Help turn your CPO’s frown upside down by benchmarking your performance and demonstrating your value. Learn how to here.
Suppose you wanted to own the fastest car in the world. When you were shopping for that car, would you simply ask: How fast does it go? Or would you instead need to ask: How fast does it go in comparison to all other fast cars? That’s the thing about having something the fastest, or indeed, doing something well at all: it isn’t done well if it isn’t done well in comparison to something else.
The same is absolutely true when it comes to supply chain management.
At any one time, it’s likely that something in your supply chain will be changing in a less-than-favourable way, and this will irk your CPO. But a great way to show that you’re still adding value is to invest in supply chain benchmarking, which is critical to success and one of the big supply chain and procurement ideas.
So what is supply chain benchmarking, and how can you get started with it?
What is supply chain benchmarking?
When you aspire to own something like the fastest car in the world, the metric you use to measure its speed is pretty simple. The car either goes faster than all other cars, or it does not.
Anyone who has worked in procurement and supply chain, though, knows that things in our profession are unfortunately not always that simple. At any one time, there will be a number of trade offs that make meaningful comparisons more challenging.
Despite this, supply chain benchmarking – or the act of comparing your performance to various available indices – can help establish that even if things might not look so rosy in your category or area, they actually are. Benchmarking also has other important benefits, including helping you and your team identify gaps, innovate, and focus on continual improvement.
One commonly used index that may help you compare your performance against others is the SCOR method (of which benchmarking is just one part). You can use the SCOR approach to assess your business based on three pillars: process modelling, performance measurement, and best practice.
How can you get started with supply chain benchmarking?
Benchmarking can sound daunting, and there is no doubt that it can be a little time-consuming, but the benefits are certainly worth it. In order to get started with benchmarking, experts recommend:
Start with internal benchmarking: Sometimes, excellence can be sitting right in front of you. For that reason, especially if you work in a large organisation, it’s important to start your benchmarking internally. What are other business units doing better, both locally and globally, and how can you imitate their successes?
Analyse your findings:No one knows your business like you do. So after you’ve finished your benchmarking, ensure you analyse your findings. Pay attention to lessons learned, but also take the time to understand why it might not be possible to be the best of the best in every metric for your particular business.
But should you track all of your spend when measuring against indexes? Anklesaria Group recommends you should only track a certain amount. Discover what that amount is, and many other game-changing ideas, in our compelling whitepaper 100 Big Ideas for 2021.
The idea of this highly sophisticated technology might seem scary.
A lot of people in supply chain are worried about the robots taking their jobs. But actually, technology is needed to meet the changing consumer demand.
“Customers want products and services in their hands more quickly; they expect a more personalised experience and all this at a lower cost,” says Vikram Murthi of Llamasoft.
“Which means more customised products and services, faster order fulfillment times and super efficient delivery. This will require an entirely new way to architect, design and manage supply chains across broader ecosystems, new technologies and new roles and skill sets.”
How AI is changing supply chain
Everyone throws around terms like AI, but what does that actually mean for supply chain?
“Tech leaders herald artificial intelligence as ‘the next electricity’ or fire,” says Jonnie Penn, an artificial intelligence expert at the University of Cambridge and keynote speaker at the 2020 Big Ideas Summit.
“These bold claims convey that AI will be disruptive, but not why or how such technological change will unfold. “
AI at work
That’s why AI makes most sense when you see it in action, Penn says.
Like Attabotics, a Canadian company specialising in high-density vertical storage using machine learning and 3D robotics.
Or Caterpillar using ship-board sensors to calculate that cleaning the hulls of their eight ships more frequently (e.g. every six months rather than every two years) reduced drag and minimised energy waste.
“That insight saved them five million dollars per year,” says Penn.
Saving the planet
Clever application of AI could also go a long way for sustainability.
“Since 80 percent of greenhouse-gas emissions are due to supply chain management, this pressure will not abate in the decade to come,” Penn says.
“Even small gains made through AI could mean large steps towards the UN’s 2030 Sustainable Development Goals.”
Jonnie Penn is a Rausing, Williamson and Lipton Trust doctoral scholar researching artificial intelligence at the University of Cambridge. Follow him on Twitter at @jonniepenn
The future of procurement is digital. Experts share the tech skills you need to thrive in that future.
The future of procurement is digital. How can you make sure you’re part of that future? By understanding what your company needs from procurement, then using the right digital tools to meet those needs.
Here are the most valuable tech skills in procurement:
Supplier risk management
Companies want better supplier risk management, especially in the wake of COVID-19.
That’s why supplier risk management technology is top of procurement leaders’ list of digital priorities.
Employers now expect procurement teams to move faster and mitigate risk long before another crisis hits.
End-to-end supply chain visibility
A by-product of proper supplier risk management is increased visibility, according to Hau Lee, Professor of Operations, Information and Technology at the Stanford Graduate School of Business.
“You need end-to-end visibility about your supply network (capacity, inventory, disruptions, production yields, lead time, bottlenecks, social and environmental performances, their financial conditions, etc.), and your demand network (orders, demand forecasts, backlogs, channel inventory, promotion plans, and disruptions),” Lee says.
There are a host of tools out there to improve visibility. One is IBM Sterling Inventory Visibility, which is a cloud-based Software as a Service (SaaS). It compiles all of your inventory information from different platforms so you can see available product in real-time.
