Before you even think of demanding a discount from your suppliers, try these avenues first – they’re far less treacherous routes
An essential part of procurement’s job, and something that will always be required of procurement, is to negotiate the best supplier deals for the business. And as much as we talk about strategic procurement (and this is really important), procurement’s success will always be measured by cost savings. Those savings are not the only way our success is measured, of course, but they are one of our raison d’etres.
So we know we need to save money for the business, but what is far from settled is how. Is a demand letter appropriate, especially in this year’s challenging business environment? Or should we use a more relationship-based approach? We’ve tackled the topic from a number of angles this year, so here is the very best advice from industry influencers and experts.
In a nutshell, many people thought that this approach was a little arrogant, and that it gave the impression that you were a ‘big brand, doing it just because you can.’ And while this approach may have been acceptable 20 or 30 years ago, now it most certainly is not.
More than that, though, many people didn’t like the idea of generic demand letters simply because they didn’t work. Discounts depended on good relationships, and demand letters did not cultivate those, as one procurement professional noted:
“Customers depend on suppliers and vice-versa. It’s a big ecosystem, and [we all need to remember that] if you squeeze out small suppliers and competition lessens, costs will inevitably increase.”
According to Joe, many of us take the attitude of ‘if it’s not broke, don’t fix it.’ But when it comes to relationships, we shouldn’t be taking this attitude, but instead always be looking for the opportunity to improve relationships, streamline processes, and change cost models. In a nutshell, we need to challenge the status quo.
This starts, he believes, with asking your suppliers the simple question of: ‘What can we be doing better?’
Beyond this, we should aim to improve on the following with all of our suppliers:
Trust and loyalty (treat your suppliers as much more than just vendors)
Technology and automation
Adherence to payment terms
Creation of a dedicated Supplier Relationship Manager
Internal alignment between Procurement and Supply Chain category leaders
Continually improving the above will drastically improve our relationships with our suppliers, which will, in turn, enable us to ask for further discounts.
Potential areas for discounting
If great relationships enable us to ask for a discount, should we then just ask for one? Not quite, says Corcentric’s Joe Lazzerini. In fact, there’s so much more to discounting than simply hammering down the unit price.
When asking for a discount, Joe recommends that you do as much preparation as possible, including considering how you can make discounting a win-win, and remembering that you need to collaborate, compromise, and at all times work with a partnership in mind. Here are 9 talking points to begin your discussion about cost optimisation:
Reduced future cost increases with caps
Better reporting, more transparency, communication plans, etc.
This year, more than every other year before it, we’ve learnt that relationships, partnerships and people form the basis of success in just about everything we do. Asking for a discount is no different: if you first focus on developing a strong strategic relationship, everything after that will be more successful.
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!
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.
Look at your latest supplier contract. Does it specifically mention Zoom catch-ups? If not, why not? Sally Guyer from World Commerce & Contracting talks with Procurious about getting the most from suppliers and technology.
Have a look at your latest supplier contract. Does it specifically mention communication like regular Zoom catch-ups or phone calls? If not, you’re missing a trick.
Procurious Founder Tania Seary recently spoke with Sally Guyer, Global CEO of World Commerce & Contracting on getting the most out of supplier relationships and predictions about the future of procurement.
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It’s been a wild year, but disruption isn’t unique to 2020.
“I think it’s really interesting because there have been numerous supply chain upheavals inflicted by disaster in the last decade,” Sally says.
“You’ve got things like the volcanic eruption in Iceland, Japanese earthquake and tsunami, the Thailand floods, numerous hurricanes, not to mention the global financial crisis which also needs to sit on that list; yet we don’t seem to have learned very much,” Sally explains.
“Most companies still found themselves totally unprepared for the COVID-19 pandemic.”
After this crisis is over, companies will fall into two categories: those that don’t do anything and hope that a disruption like this never happens again, and those that map their supply networks.
