). For example, the packaging of a finished good is WIP.

-Maintenance, Repair, and Operations (MRO): Inventory is what is needed to assemble and sell a finished product but is not built into the product itself. For example, basic office supplies such as paper, pens, and so on.

-Finished goods: This refers to the finished goods that are available for purchase by customers. This category includes any product that is ready to sell.

The Techniques of Inventory Management

Inventory management techniques can be used to control inventories regardless of the size of the business:

Techniques of Inventory Management

Techniques of Inventory Management

-Bulk Shipments: This method states that the goods are cheaper when they are bought in bulk. This is done when there are high consumer demands. This technique has the downside of keeping the bulk shipments in the warehouse, which results in higher costs overall. On the other hand, it reduces the shipping cost and it works well with the staple goods having long shelf lives.

-Backordering: It refers to the decision of taking orders and receiving the payments in advance for out-of-stock products. It’s a desire for most businesses but can be a logistical nightmare for the ones who are not prepared. Enabling backorders, increases sales and it’s just like a juggling act.

-Just in Time: Under this arrangement, finished goods are made available at just the right time. This means that the supplies of raw materials arrive as soon as the finished goods are ready to be shipped. This technique thereby helps businesses meet consumer demand without overfilling inventory and incurring any holding costs

-ABC Analysis: This is a technique based on putting the goods into different criteria in order of high importance, i.e. A being the most valuable and C being the least. Not all products are equal in value, and more emphasis should be placed on more valuable products. It improves time management and resource allocation.

-Drop shipping and cross-docking: This method completely removes the cost of maintaining inventories. When you have a drop shipping arrangement, you can transfer the client orders and shipping details to the wholesaler or manufacturer, who then ships the product.

Key statistics and facts about Inventory Management

The below points highlight some of the key statistics about the global supply chain market.

-The global supply chain market is estimated to be $15.85 Billion.

-The global supply chain is projected to grow by a CAGR of 2%

43% of small businesses in the United States do not track inventory or do so using a hands-on system

The #1 cause of U.S. supply chain disruptions is random IT shutdowns which is approximately 68%.

-The average US retail operation has an inventory accuracy of only 63%.

34 % of businesses have shipped an order late because they sold a product that was not in stock.

-Inventory losses cost an estimated $1.1 Trillion

-Prevention of stockouts can lower inventory costs by 10%.

-As of June 2019, US retailers are sitting on approximately $1.36 of inventory for every $1 sold.

-The number of private warehouses in the US has risen from 15,763 to 18,182 since 2013.

-The industry in the US has moved towards having smaller warehouses – from an average of 400,000 sqft to 50,000-200,000 sqft.

Magistral’s service offerings for Inventory Management

Capital tied up in inventory leads to requirements for higher working capital. Apart from higher working capital requirements, the non-moving list also leads to wasteful inventory carrying costs. Our services span from requirement gathering, ordering, delivery and maintenance to ensure you only carry the inventory optimum for your required performance.

-ABC Analysis: This includes inventory management strategies and the services related to working capital reduction.
Inventory reduction: Working capital optimization as well as monetizing non-moving items are provided under this head.
Ordering and Refill: In this minimum order quantity is calculated, also logistics cost optimization is done.

About Magistral Consulting

Magistral Consulting has helped multiple companies to reduce operations costs through its offerings in Procurement and Supply Chain.

About the Author

The article is Authored by the Marketing Department of Magistral Consulting. For any business inquiries, you could reach out to prabhash.choudhary@magistralconsulting.com

 

 

Introduction

Supplier Risk Intelligence aims to reduce supply chain interruptions by hastening response to as many possible preset events. We now know that dangers in the supply chain can originate from anywhere. Although some risks occur more often than others, even those that seem less urgent might be harmful. These might include shifting market dynamics, rival companies expanding their market share, cutting costs, or changing consumer preferences. While checking margins, expenses, and quality, businesses must be adaptable and resilient. Customer satisfaction must continue to be a top concern, needing the ability to quickly adapt the supply chain intelligence to meet changing customer demands. No matter how little it may appear, a single supply chain disruption can affect any of these factors. Therefore, each organization that depends on others for its success must conduct a supply chain risk assessment. The main participants in the supply chain include suppliers, distributors, manufacturers, and retailers. Every part—from raw materials to parts and carriers—must function synergistically for the end-user to receive what they expected.

