Tag Archives: agile supply chain

Agile Procurement Through the Ages…

Agile principles are all about the decision-making process. What changes should you implement to drive greater value at higher speed?

At IBM, we understand agile as a set of principles and values that when thoughtfully considered across the business, enable quality decision making, empower teams, and delight customers.

In procurement, the Category Manager’s role is to enable their internal customers by eliminating any disruption or friction within the business while also managing cost using their category knowledge and procurement skillset. The key here is the category managers’ ability to have deep category knowledge paired with a breadth of understanding for all internal customer profiles and needs.

As a category manager, team members must build a consultative skill set that allows them to identify pain points, use time wisely, and seek feedback. The result is a category manager who works towards customer needs rather than contract expiration dates and the latest price benchmarks. As a guide, we should seek to digitise and automate as much as possible regarding benchmarking, negotiations, RFx process’, contracting, etc., allowing us to give the appropriate attention to discovering internal customer needs including service levels, pain points, and demand.

What we did before vs. what we do now!

Previously, IBM, like most large companies, hosted a heavily layered procurement organisation requiring multiple sign offs and complex processes in order for decisions to be made. Agile principles are all about the decision-making process. Our leadership knew we needed to make some major changes resulting in fewer layers of management, accountable teams with decision making authority, and greater collaboration across the business, allowing them to drive value for our customers at the speeds they expect.

In a traditional procurement organisation, the category manager’s role is to identify where the savings opportunity is and act accordingly. They do this while following age old processes and having little to no interaction with internal customers. Many organisations seek to use poorly participated customer surveys to get a sense of how well category managers are serving their customers.

Yet, the best way is to open the channels of communication and collaborate with the business, whether it be face-to-face or virtually, allowing category managers to make the right decisions.

While cost reductions are still a priority for nearly all organisations, we found that when we work closely and listen to customers, we can eliminate the costs associated with under and over delivering across the business, which in turn, results in lasting cost savings.

The journey

To achieve this transformation, it takes strong displays from leadership of all the principles and values agile organisations are known for, establishing a belief system across the business encouraging category managers to ask ‘why’ when performing a task their internal customers do not care for or need to be successful. Implementing an agile belief system into a large organisation requires a major cultural change that takes time and patience from all parties.

In this new space, the role of a category manager has quickly evolved from contract and cost management to a crucial role that links business needs to the external marketplace for a specific category of goods. To achieve success in this role, category managers must interact daily with internal customers and evaluate each moment of their time spent not serving their customer’s needs.

Even so, many procurement organisations are too deep into spreadsheets and other manual processes to be ready for such an agile way of working. These manual processes make it impossible for category managers to have the time capacity to be a true advocate and trusted advisor for the business. To lift category managers’ heads from the clutter, organisations must invest in digitising their procurement processes where possible and identify the areas where they are not ready and get ready!

This article was written by Shawn Busby, Global Category Lead- IBM and Norman Braddock, Sourcing Consultant – IBM. 

Easter Supply Chain Set for Record Year

You may not realise the complicated Easter supply chain that exists in order to cope with increasing consumer demand.

Easter Supply Chain

Whether your Easter delicacy of choice is the humble egg, sweets like jelly beans and marshmallows, or something more like a Spanish torrija, you are contributing to the enormous spend on confectionary and other Easter-related items.

In the UK, Easter sales of chocolate make up 10 per cent of the figures for the entire year. According to the National Confectioners’ Association in the USA, around 70 per cent of the Easter sweets purchased are chocolate, which works out to a whopping $2.2 billion spend.

All of this puts pressure on the Easter supply chain plans that businesses have in place. And 2016 is expected to be a bumper year for consumer spend.

Highest for 13 Years

According to the National Retail Federation (NRF) in the USA, total spending on Easter this year is expected to hit $17.3 billion, the highest level for 13 years. To put it into perspective, that’s a spend of $146 for each person in the USA.

According to some statistics, this will put spending, particularly on sweets and chocolates, at a higher level for Easter than it is for Halloween. The NRF have estimated confectionary sales will total $2.4 million, surpassing the average of $2.1 million for Halloween sweets.

Possibly not good news for the 81 per cent of adults who admitted to stealing chocolate from their children’s stashes over the holiday period…

Retail Sales

And it’s not just the confectionary market that sees a huge spend at this time of year. With adults planning on spending on average 50 per cent for Easter than they did on Halloween, the money is being spread around.

According to the NRF survey, spending will see high figures in the following areas:

  • $5.5 billion on food
  • $3 billion on clothing
  • $2.7 billion on gifts
  • $2.4 billion on confectionary
  • $1.2 billion on flowers

And with over 40 per cent of shoppers visiting department stores to carry out their shopping, and 21 per cent shopping online, organisational supply chains will be working flat out to cope with demand.

Easter Supply Chain Optimisation

Delivering all this chocolate, sweets and other items to stores requires a mammoth effort from logistics organisations around the world. Shipping efficiency, customer location, order quantities and supply chain management all have to be reviewed in order to keep up with the demand.

In the USA, Hersheys opted to optimise their supply chain around the elements of customer geographical location and grouping stock-keeping units with product groups. It is estimated that by doing this, and using off-the-shelf software, the organisation has saved itself in excess of $15 million per year.

Just Born, a confectionary manufacturer who are responsible for America’s favourite non-chocolate treat, the Peep, changed their Easter supply chain strategy in order to cope with the huge demand for their products over the holidays.

The organisation now uses distribution centres and 3PL to break bulk orders for more efficient delivery to retailers. Just Born also shares these centres with other organisations, with this collaboration further reducing the costs associated with deliveries.

An increasing use of technology for inventory management and planning is making life easier for organisations too. Barcodes can be used to manage inventories more efficiently, while also allowing for real-time tracking of stock at both distribution centres and retail outlets.

Further advancements in technologies such as ERP and MRP systems will allow organisations to further increase efficiencies, while increased collaboration will benefit not only the whole industry, but also the consumer.

So just remember, the next time you crack open that chocolate egg, there’s more than a simple process required to get it from manufacturer to shelf (and that’s before the Easter Bunny gets involved!).