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John Burson  edited Thursday, December 7, 2023

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The food, pharmaceutical, and natural resource manufacturing companies understand the importance of procurement in the reduction of short-term costs and strategic management. Procurement involves translation of the supplier requirements, management of the supplier relationships, and ordering goods and services required for production.

Manufacturing companies view supplier relationship management (SRM) as one of the key improvements in the manufacturing industry. Strategic supplier relationships are very critical in the growth of a company and its ability to stay competitive in the business world. Therefore, manufacturing companies collaborate with various suppliers to increase their competition and innovation practices as well as improve their procurement processes.

Procurement Challenges

Integration of enterprise content management tools to the SRM tools helps in the development of solutions that assist in solving the procurement problems. Some of the challenges that most businesses face during procurement include:

A lot of Paperwork and Documents

Internal procurement processes involve a lot of paperwork and large masses of documents stored in incompatible files, systems, and formats. The paper works help in the planning stages, placing and tracking of orders. Additionally, documentation is proof that an order meets the original set requirements. Companies should aim at eliminating all these paperwork to improve their manufacturing processes.

Lack of a Standard Approach to the Information Management

External supplier management merges the manufacturer's operations together with their supply chain. The two have diverse ways of managing their information leading to high level of inefficiency in business. Eliminating the paperwork contributes to an attention shift from the document management to the information in the paperwork.

Treatment of Suppliers Equally

Segmenting suppliers depending on their roles and values goes a long way in maintaining external supplier relationships. Different suppliers range from the transactional suppliers who rely on specific contract requirements to the collaborative suppliers who focus on risk reduction and delivery of just-in-time inventories.

Squeezed Manufacturing Margins

Production and the number of modern manufacturers working with a wide range of suppliers are growing every day. However, there is an increased tendency to cut prices for the consumers which in turn leads to squeezed manufacturing margins. Companies are now switching to SRM to help in maintaining the efficiency and profitability of the business.

Sophisticated Supplier Sales Systems

Sales systems of the supplier organizations have a certain form of uneven sophistication with those of the manufacturing organization. The result for this unevenness is a decrease in manufacturers’ buying power.

Benefits of SRM Systems

Most businesses and companies have tried to solve the challenges by adopting SRM systems. The system has helped in cost reductions, increased efficiency, supply chain consolidation, improvement of the manufacturing process, and the increased ability to outsource various specific activities.