Factors involved in Supplier Risk Intelligence

Companies often undertake supplier risk intelligence tests to learn more about their suppliers, the risks they can present, and the risk management strategies they employ.

Factors Involved in Supplier Risk Intelligence

Factors Involved in Supplier Risk Intelligence

Regarding suppliers, there is no such thing as zero risk. Not everything is predictable, and every firm has its weaknesses—both internal and external. The goal of supplier risk assessments is to evaluate supplier risks with the company’s risk thresholds and show whether the suppliers are meeting expectations within an acceptable level of risk, not to exclude suppliers that pose any risk. Of course, in some instances, supplier risk assessments lead to a company needing to fire a supplier because there is no workable method to reduce that risk. As many businesses will attest, diversifying the supply chain enables better agility if a supplier arrangement is broken. It is vital to avoid any situations where businesses are forced to collaborate with a supplier that poses a severe risk to the company just because a replacement cannot be found. There are several factors involved in supplier risk intelligence.

Financial Stability

Businesses should create a financial risk score for each supplier using a credit bureau rather than a data source while trying to reduce threats to financial stability.

Insurance Management

Continuous monitoring is recommended for insurance management since it enables businesses to alert their management if a supplier no longer has sufficient insurance due to not paying a premium or canceling a policy.

Reputational Protection

Resources can also be used to protect one’s reputation. Prominent Supplier Risk Intelligence firms search more than 35,000 periodicals globally using adverse global media monitoring to look for reports about bad suppliers. Programs like these can help businesses in expecting lousy press.

Regulatory Compliance

Global watch-list monitoring and document validation are two methods for monitoring regulatory compliance issues. Regulatory hazards are among the concerns a corporation cannot control but should be vigilant about monitoring.

Cyber Security

Cyber security vulnerabilities are among the most significant issues businesses have been looking for help with Supplier Risk Intelligence firms. The ability to create a security rating, monitoring tools, potentially a security questionnaire, and the resources to gather and manage the information are all necessary for Supplier Risk Intelligence.

Document Management

Businesses should concentrate on document management to gather, organize, and authenticate any standardized document. Humans must review essential documents like insurance policies to ensure they are insured.

Social Responsibility

Verifying diversity, promoting sustainability, and analyzing anti-slavery and human trafficking issues should all be part of efforts to tackle social responsibility concerns. It is essential to build ties with suppliers who perform well rather than associating the business with those who do poorly on these metrics.

Health and Safety

Additionally, businesses must gather and manage data, including public safety and health statistics and other materials, to oversee their operations’ overall health and safety.

Processes in long-term Supplier Risk Intelligence

The most important thing to understand about supplier risk intelligence is that it cannot be completed in a single step. Various processes are needed to achieve it.

Processes in Long-Term Supplier Risk Intelligence

Processes in Long-Term Supplier Risk Intelligence

Documenting Known Risks

Mapping the supply chains for all the goods and services offered is the most effective method to start any risk assessment exercise. The goal is to understand each link in the supply chain and the risks. Create a risk registry for each supply chain the company depends on so that processes can be prioritized on what to watch. Any areas where risk is uncertain or the lack of data should be noted when finding and recording risks. To find out if these are unknown risks or if the suppliers need to be more forthcoming, they can flag them for further inquiry.

Creating a Framework

When conducting audits, developing a risk management framework is necessary after creating a risk register. Although the framework can be straightforward, it is vital to consistently evaluate the risks to the supply chain and business operations. Consistency allows prioritized actions based on the risk and harm they pose to the company. This strategy covers bases by enabling access to risks associated with the suppliers and the adaptability and readiness of the company to manage any problems.

Monitoring Risk

A strategy for ongoing and persistent analysis is essential once the risk management framework has been built and initial audits have been completed. Continuous monitoring not only serves as a reliable early warning system for foreseeable problems in the supply chain, but it may also strengthen the relationships with suppliers because they will know where to focus the mitigation efforts. Risk measurement and monitoring are now easier than ever, thanks to the development of digital supply chain visibility technologies in recent years. It is now possible to obtain real-time information while tailoring the metrics, watched according to the needs and risk tolerance. The latter can be beneficial if rapidly changing factors like the weather are being tracked because, for instance, a hurricane or typhoon could impair operations at a supplier’s plant.

