Don’t Let Black Holes Warp Your Procurement Process

Are organisational black holes playing havoc with your organisation? Can you stop your procurement process getting sucked in?

Do you feel like your procurement process gets lost in a black hole? Things seem to be moving along according to plan until suddenly, they aren’t. You lose sight of the RFP response, PO approval, delivery schedule or another of the critical elements of the process. Everything just stops, but it’s hard to see why.

In astronomy and sci-fi movies, a black hole is a region of space so densely packed that not even light can escape. Gravity is strong because a star larger than our sun has been squeezed into a blob the size of a few atoms. They’re called black holes because they’re even darker than the surrounding nothingness of normal space. 

Astronomers recently captured the first images of a black hole in another solar system. According to NASA, there’s no truth to the rumour that the black hole looks like your boss’s inbox.

However, your procurement process could be dragged down by a few black holes. But these black holes aren’t the remnant of a dying star. Instead, organisational black holes tend to appear on the edge of enterprises. They can pop up any time that information, raw materials, production parts, or finished goods change hands.

It’s all too easy to get sucked into a black hole and then struggle to get back out again, costing time, resources and – worst of all – your credibility. 

Physical Goods Black Hole

You can track your pizza being made or get daily updates on an Amazon purchase as it crosses the country. In some cases, Amazon can tell you that the driver is five stops away from your home.

So why is it hard to track the movement of high-value goods like pharmaceuticals, electronics and machine parts? If your product moves through several countries on multiple modes of transportation, each hand-off can represent a black hole. 

Each carrier may have some visibility of its own systems, and yet it’s still hard to track a package from a courier pickup in Taiwan, to delivery in Oakland, to an LTL carrier, to your loading dock in Silicon Valley. Add in snafus like the Ever Given, or a trucker strike, or a pandemic, and it’s challenging to get an accurate snapshot of a location.

Black holes tend to occur when there’s loss of visibility and accountability. Even with the level of technology focused on procurement and the supply chain, many businesses lose sight of products and processes outside their organisation’s walls.

In the past, an organisation could count on close relationships with suppliers. But those days are gone. Organisations push to increase the number of suppliers for resilience and competitive purposes. And suppliers strategise to expand their customer base. 

Black holes tend to occur when there’s loss of visibility and accountability. Even with the level of technology focused on procurement and the supply chain, many businesses lose sight of products and processes outside their organisation’s walls.

Because those relationships are more fluid and distant than in the past, it’s easier to have a breakdown in communications. Transactional costs can accrue in the process, so expenses rise past the budget, and no one seems to know the reason.

Data Blackholes

While physical goods can get sucked into a black hole, so can data and information. EDI was cutting-edge technology years ago, and users were thrilled to get advance shipment notices sent in daily batches. The standard now is real-time tracking from door-to-door.

Companies may choose to carry extra inventory because they don’t have real-time insight into their stock situation. Excess inventory carries a material cost on the balance sheet, but with better visibility, an organisation can reduce safety stock.

Without actionable, up-to-date information, companies can’t forecast demand and shape the supply chain accordingly. While partial order fulfilment is a fact of life, problems may be more fundamental. Buyers and sellers may use different classifications or SKUs for the same product, or commingle components and finished products. You may find the need to pay for expedited shipping for out-of-stock parts or incur other unexpected expenses. Or, a supplier may be shipping expedited to cover up its own lack of visibility. If the buyer pays the freight, the shipper doesn’t have an incentive to use the lowest cost mode.

Realistically, any system must prove itself every day. Even if a tracking system has a very high accuracy rate, users may distrust it if there’s an occasion where it’s not 100% accurate. Wary users may look for workarounds that lead to even worse black holes. 

Black holes can occur even within an organisation’s four walls. It’s not uncommon to lose sight of a product in a company’s own warehouse after it’s received.

Any system that relies on manual inputs is prone to error. Finding and reconciling blackholes takes time and labour that most organisations don’t have to spare. Manual counts of large inventories just won’t happen. Of course, container yards and cross-docking terminals are well-known blackholes. The product goes in and may never come out.

International trade compliance is a fertile field for black holes. An error in classifying goods according to the Harmonized Commodity Description and Coding System can lead to customs delays and fees. 

Escape the Black Holes

So far, science hasn’t figured out a way to escape a black hole. But you can discover ways to warp out of the black holes in your procurement process.

Of course, your procurement tech must take into account varying levels of sophistication with the supplier base. Some suppliers are leaders in the field, with enough tech to make you jealous. Other suppliers consider upgrading to the latest version of Excel to be a digital transformation. Some suppliers may still use EDI that communicates in batches compared to real-time over-the-internet connections. One tech supplier works with suppliers from a religious sect that aren’t allowed to have telephones or computers in their home so they call from a communal phone to relay information.

Black holes of information within a multi-tiered supplier base prevent companies from making accurate delivery estimates to their customers. Companies fudging along with siloed data systems built from mergers and acquisitions should strongly consider plugging blackholes with enterprise systems. Often, there’s not a holistic view of the whole process. 

With contextual data, procurement managers can conduct root cause analysis to pinpoint recurring problems and take steps to avoid them. They can reduce unanticipated delays, or at least be aware of them to communicate to key stakeholders proactively.

To escape the event horizon of the black hole – the distance at which it’s impossible to overcome the pull of gravity – requires a comprehensive flow of data throughout the enterprise. Failure to get this will result in your company getting sucked into the abyss, potentially never to be seen again …