You should know how your suppliers (and your suppliers’ suppliers) fit together, which is why mapping out your network is so useful.
Companies who already made the effort to document their network acted quickly when the pandemic spread. Other companies were floundering and reactive.
“We know from our research that many organisations typically don’t see beyond the first tier of suppliers, or possibly tier two,” Sally says.
“If we ever doubted the importance of visibility, the pandemic has provided a dramatic example of why it’s absolutely essential to have insight into sources of supply.”
Sally is seeing leading organisations require suppliers to participate in supply chain mapping efforts as part of their contract.
And it serves an important part of rebuilding.
“[We’re] moving away from the linear and much more to a recognition that supply networks’ supply ecosystems are a huge number of organisations all interacting with one another where there needs to be fluidity amongst them all.
“And that’s essential to accelerate and support recovery.”
Companies are also investing more heavily in technology to help them gain end-to-end visibility.
And even though cashmere is considered natural and sustainable, soaring consumer demand is fueling overgrazing and damaging the land.
So Toronto-based Convergence.tech and the UN teamed up to create an app for Mongolian farmers, backed by blockchain technology.
Now the UN is able to interact with over 70 different herders and eight cooperatives through a simple app.
Farmers use the Android app to register and tag their cashmere. Then their location is pinned on a map to allow for end-to-end tracking. The UN works with the farmers and other producers along the supply chain to improve sustainability.
“Farmers are willing to have their goods marked in return for training on better practises, and then open markets pay fair prices for truly sustainable and high-quality cashmere,” Sally explains.
“Everybody benefits. Everybody wins.”
Better contracts, better relationships
Another way technology is transforming the supplier/client relationship is through communication.
Sally advises all clients to include communication obligations in supplier contracts.
“It comes down to simple things like if we want to do video conferencing does your organisation support Zoom or not, because if I do and you don’t then [that’s an issue],” Sally says.
It’s not rocket science. All good relationships hinge on good communication, says Sally.
“Fundamentally, partnerships are founded on robust and clear communication, and you know I always talk about professional relationships in the same context as I talk about personal relationships,” Sally says.
“If you don’t have clear communication with your friends, with your partner, with whomever is around you, then you are not going to have a very successful relationship.”
While you can’t provide for every eventuality in your contracts, you need a robust framework to support the relationship which means communication needs to be at the top of the agenda.
Predicting the future
The year is 2030. What are the hot topics in procurement? Here are Sally’s predictions:
“We’re still a long way from creating our sustainable planet and it has to be something that we all continue to champion,” Sally says.
“We need to be promoting best practises to reach the next level where we’re actually starting to give back. Not just to seek neutrality but actually give back.”
2) Social inclusion
“I can’t imagine that social inclusion wouldn’t be important in 2030,” Sally says. “Perhaps a scorecard of corporate performance on social inclusion and social value.”
“Numbers suggest we’re only using 30% of the data that we are producing,” Sally says.
“And if organisations are genuinely on a journey of continuous improvement then they need to be using data and the likes of artificial intelligence natural language processing if they’re going to continue to advance.”
“We need to organise for integration,” Sally adds. “We need to break down the internal barriers that exist.
“We all operate in silos. We’ve got organisations who have a buy side and sell side and they have no idea what’s going on on either side of the organisation. So those companies are starting to look at how they create an integrated trading relationships function.”
Organic, original, challenging and aspirational – is this what procurement means to you? Maybe it should.
In a recent conversation with a business partner where we discussed all-things procurement, a new notion came to mind. The more we talked about it, the more it resonated and the more tangible it became. The concept, as simple as it sounds, embodies a holistic vision of what procurement professionals must strive for. We called it “Procurement 100%”.
“Procurement 100%”, is not the same as “100% procurement”. It’s a concept that recognises everything an organisation does is not purely focused on procurement, but that procurement must operate at 100% to enable the organisation to achieve its goals.