Implementing Governance

It is excellent practice to ensure a governance framework to help review supply chain risks and continuously watch hazards. Companies choose internal champions to oversee each supply chain node as part of the supply chain governance strategy. When risk levels change, or mitigation is needed, each person would then collaborate with the suppliers to offer ongoing support and follow-up. Creating a governance board for the company that consists of the people in charge of the various supply chain nodes can be done. The governance board might meet regularly to update the company’s risk profile and forecast and assess the risk ratings related to the supply chain. The procurement and sourcing teams would receive help from these efforts since they always have the latest standards when creating questionnaires and other materials for onboarding potential new suppliers and partners.

Magistral’s Services on Supplier Risk Intelligence

Magistral’s Supplier Risk Intelligence delves more profoundly than just financial risk markers. They offer Custom insight dashboards and Flexible solutions to support the business, regulatory, and sustainability goals. Other services offered by Magistral on Supplier Risk Intelligence include:

ESG Scorecard:

This includes evaluating a supplier on 49 detailed ESG parameters and also preparing a carbon footprint for the client.

Compliance Monitoring:

This is the important step in compliance data collection, analyzing, and reporting it.

Dashboards and Visualization:

This consists of preparing risk dashboards and then highlighting the concerns associated, with the client.

Custom Research:

Risk Analysis is done on the customized parameters as suggested by the clients.

Risk Evaluation:

Quantification of the impact of potential risk is done here.

Supplier Monitoring:

This has newsletters, data collection, and reporting, vendor scorecards, etc.

About Magistral Consulting

Magistral Consulting has helped multiple companies to reduce operations costs through its offerings in Procurement and Supply Chain.

About the Author

The article is Authored by the Marketing Department of Magistral Consulting. For any business inquiries, you could reach out to prabhash.choudhary@magistralconsulting.com

Introduction

Because it is impossible to foresee the outcome of an uncertain occurrence, commodity intelligence entails lowering uncertainty by regulating risk variables. To effectively manage commodities risks, however, a clear perspective of the status of the business and the risks associated with it is needed, as well as a suitable risk management framework with the right people and the necessary tools.

Pricing, supply, and demand instability in commodity markets directly and significantly affect the company’s procurement budget, ability to save money, and overall profitability. The problem is that many commodity markets are incredibly volatile. Monitoring commodity price predictions and trends are integral to procurement teams’ and organizations’ strategic plans. It enables them to make data-driven planning and choices, foresee pricing-related risks, and manage suppliers proactively while avoiding supply chain disruption caused by price fluctuation.

Commodity price risk refers to the likelihood that price variations in commodities can result in financial losses for commodity purchasers or producers. Buyers are exposed to the possibility of higher-than-expected commodities prices. Commodity producers face the danger of lower commodity prices. Commodity producers and consumers can both use commodities markets to mitigate risk. Commodity price risk is a severe concern for businesses and consumers, not just commodity dealers, as the purchase and processing of diverse commodities, ranging from metals and energy to agricultural and food goods, is needed for everything from raw materials to finished products.

Methods of Measuring Commodity Risks

Producers most vulnerable to price drops earn less money for the commodities they create. Commodity consumers most vulnerable to rising prices increase the cost of the commodities they produce. The time lag between placing an order and receiving goods and exchange rate variations pose a risk to exporters and importers. Such risks should be effectively controlled for a firm to focus on its core operations without being exposed to unnecessary hazards. The methods used for measuring commodity intelligence include:

Methods of measuring commodity risks

Methods to measure commodity risks

Sensitivity analysis

Sensitivity Analysis is performed by selecting arbitrary commodity price movements or basing commodity price movements on historical data. The risk is estimated by adding the currency and commodity price changes if the commodities are priced in a foreign currency.

Portfolio Approach

The company analyses commodities risk and a more extensive examination of the potential impact on financial and operational activities using a portfolio approach. The risk is calculated using stress testing for each variable and a combination of variables in a portfolio approach.

Value at Risk

When doing a sensitivity study known as “Value at Risk,” some businesses, particularly financial institutions, adopt a probability method. In addition to the sensitivity analysis of pricing changes outlined previously, the corporations assess the likelihood of the event occurring. As a result, sensitivity analysis is used to simulate the potential impact of commodity price movements on its exposures by analyzing historical price history and applying it to current exposures.