That’s just one example. Lee recommends educating yourself about other available tools that improve visibility. These harness technology like the Internet of Things (IoT), machine learning, and deep data analytics.
Reduce complexity in global sourcing
Professor Lee says understanding the intricacies of global trade, and how technology can reduce complexity, can make you an extremely valuable asset.
“Today, you need to be aware of the tens of thousands of bilateral trade agreements that exist between some key trading countries for products and components that may affect you,” Lee says.
And not just for minimising disruption. Where and how you source products can have a major impact on your bottom line.
Lee uses the example of breaking up a product and sourcing parts from different countries, like sourcing frames from Cambodia while the other parts from China. That way, you can use Cambodia as the country of origin instead of China, which can save you a great deal in taxes and custom duties.
“As countries start to gradually recover from COVID-19, attention will be shifted back (it has already started) to trade wars, tariff frictions, and protectionism,” Lee says. “Databases from WTO, for example, should be useful. Some experts call this “tariff engineering,” and there can be big differences.”
Conduct due diligence on suppliers for complete transparency
Ethical sourcing is already a hot topic, and it’s even more scrutinised now. Your company’s reputation is on the line, and you are held accountable for how and where you source materials.
It’s certainly a top concern for your company’s executives. They desperately want assurance that suppliers are reputable. Luckily there are digital tools that help you do your due diligence for potential suppliers, Professor Lee says.
“For example, many big brands have already been using IPE, the Chinese website that captures environmental violations in China, as a source of data to do due diligence of their prospective suppliers,” Lee says.
In fact, companies like Nike use apps to connect with the factory workers and educate them, Lee says. “[That] allows them to have better visibility of the conditions of the factories (instead of just relying on imperfect factory audits to monitor), and at the same time help to improve productivity there.”
Interpret data in a meaningful way
Being able to understand and interpret data is sorely needed in procurement.
This is especially true before you bring in new tech systems, says Susan Walsh, Founder of The Classification Guru.
“An area that’s often neglected is data preparation or cleansing before the implementation of any new software or systems,” Walsh wrote in a recent blog. “By the time it’s discovered there are errors in the data, staff have lost faith in using the software and are disengaged, claiming it doesn’t work, or they don’t trust it because it’s wrong.”
The beauty of procurement technology is cutting out admin and simplifying processes.
The ugly side of that same technology is displacing people who currently handle that admin. That’s why you need to gain useful skills beyond manual data processing if you want a future in procurement.
But where do you start, especially if new technology seems overwhelming?
Craig Carter, Professor of Supply Chain Management in the W. P. Carey School of Business at Arizona State University, says start with the basics.
“Supply management professionals need to have a general understanding of all of the technologies that are being adopted or are on the horizon – AI, blockchain, descriptive analytics, and predictive analytics,” Carter says.
But don’t panic, as Carter adds that understanding does not mean mastery. You don’t need to become an expert overnight.
Technology is coming
Don’t be surprised if this future tech is on your desk a lot sooner than you think. The pandemic has only accelerated the adoption of technology, as shown by our Supply Chain Confidence Index.
When asked which technologies show the most promise for helping to mitigate future pandemics and supply disruptions, 49% said predictive analytics and 38% said AI/ machine learning.
Ultimately, companies will do anything they can to minimise risk. Which is why procurement is so perfectly placed to contribute.
All you need to do is prove you have the answers they need, says Professor Carter.
“What is necessary is a demonstration of a procurement professional’s strategic value,” Carter says.
“Procurement professionals who can critically analyse, think strategically, and build relationships will continue to be in demand.”
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Airmiles on a sleigh? Elves and Modern Slavery? Sustainable fur for Santa’s suit? Industry 4.0 technologies could change the very fabric of Christmas supply chains…
If you’re anything like the team here at Procurious HQ, it doesn’t feel we’ve recovered from last Christmas, let alone be ready for this year! While the festivities kick-off, we can’t help but think about the key role Procurement and Supply Chain play in making the holidays have all the joy and cheer you could possibly need.
However, it’s impossible to fail to see how the traditional Christmas supply chain will be altered in years to come and it’s all down to innovation and Industry 4.0 technologies. And there’s one organisation that might really see some changes. That’s right, we’re talking about Santa.
Now, as none of us have been fortunate to venture into Santa’s workshop at the North Pole (not for the want of trying…), we don’t know what technology he already possesses. A veritable Christmas-load of magic, yes, but is it time for a Kringle 4.0 upgrade to make sure he’s staying up to date with current trends.
Let’s have a peer into the supply chain to find out…
Airmiles, UAVs and RPA
Global population growth may have slowed to around 1.05 per cent per year, but it is still on the rise and expected to hit 10 billion by the late 21st Century. What this means is that Santa is going to have to find a way to exceed the already blistering 650 miles per second he has to travel in 2020 to ensure that he completes his deliveries on Christmas Eve.
What does this mean for Rudolph and the other reindeer? After over 300 years of delivering presents, could reindeer be on the way out and be replaced by a more innovative solution to help Santa out? As technology develops further it might even be possible for the traditional sleigh to become an Unmanned Autonomous Vehicle (UAV), or perhaps for reindeer to be overtaken by RPA.
