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The global shipping crisis and procurement: why automate order confirmations?
- Jim Beard
- October 14, 2021
The two-week closure of China’s Ningbo-Zhoushan Port south of Shanghai in August, following a dock worker’s positive test for COVID-19, has exacerbated the global shipping crisis. The pressures caused by this supply chain disruption have been relentless and, in procurement, it’s quickly being defined by significant delays and a subsequent backlog of purchase order confirmations that need to be processed. In Europe, businesses are reporting a dramatic increase in order confirmations as the ongoing disruption is forcing suppliers to provide multiple order confirmations for each purchase order. This challenge presents an opportunity for businesses to build long-term and sustainable resilience within their purchasing processes. By automating order confirmations with the Netfira Platform, businesses are able to ensure end-to-end transparency and allow employees to focus on value-adding tasks.
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Procurement and the uncertain new world
COVID-19 has caused unprecedented global disruption to businesses and consumers alike. The pandemic led to a drastic shift in consumer demand for certain goods. This demand was met with widespread lockdowns, causing many workers to remain at home, and has resulted in a massive shipping backlog and a global shortage of key materials and components. In May 2021, container ships were estimated to be spending an average of 33 hours anchored due to port congestion, up from only 8 hours in May 2019. This disruption has been felt by businesses across the globe, regardless of size. In September, for example, Toyota announced a 40% reduction in car manufacturing in light of a computer chip shortage. However, the pandemic alone is not to blame for the current global shipping crisis. In March 2021, a 400-meter-long container ship was blown off course by strong winds and caused a 6-day blockage of the Suez Canal, a vital passage linking Europe and Asia. The Suez Canal blockage is estimated to have cost $9 billion per day and highlights the need for business leaders to future-proof their processes against disruption in an uncertain and interconnected world.
What makes purchase order confirmations so important?
Purchase orders are legally binding contracts between the supplier and the buyer, but that legal protection is not valid until the purchase order confirmation is issued. If the purchase order is not confirmed and accepted by the supplier, it is not a contract. Moreover, without the purchase order confirmation, it is impossible to know whether or not a supplier actually received the order and is in the process of fulfillment. As soon as the supplier confirms the purchase order, the buyer receives a confirmation number by e-mail he or she can reference in the event that there is an issue with the order. Purchase order confirmations are also vital because the confirmed date will be taken into account when the system checks the material availability. Consequently, purchase order confirmations serve a legal as well as an operational function ensuring smooth procurement activities.
Why purchase orders and purchase order confirmations need to be compared
Documents that do not match perfectly represent different expectations for buyer and supplier and expose both to the risk of litigation. In addition, important details such as delivery dates are confirmed in a purchase order confirmation, making this transaction crucial to smooth business operations. Therefore, it is important that the buyer checks the confirmation against the purchase order, and contacts the business partner in case any discrepancy is found.
Automated order confirmations in response to new challenges in an uncertain world
Manually processing, comparing and checking purchase order confirmations has always been time-consuming and error-prone. But with the COVID-19 pandemic exacerbating the global shipping crisis and leading to a significant shortage of materials, the workload has increased excessively. Buyers are confronted with an increasing backlog of purchase order confirmations. Today, it is not uncommon for up to 10 purchase order confirmations per purchase order to be generated due to changing situations and circumstances.
Whenever the price, quantity or delivery date changes because of unforeseen events or backlogs, a new purchase order confirmation must be created. The buyers, in turn, need to check and compare the new order confirmation against the purchase order. That is why purchasing needs to implement intelligent solutions allowing automated processing of order confirmations.
How the Netfira Platform automates purchase order confirmations
The Netfira Platform automates operational processes and the data and document exchange. For purchase order confirmations without deviances, the Netfira Platform offers fully automated processing thus completely erasing the need of manual work. In case the Platform finds a discrepancy, the system offers the buyers a guided standardised process. That way, buyers can process a high volume of order confirmations quickly, efficiently and correctly.
Future-proof processes through the automation of order confirmations
COVID-19, the shipping crisis, and the global shortage of key materials and components have significantly disrupted the supply chain. Purchasing must deal with an unprecedented level of uncertainty. Since uncertainty is inevitable and will always be a part of procurement managers’ lives, purchasing departments need to optimise and future-proof their operational processes to meet the challenges of an uncertain world and to deal with supply bottlenecks quickly and efficiently. By automating mundane work like processing purchase order confirmations, businesses can increase the reliability of their processes and achieve a competitive advantage. The Netfira Platform relieves buyers quickly and reliably, reduces manual workload and future-proofs procurement for present and future challenges.
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