 

Commodity Intelligence for Profitability

Even though the costs of raw materials, services, and other commodities fluctuate so often in today’s dynamic market environment, it is astonishing to see that the end product’s price is virtually always consistent. Procurement managers continuously look for the most cost-effective products but may have to buy even if the price is high to meet the production schedule. On the other hand, Procurement managers can boost the company’s profitability by monitoring commodity price volatility and altering sourcing strategy. Adjusting the sourcing strategy does not imply buying in quantity when prices are low, as this could result in waste.

Profitability by Commodity Intelligence

How to attain profitability using commodity intelligence?

Futures Procurement Contract

Signing a formal agreement to buy a specific commodity at a predetermined price at a specific period in the future is one of the best strategies to limit risks associated with commodity price volatility. The oil and gas industries and other commodities such as industrial metals, precious metals, seeds, cattle, and grains use futures contracts extensively. Such signed agreements allow the organization to manage better the risks associated with shifting commodity prices while increasing income predictability.

Price and Technology Trends

Companies may not always have the option of passing on higher commodity prices to their customers. Based on past data and projected patterns, significant commodity prices can be watched and predicted. Observing current market patterns and the global economy and employing standard forecasting tools can be a good signal for predicting commodity prices.

Bundling Services

Procurement managers who cannot limit risk due to variable commodity prices may use product and service bundling with a dependable supplier. Bundling products or services together hold the end product’s price by stabilizing the commodity’s ultimate price.

Price Forecasting Models

With the introduction of big data, purchase managers now have access to enormous data and information. An exact prediction of future commodity prices can be produced with proper prediction and study of elements influencing commodity prices. Purchase managers might use this data to make bulk purchases or postpone the procedure to increase overall profitability.

Future of Commodity Intelligence

At various periods, commodity markets have shown high price volatility, with unanticipated changes in demand or supply causing significant price fluctuations. It is not always easy for a commodity trader to keep track of every tiny change in a commodity price or other factors that affect that price. With commodity volatility and unpredictability increasing, and more data sources available to support decision-making, one thing is sure: AI will play a significant part in commodity intelligence in the future. It is possible to supply commodity intelligence unlike any other using artificial intelligence (AI).

Natural language processing (NLP) and machine learning (ML) are commonly used in commodity forecasting to automatically break down organized and unstructured data and construct models that predict commodity prices with minimal human interaction. Things that would usually be invisible to the naked eye can be brought to light, allowing manufacturers to foresee production, traders to forecast pricing, and buyers to plan more strategic procurement. NLP employs rendered algorithms to analyze written material, allowing techniques such as sentiment analysis to extract information from news articles, emails, and social media postings. Traders often use it to analyze current events and forecast market developments. On the other hand, machine learning (ML) involves algorithms that can be trained to act and think like people over time to improve predictions. A supervised learning approach means that as these algorithms are exposed to more data, experts who train the models can ensure that they keep improving.

Magistral’s services on Commodity Intelligence

Magistral’s services help companies to get an exact picture of their market position by accessing the correct forecasts and analytical reports, cutting through the market’s noise, and figuring out which risk indicators threaten their category and overall procurement strategy. Continuous insight programs that allow them to reach their full potential as strategic advisors to the rest of the company are also created. The services provided by Magistral are as below:

Predictive Price Analytics: All the services like Predictive Price Modeling, Price Tracking, Should-Cost Modeling, and Data Analytics are included under this head.

Expert Interviews: Niche Area Reports and Interviews of Specific Commodity Experts help in understanding the prices and other factors related to that commodity.

Risk Management Support: In this, Risk Intelligence reports and Custom reports are made to analyze the risk and reduce it further.

Price Tracking and Visualizations: Various MIS, Dashboards, and Data Analytics with layouts are prepared.

Business Impact Analysis: All those factors which affect the business are identified like supply disruptions, price changes, and volatility. Proper reports are made to explain how and what impacts it can cause to the business.

About Magistral Consulting

Magistral Consulting has helped multiple companies to reduce operations costs through its offerings in Procurement and Supply Chain offerings.

About the Author

The article is Authored by the Marketing Department of Magistral Consulting. For any business inquiries, you could reach out to prabhash.choudhary@magistralconsulting.com