Both solutions come with their own drawbacks. The airmiles on the sleigh are gargantuan on an annual basis, though with it being powered by magnetic levitation (or magic) the carbon footprint is at least very low. There is a limit to the current technology on time in the air for UAVs, as well as how far away a pilot can be before the signal is lost. And if the sleigh is a UAV, who is going to eat all the mince pies and carrots and deliver all the presents?
Blockchain and Sustainability
There are few conversations around Industry 4.0 without some mention of Blockchain and traceability. But with the volume of gifts that are given around Christmas increasing exponentially, it’s something that is more important than ever to aid traceability of products, but also their source raw materials and the individuals who made or used them.
Now, we know that the Elves (more on them in a minute) make all the toys for Santa, but Santa still needs to source his raw materials from somewhere. When considering sustainability, we also need to look to a future where Santa’s suit is trimmed with sustainable fur and he’s using a sustainable, or Vegan-friendly, leather for his harnesses and boots.
Santa, of course, should be using blockchain to ensure that all his wood is grown in sustainable forests, all his electronics are free from conflict minerals, and his second, third and fourth et. al. tiers in his supply chain are free from Modern Slavery.
Which brings us back to the elves. We would hope that they are provided with the best of living and working conditions and countless sources have told us how much they enjoy their jobs. But we should still be able to request their employment contracts under a Freedom of Information request. Just to make sure…
Optimisation and Risk Mitigation
With the supply chain becoming increasingly complex, as well as the increasing number of deliveries, Santa needs to find a way to optimise his supply chain. He already has key stakeholders to provide input, as well as having access to the myriad data from global sources. Santa may be able to use technologies like IBM’s Resolution Rooms, which facilitate discussions and create references and knowledge for future problem solving.
A key risk in 2020 is COVID-19. Not only will Santa have to load his sleigh with presents, but he’ll need gallons of hand sanitiser and a face covering for each household. Crowdsourcing ideas or using Resolution Rooms would be a good way for him to set an effective strategy for how to handle this.
What has also become clear during 2020 is that organisations that don’t recognise gender equality are doomed to failure. You only have to look at the success of the Procurious Big Ideas Summit to recognise the role of successful female leaders in business now and in the future. Fortunately, Santa already has a female leader who can play a more critical role as the organisation’s CEO – Mrs Claus.
As the organisation grows and so do the challenges of the global supply chains, Mrs Claus will play a pivotal role in the smooth running of operations, ensuring Santa has the freedom to focus on delivering presents. Mrs Claus brings a strong leadership to the North Pole, making sure strategic planning begins in plenty of time and that the right decisions are made. It’s high time Mrs Claus got the credit she deserves from the rest of the world!
The Future is Bright…
No matter what the future of the Christmas supply chain looks like, we all know it’s in good hands and (hopefully) making best use of the Industry 4.0 technologies available. Take time to consider all the work that goes into this when you wake up on Christmas morning and find your presents waiting for you (we’re assuming you are all on the nice list…).
It truly is a technologically driven Christmas miracle!
Marketplace solutions will drastically improve end users’ experience, increase our own efficiency and revolutionise how suppliers and buyers engage with one another – so here’s what to look for in a Marketplace Platform.
Over the past two decades, we have seen an outstanding increase of B2C e-commerce platforms, now representing 30% of total trade1. As a result, it is no surprise that B2B e-commerce is also seeing significant growth in popularity built upon B2C e-commerce platforms’ success. Until recently, B2B e-commerce platforms have been limited to a small number of indirect categories such as MRO or Travel & Transportation. However, we are now seeing companies expand their use of marketplaces across indirect categories due to an understanding that the path forward is to transform the Source-to-Pay process to allow end users to self-service their requirements.
Marketplace solutions will transform the overall Source to Pay (S2P) process in three ways:
1. Improve the end-user experience from search to buy, allowing budget holders to buy “in three clicks” as they are used to in their personal B2C shopping experience, thus increasing client satisfaction
2. Drastically reduce procurement teams’ time and effort responding to tail & tactical needs so they can focus instead on value-add activities and strategic supplier relationships
3. Improve the way suppliers and buyers engage with each other, with a focus on small and medium businesses — a move from “off-line” to digital offers via the marketplace reduces the visibility gap of products and services offered by large and small suppliers.
In this blog, I outline the transformation journey to prepare for a marketplace approach, as well as identifying how to select the right marketplace platform for your needs.
Transformative journey for end users, sourcing team and suppliers
The Covid-19 crisis has accelerated S2P digitisation and the need for CPOs to propose new approaches that satisfy both end users and suppliers. These include improving end user satisfaction through self-sourcing, focusing the sourcing team on value-add activities, and complying with preferred supplier strategies.
Improve end-user satisfaction through self-sourcing
For a certain level of need, under a certain spend clip threshold, it can be onerous for end users to follow company guidelines, be trained on ERP or e-sourcing platforms and to try to find the products or services they want. The risk of this burdensome process is that end users may go “off-line” (outside of Procurement’s visibility), select their preferred vendor, then issue a retrospective PO to their organization.
Whereas, embedding a marketplace platform into the company’s ERP or e-sourcing platform will transform the “procurement end-user journey,” giving the power of sourcing and selecting vendors to the end-users to suit their needs and leveraging the natural “best buy” environment of the marketplace platform to improve savings.
Focus the sourcing team on value-add activities
Once the traffic of spot buy and tactical needs is funneled through a marketplace environment, the sourcing team can focus on the strategic needs of the organisation. They will also gain visibility to the tail and tactical needs of their organisation thanks to the analytics capabilities embedded into the more advanced marketplace environments. With this view, they can analyse the marketplace traffic and supplier revenues and consider switching some relationships from tactical to strategic.
Comply with preferred supplier strategies
In an “off-line,” non-digitised environment without means to track spend, it can be difficult to push tail and tactical spend to preferred suppliers such as minority vendors, corporate social responsibility (CSR) suppliers and small to medium suppliers.
The degree of supplier digitisation and ability to offer products and services “on-line” clearly allows procurement organisations to put those highly digitised suppliers and offerings in front of their end-users more easily than suppliers who are not as digitised. Marketplaces level the playing field for smaller suppliers. And, marketplace ranking capabilities linked with supplier performance (such as EcoVadis ratings, on time delivery, minority spend, etc.) gives Procurement Sustainability Managers the ability to build preferred supplier lists directly into the marketplace environment and funnel end-user demand to those suppliers.
As companies decide to invest in marketplace capabilities, there are some key criteria to consider before selecting the platform that best fits your organisation’s needs.
How to select the right platform
Public vs. private B2B marketplaces
Public B2B marketplaces are the most developed solutions across the platform industry today. They follow the same principles of the B2C environment where suppliers and their associated products, services and pricing policy are fully managed by the platform owners. Platform owners may decide to provide their own products vs. those provided by suppliers invited into the marketplace, with limited visibility to alternative suppliers for the procurement organisation. Consider the following key benefits and limitations of public marketplaces:
Public Marketplace benefits for Procurement organisations:
· Content is fully managed by the platform owners
· Onboarding of vendors is driven by the marketplace
· Integration within current procurement platform is easy
Public Marketplace limitations for Procurement organisations:
· Limited categories are available
· Limited ability to integrate with legacy supplier base to offer products and services that the organisation has a history of buying
· Payment process is often managed directly in the platform and control of spending is more difficult
· Inability for an organisation to monetise their own supply chain
Given the limitations of public marketplaces, we are seeing a rapid rise in private marketplace platforms. In some industries, the use of private marketplaces is quite natural. The hospitality industry, for example, was among the first to build procurement private marketplaces to propose to their franchisees and agents the ability to leverage their combined buying power, thanks to the digitisation of their needs both on the product and service side.
Before deciding to build your own private marketplace, a procurement organisation will need to size the effort required to build and maintain such an environment. Consider also the following key benefits and limitations of private marketplaces:
Private Marketplace benefits for Procurement organisations:
· Procurement organisation is fully in control of the suppliers onboarded
· Historical vendors and associated content will help end-users buy-in
· Fully aligned with internal procurement process including vendor payment
· Organisation’s ability to monetise their own supply chain
Private Marketplace limitations for Procurement organisations:
· Content critical for marketplace adoption is managed by the procurement organisation
· Potential lack of supplier competition on the marketplace
· Time and effort required to set-up the environment vs. a plug and play public marketplace
Other critical aspects to consider when evaluating marketplaces
Products and services
Marketplaces are developed and implemented mainly to reduce the effort of managing tail and tactical spend. Within that spend remit, services are often as important as products. However, if a marketplace environment is optimised for products, it can be a challenge to add services. Customisation and specification refinements are typically required to handle both.
Today, some platform providers have dedicated their platform to services while others to products — the end-user has to select one or the other environment based on his or her needs.
When selecting a private marketplace, if the procurement organisation has a say in the functionality, be sure to look at the platform’s collaboration capabilities between the end-users and suppliers. Collaboration bots can refine user needs and are a key enabler to self-source.
One of the first objectives of a marketplace is to control tail and tactical spend. But next, we can expect the marketplace environment to manage much larger spend. To be successful in with larger spend and to differentiate further from e-catalogue providers, marketplaces need to increase the average spend clip levels while keeping a “best-buy” environment. Having “three quotes and a buy” capability within the marketplace will allow end-users to manage small RFQs directly for both products and services and will push upwards the level of spend transacted on the platform.
Analytics capabilities are important for both the sourcing team and the suppliers. It will bring to the sourcing team a clear view of the organisation’s needs and potential missed savings reporting (such as when end users do not select the best available prices). For the suppliers, it is equally important that they understand how they are positioned in term of pricing, but also that they understand the most popular products and services to continue providing them and increase their revenue while participating in a “best-buy” environment.
With all of their benefits, whether public or private, we can expect B2B marketplaces to continue their rapid expansion into procurement organisations. Marketplaces can dramatically improve user experience, enabling end users to self-serve when buying. They can free up procurement staff to focus on more strategic activities. And, marketplaces help connect buyers and suppliers and give more visibility to SCR suppliers and their offerings.
(1) Brohan, M. (Dec 1, 2020). Gross sales on B2B marketplaces will finish strong in 2020 Digital Commerce 360. https://www.digitalcommerce360.com/2020/12/01/gross-sales-on-b2b-marketplaces-will-finish-strong-in-2020/
As 2021 dawns, it’s time for a new-look site with new capabilities for a new era – find out how it can help you catapult your influence.
There are so many benefits to increasing your network and influence. It won’t come as news to you that it helps to advance your career … but did you know that having more influence actually helps to increase the value you’re able to negotiate?
Think about it: people with more influence always get more – more deals, more access, more benefits – which prompted us to offer you more. After all:
Influence = value
In 2014 we created Procurious to help professionals like you grow their network and increase their influence, and it’s served our community well. Now, after what has been a remarkably challenging year, we felt it was the perfect time to enhance, upgrade and refresh the platform to help you achieve this, so we’re excited to share some of the updates we’ve been working on …
1. More tools to connect and grow your professional network
We believe one of the most important aspects of our profession is the development of strong relationships and a diverse network. This has always been at the heart of Procurious and has been a key focus for the new platform.
By introducing new features such as live-chat and profile additions like skills we’re making it easier to find, connect and collaborate with like-minded professionals.
2. Enhanced micro-communities and groups
Whether you’re sharing a valuable resource, discussing an idea, establishing a think-tank or reflecting and asking for feedback on a recent experience, Procurious has you covered!
We’re always looking for new ways to support the activities that help you and your team learn, grow and achieve excellence, and the upcoming enhancements to our groups and discussions are no exception.
3. New and convenient ways to find and participant in live events
We love assembling our community to share and discuss new ideas, important trends, emerging challenges and exciting opportunities, and our new approach to events aims to make this easier and more powerful.
With simplified search and registration, event specific community feeds, upcoming session alerts and integrated live-streams, we’re looking forward to helping everyone in our community to make the most of these opportunities to connect.
Procurious is here to help you take control of your procurement and supply chain career. The more you give, the more you get, so be generous: together we can all move forward through Procurious.
If you have any questions at all about Procurious, please get in touch at [email protected]
The tools exist – and are affordable – to utilise Procurement data throughout the organisation for actionable intelligence. So how do you make that transformation? IBM Procurement’s Laura Beth Hirt-Sharpe writes the definitive guide to clearing the myriad hurdles.
A Procurement organisation’s success relies on transformation from standard spend visualisation tools to a comprehensive strategy to monitor, maintain and utilise Procurement data throughout the organisation. With the advent of inexpensive, efficient and reliable data collection and curation capabilities, many Procurement executives have the opportunity to efficiently create actionable intelligence from their data. Though a myriad of tools, methods and services are available to support this work, a significant hurdle remains for organisations: leaders must determine the best tools and services and curate an appropriate data strategy and data-driven culture to drive the change necessary to remain competitive. All this, while cutting costs and reducing complexity.
As leaders embark on their Procurement analytics transformation, they face three major considerations: data and data governance strategy, data cleansing and curation, and skill gaps in core analytics and data science skills. In this blog, I will provide suggestions for each consideration based on my experience with global clients at various levels of maturity.
1.Data and data governance strategy
Many Procurement organisations begin their digital transformation by thinking that data strategy and technology strategy are one and the same, when in reality these are two distinct, codependent pillars. A best-in-class approach to data strategy is to begin with the outcomes you are looking to drive from your Procurement data. These outcomes can range across various domains beginning with traditional spend analytics, risk and compliance monitoring, to AI-based trending of key metric behavior within your environment, and many more in between. Once you have a clear view of the outcomes you want to drive, begin thinking through important questions like:
· What data needs to be captured and what level of structure is required within those elements?
· Is this data captured today, and if so, how?
· What data gaps are present against target outcomes?
· Does reasonably consistent master data exist across various source systems?
· How can data completeness, accuracy, and meaningfulness be assured over time?
· What is the best way to collect and curate data over time? (This is not a “one and done” event!)
· How can Procurement processes be optimised to ensure efficient and effective data capture?
These types of questions will help shape your data and data governance strategy. It is important to understand that there will always be a trade-off between speed of execution and granularity of data capture. Finding the right balance is key, and ensuring you have the right technology and innovation partners in place is crucial to optimising this balance.
2. Data cleansing and curation
There are two primary factors to consider with regard to data cleansing and curation: determining who from your organisation should be involved and maintaining value drivers in your dataset.
Who should be involved?
Procurement data teams within an organisation typically lean toward one of two strengths: data science or Procurement. Some organisations focus on pulling data experts from other parts of the organisation to Procurement to help curate an accurate merge of their datasets into a “source of truth” dataset. However, through this method, Procurement subject matter experts (SMEs) have a limited stake in the data cleansing activities. Knowledge of Procurement is essential to rapidly increase the data return on investment, such as supplier name normalisation and logic flagging. If those knowledge assets are not brought into the process early, the path to monetisation will be slow and spotty.
Alternatively, some organisations choose to assemble a team of Procurement professionals who can educate themselves on data techniques and procedures and curate the source of truth data. For these organisations, technical issues and lack of repeatability of process steps ensure the source of truth dataset will require a similar pruning process again in the future. This also has drawbacks in that data architecture is best left to data professionals – especially data that will be used for AI and Cognitive algorithms. Merging Procurement SME talent with data design in a Procurement environment is tricky. Couple that with the reality that top data and Procurement talent have “day jobs” makes this investment in talent critical, complex and expensive.
What are the key value drivers?
Organisations that pull their data into a central repository and want to utilise it to its fullest should maintain two value drivers within their dataset: 1) Procurement-specific categorisation and 2) knowledge-infusion based on outside information.
Cleansing data to support a Procurement taxonomy cannot rely alone on a set of off-the-shelf tools built for classification of natural language – sentences and paragraphs – but will need to be curated for terms and phrases specific to Procurement’s categories. Furthermore, high-accuracy categorisation of spend data hinges on multiple fields such as supplier name, GL classification and rich line-item text fields.
Utilising these Procurement-specific fields in classification requires more advanced algorithms to decide between potentially disagreeing field content. To further complicate categorisation and curation, data experts are regularly tasked with combining non-structured information into the source of truth dataset. This work requires technical knowledge and industry acumen to execute as well as regular refreshes of data and terminology. For example, these data points could include diversity supplier type, occupancy and building information as well as market intelligence purchased from third party providers. This work requires an in-depth knowledge of the source of truth dataset and supporting datasets which may be unstructured. These fields must be updated and verified with Procurement stakeholders. Categorisation work and additional field inclusion require a significant investment by Procurement organisations to create and maintain.
Determining the right team and the value drivers within Procurement-specific data is a task that takes dedicated individuals, time, and effort. However, the size and forethought of this effort will determine the return on data initiatives.
3. Core analytics and data science skills
A pervasive issue I see with organisations that hire data scientists from top schools at high salaries is that they struggle to extract value from the data that already exists in their systems due to lack of Procurement acumen.
Another common issue is that an organisation’s current team cannot afford incremental budget for the aforementioned data resources, and therefore leans on its existing Procurement and IT staff to monitor, maintain, and report utilising spreadsheets and visualisation tools.
Both approaches leave a significant amount of value unrealised for the business. Instead, I recommend cross-collaboration across the organisation, designating analytics champions and emphasising grassroots training. Without these, the value of your data will remain untapped and will require a significant amount of future investment to digitally transform your business.
A successful data-focused organisation is one that is fully integrated within your Procurement function. The data team cannot be a siloed organisation, building point solutions for the loudest stakeholder’s pain point. There needs to be an agile approach to daily activities, with a robust backlog and tasks prioritised for highest return to the business.
Analytics champions are an important, yet often overlooked, position. Data Translators are another name for this role, as organisations need to treat data as another language with certain speakers of the database and statistics “dialects.”
For example: if an executive has a short turnaround project that is important for continuing operations, they need to meet with their function’s analytics champion before they meet with the data team. The intent of this role and meeting is to vet, assess and format answers to the rudimentary questions that often derail otherwise productive data initiatives. Potential topics to cover include data availability, awareness of the project backlog, agreement on fair timelines and investment, and blockers.
Analytics champions need to be cultivated internally first as functional experts and grow as the organization evolves. There are positives to hiring versus training, but as discussed earlier, without the proper functional understanding you will likely see a lack of results without the proper structure in place.
Your current functional team knows your business, processes, industry, and supply base best, so enable them to make decisions and give structured guidance to the data experts, even if a data translator is required.
Meaningful transformation through modern Procurement
Analytics is at the forefront of high-impact Procurement organisations as a trusted business advisor role, as a supplier relationship reference source, and as the foundation of effective compliance management. Through analytics, modern Procurement can be predictive in their actions and trusted throughout the broader business. To produce the granular level data required for actionable intelligence, source data has to expand beyond basic accounts payable and purchase order elements. New sources of information, such as demand, consumption and compliance data from a variety of internal and external sources must be linked. This process appears daunting, but we have seen meaningful transformationhappen over small, structured, prioritised steps with a focus on data as the foundation for meaningful transformation.
To solve for this complex need, Procurement Business Process Outsourcing services are innovating through AI-based technology infused with an influx of new and re-purposed Procurement talent skilled in data science, mathematics, statistics and computer science. Ensuring the correct mix of skilled data resources with Procurement experts has proven to be an expensive challenge for CPOs, and an opportunity for market-leading specialists such as IBM Procurement Services. These services assist Procurement organisations to meet their analytics demands while empowering their sourcing practitioners to focus on taking action based on the analytically discovered opportunities. Incorporating knowledge built across clients and industries, these services allow Procurement to adjust focus around high yield data and statistically verified opportunities.
As the workforce bounces back, the gig economy is expected to boom. So how will this mode of employment suit Procurement? We asked Prometheia Procurement CEO Jody Rowe.
COVID-19 has raised many challenging questions about the way in which we work. It’s causing individuals and companies the world over to review their operating models. The procurement profession is not isolated from this and will need to think about the security of supply chains, how we work, who to work with, what an effective operating model is, what systems to use, the questions are endless…
This changing environment is driving the need for procurement solutions to be flexible and virtual, and toprovide simple access. We need processes and tools which empower all users and ensures continuity of knowledge, especially for the gig economy which requires access at any place, at any time.
We are also under a lot of pressure to make smarter decisions that mitigate risk, leveraging the best consulting knowledge in the business, while still ensuring retention of key personnel.
It’s becoming obvious that we now need to embrace open systems thatprovide instantaneous connection that enables group collaboration and creates a valued global network and access to knowledge.
The drivers of these changes are simple – it’s down to cost and managing risk. The question is how to get things done whilst keeping overheads down and providing real value? The opportunities of enjoying full-time work at one company for the entirety of your career has greatly reduced. Some industries, such as Oil and Gas, are already acutely aware of the steady shift towards the gig economy, which has been driven by both companies’ and individuals’ needs as people seek improved work-life balance.
Do companies need to maintain a large physical footprint or would they be better reducing their liabilities by gaining access to a diverse, flexible and talented workforce when required? As a result of the COVID-19 pandemic, companies have downsized and placed recruitment freezes, yet have still managed to operate effectively. To me, this demonstrates an underutilisation of resource pre-pandemic.
When the rebound from COVID-19 comes, companies will move even more towards the gig economy to meet their needs for short-term contracts and freelance work. With commodity price fluctuations and layoffs continuing, it is likely we will see this kind of marketplace continuing to grow for the foreseeable future.
In a gig economy, employers have access to a flexible workforce with the appropriate talent available at short notice. There’s no upskilling required as contractors are typically experienced specialists in their field, which can result in projects being completed more efficiently. Contractors often enjoy much greater flexibility in terms of work location, schedule and leave, as well as the excitement and experience obtained moving from one project to another; all of which ultimately adds to their valuable skillset.
Digitisation is paramount for a gig economy to be effective; reliable global access to systems exists and is well-tested. Access to global resources can be sought easily and work can be undertaken anywhere in the world. There are multiple workforce gig economy websites that successfully provide ad-hoc services: you can send a scope, obtain a price and get the work completed.
So why not access procurement in this way?
When you reflect on the way in which we are working in multiple countries – UK consultants working with an Australian client, Australian consultant working with an Indonesian client – you can conclude this new smarter way of working is upon us. Adapting to this change would be pivotal in continuing to deliver value within the Contracts and Procurement function. There’s no denying the function is critical to any business in managing risk, providing strong governance and soundly managing spend.
The answer was to develop a digital platform which provides access to talent across the globe via a flexible and virtual model which provides a cost-effective opportunity to fast track performance, access to procurement professionals that can save time and money, and assistance in managing risk and spend by offering easy-to-use services that can be accessed from anywhere.
And so was born Promitheia Procurement: A comprehensive online procurement tool that provides business with the opportunity to purchase procurement templates and work with online professionals to design any business procurement function to meet their unique requirements.
Here are three keys to conceiving, deploying and using technology to elevate the performance of your procurement process operations from IBM’s Chander Vashistha
Procurement organisations depend on technology to manage their source-to-pay (procurement) functions most efficiently and effectively. Technology also provides exceptional services experience to their requestors, buyers and suppliers. However, organisations often find the process of selecting, implementing and using technology platforms and applications challenging. While procurement technology provides many benefits, organisations that do not select the right technology, integrate the technology to create a connected ecosystem and create processes to use the technology often do not realise the full benefits.
Clarity is the cornerstone of successful procurement practices, and procurement technology must support and enable clarity between both parties. When organisations do not receive full value from technology systems, the issue often comes down to clarity. However, it’s essential that clarity exist before adding in the technology. Technology doesn’t create clarity, but improves and enhances clarity already present in the process.
Organisations with good clarity in their procurement practice see significant competitive advantages, business continuity, resilience and digital transformation. While these aspects are essential for a successful business, the COVID-19 pandemic and resulting business disruption significantly increases their importance.
Here are three keys to conceiving, deploying and using technology to elevate the performance of your procurement process operations:
1) Align the purchasing strategy with operations and vision
When organisations lay technology on top of disconnected strategy and vision, the new platforms and systems often magnify the misalignments. Before focusing on technology, organisations should review their current strategies to ensure alignment. A well-connected procurement strategy and vision drives implementation of a frictionless technology ecosystem rather than a patchwork collection of discrete point solutions.
The purchasing process works within both your procurement process and overall company operations. On an even more granular level, the purchasing strategy tightly connects with procurement operations’ vision and procurement operations strategy. Before making changes, especially in processes and technology, practitioners must step back and consider strategic alignment.
After understanding your organisation’s purchasing strategy, procurement vision and procurement operating strategy, the next step is ensuring they all align with one another. After making any necessary changes, your organization will have the foundation to begin looking for technology that supports all three.
2) Understand the four types of procurement technology
Procurement professionals often assume — incorrectly — that all procurement platforms and systems fall into a single category. By understanding the different types, organisations can ensure they are researching and purchasing the best type of technology for their needs. Without clear understanding of the different types of procurement technology, organisations may purchase multiple technologies performing very similar functions, which creates waste and redundancies, not to mention wastes funds.
Procurement organisations use the following four types of technology:
ERP software and blockchain equivalents – SAP-MM, SAP-FICO, TYS blockchain, IBM Temp labor blockchain and RSBN blockchain
Commodity or process-neutral procurement technology – SAP Ariba Solutions, Coupa, Tradeshift, Sourcematrix and IBM SpendIQ
Commodity or process-specific procurement technology – IBM Oniqua, SAP Concur, SAP Fieldglass, Amazon Business, Alibaba 1688, Uber for Business, Service Now and JIRA
Cognitive e-procurement applications with intelligent workflow platforms – IBM Procurement Service Desk, IBM Watson Virtual Buying Assistant, IBM B2B Marketplace and IBM Direct Spend IQ
Organisations often invest in one or two types of procurement technology, which does not typically enable achieving their procurement strategy and vision. Often these organisations assume they fell short due to the technology implemented. By deploying relevant technology from each of the four types, organisations achieve the clarity needed to meet their goals.
3) Focus on cognitive e-procurement applications
Organisations find a wide range of choices in technologies, especially in cognitive e-procurement applications, which use artificial intelligence to open procurement transformation processes. This type of technology helps organizations transform the procurement process experience for buyers in direct, indirect, MRO and capital purchasing.
Because cognitive e-procurement applications are relatively new and come with a large amount of hype and innovation, organisations should fully understand what features they need as well as the features offered by each solution. By selecting the right application for your specific needs instead of the most feature-rich product, you’ll significantly increase your ROI and strategy improvements.
For example, Trust Your Supplier blockchain, which came to market in 2019, helps procurement professionals automate and digitize supplier information like a “digital passport.” The application also provides the immutability and trust that comes with processing transactions through blockchain. Because the application shifts the process out of procurement operations, the technology reduces cycle time, lowers transaction costs and improves reliability of supplier information management operations. Additionally, suppliers streamline their process by only submitting information to a customer once and can share the same information to other customers using a digital key for record access.
Making the move to integrate technology
As organisations continue to manage change and disruption due to the pandemic, creating clarity in your procurement cycle remains a high priority. Through using cognitive technology driven by intelligent workflow platforms, in conjunction with the three other types of technologies, organisations can create the most effective and efficient processes that drive business value. By aligning strategies, understanding the types of technology and implementing cognitive e-procurement applications inclusive of the technology ecosystem, organisations can improve performance, maturity and outcomes.
New computers can analyse a million rows of data in minutes. So why not let the computer do the heavy lifting? As a supply chain professional of the future, you won’t be manually processing data. You will have data you can trust at your fingertips, as well as meaningful insights. The rest will be up to you! IBM’s Takshay Aggarwal explains.
In the future, what will separate the successful supply chains from the rest?
In 20 years of supply chain experience, Takshay has never seen a supply and demand shock at the same time.
“It’s completely changed how supply chain planning is done,” Takshay says.
Before, people used historical data to project demand – usually with a 5-10% variability or 1-2% percent for really mature organisations.
But even with a high level of accuracy, too many companies were unsure which supplies were coming when.
“Processes were so monthly and weekly orientated,” Takshay adds. “There was no sense of response; it was all about, ‘We’re used to this stepwise process and will get to it when we get to it.”
The result? Slow response time and lost sales. And reaction time was seriously hampered by years of cost cutting.
“An easy analogy is that you can cut and cut the fat to the bone, but when you need to run, where is the muscle?” Takshay says.
Sensing the market
That’s not true for all organisations, of course. Some companies invested in the right technology to detect changes in the market, which enabled them to respond quickly.
Takshay uses the example of two big retailers during the early days of the pandemic.
“One retailer had sensing and response capabilities,” Takshay explains. “They secured all the available supplies in the market. Their shelves were stocked and their sales were booming.”
On the other hand, the second retailer’s supply chain officer was slow to respond. “They had traditional ways of doing stuff and their shelves were empty.”
The difference between the two? “One supply chain officer is now promoted to the board and the other is finding a new job.”
That’s why it’s so crucial to have the tools in place to detect market fluctuation and respond.
Looking at data differently
Going forward, how will you prepare for disruption – not only for your suppliers, but your suppliers’ suppliers?
The solution is incorporating non-traditional data for demand planning, Takshay says.
“Let’s say a discretionary spend category like electronics or fashion; you need to understand how unemployment is panning out in certain areas because that determines the footfall in your store,” Takshay says.
Non-traditional data includes areas of demographics like looking at unemployment or how a disease is spreading.
“You will start seeing a lot of what we call demand sensing in the near term, and driver-based forecasting which is trying to understand larger drivers in terms of promotions, in terms of macroeconomic factors,” Takshay explains.
“I think that’s where we’ll see demand sensing capabilities, like trying to understand the near term impact of weather or demographics and how they affect demand.”
Spreadsheets won’t cut it
Technology will also change how you use that non-traditional data, Takshay says.
That’s because higher computational power creates the ability to process data at lightning speed.
“The basic math hasn’t changed, but what has changed is how fast you can ingest that data,” Takshay says.
Think of it this way. How long would it take you to analyse a million rows in an Excel spreadsheet? Yet for some of these new models, a million rows is nothing.
Artificial intelligence can quickly process large amounts of data, making it easier to extract meaningful data.
It will also be easier to bring in different sources of data – as and when – they’re relevant.
For example, data about the pandemic spread might be a big consideration now, but six months from now it might not be relevant (fingers crossed!)
Instead, you may be more interested to ingest data at scale about economic recovery. AI can help you make sense of a huge amount of data and understand correlations – something that used to take an army of data scientists to uncover.
Welcome to efficiency
That ability to analyse vast quantities of data will also make demand planning a lot easier.
“If you ask any demand planners, 60 to 70% of their work today is about cleansing and harmonising data, and 20-30% is figuring out what it’s saying,” says Takshay.
Now, technology can eliminate much of that manual processing. In fact, Takshay says IBM estimates around 40 to 60% of that work will be covered.
“Now imagine if you’re a demand planner and you don’t have to go through those daily tasks to get the data cleansed,” Takshay says.
Making it personal
So what does the future hold for supply chain?
Takshay predicts consumer demand is moving toward mass personalisation. The challenge for procurement teams will be supporting that personalisation in production, without losing efficiency or driving up costs.
“Ten years from now, we will be talking more about how we can better understand the consumer,” Takshay says.
“Everything will be done by machine. Supply chain may become irrelevant. It all becomes about mass personalisation so that’s where we start putting our efforts.”
That’s why human empathy will be an even more essential skill. Quantum computing could eliminate 80% of today’s procurement tasks, so our greater contribution is using human emotion to meet customer needs.