Procurement is 100% Organic
Procurement 100% implies that procurement is alive and complex, and that significant effort is required to achieve it. All the moving pieces of an organisation will influence procurement and we must be forever diligent to maintain performance.
Procurement 100% is a moving target, is a relative concept that needs to be assessed and gauged within its ecosystem, as it is no stranger to everything else within a company. It is a set of goals that defines and redefines itself constantly as risks become real and resilience is challenged everyday.
Procurement 100% is both the exemplification of sustainability, and its susceptibility to external variables.
Procurement is 100% Original
The most appealing thing about this concept is that the definition of Procurement 100% will be unique and different for every organisation. Each company must think about what 100% means to the broader vision of the organisation and devise a path and a plan against it to achieve it.
Only one rule applies. Procurement 100% is about achieving full operational transparency, enabling process compliance and capturing value at all times, no compromise.
A procurement function that operates at 100% would be world class – a function that balances process, people and technology in just the right way to enable the most ambitious goals of an organisation without wasting energy. It’s about making the right way to buy the easiest way of buying.
No procurement function is the same, or requires the same energy and resources to reach its full potential. Not every organisation will need the same set of tools, people and expertise in house in order to perform at a high level.
Procurement is 100% Challenging
Procurement 100% is an exclusive club, because it demands mastery of the competing forces of strategic vision and operational functionality. Many companies have great vision, but lack the on-the-ground resources to execute their plan. Others have strong apparatus, tools and operatives, but fail because there is no strategic direction. Everything gets tactical, too granular, and they are unable to change mindsets.
To me, the greatest ideas come from defining, embracing and deploying out-of-the-box approaches that make us a little nervous, where failing is done quickly and learnings are applied before the fear of losing again, anchors us more to our comfort zone where all is safe, where procurement is still tactical at best.
Procurement is 100% Aspirational
Procurement 100% gives everyone a goal, a vision and mission to attain. It speaks about something that must, and can be, measured. Anything under 100% means there’s work to do, everything at a 100% means it needs to be monitored.
I cannot define what Procurement 100% looks like for your organisation, but I can tell you that I don’t know a single entity who has Procurement 100%. It’s not that they don’t strive for excellence and having a high performance procurement function. Those who acknowledge the value of 100% Procurement are the same visionaries who keep raising the bar just before its reached.
What I can tell you is that in the holy trinity of procurement – people, process, and technology – each make up for exactly 33% of your winning formula. Achieving the right balance is the secret ingredient for you to figure out to unlock the full potential of your procurement function.
Supply chain is firmly on the executive agenda (at last!). But how can we keep our seat at the table? Procurious talks to Kearney partner Kate Hart about the burning issues in supply chain – from attracting new talent to co-creating with suppliers.
Supply chain is firmly on the executive agenda (at last!). But how can we keep our seat at the table?
“Recent events have highlighted how susceptible our global supply chains are to disruption, from the pandemic to ransomware attacks to global trade wars,” Kate explains.
So how do we cope? It all comes down to two critical capabilities.
The first is the ability to sense the changing environment and pivot. And the second is the ability to attract and retain core talent.
That need hasn’t changed for a decade, says Kate. So why is it worth mentioning now?
“What it means today is very different to what it meant 10 years ago in regards to the importance of being able to sense a change environment and pivot,” Kate says.
That’s because the demands on supply chain professionals have changed dramatically – and certain industries adapt quicker than others.
“Some global geographies are a lot more mature than others so far as their uptake of e-commerce and some geographies have really been lagging,” Kate says.
Why technology means survival
If retailers were hesitant to adopt new technology, they have an extra incentive now. It’s their key to survival.
“Amazon has been a trigger for some of those geographies to uptake, but obviously the pandemic has just increased the proliferation of retailers offering e-commerce platforms,” says Kate.
Companies are also becoming more innovative in the way they handle the actual distribution of their supply chains, particularly in the business-to-consumer route.
“We’ve seen a proliferation of sort of rideshare ‘uberisation’ of that last mile,” Kate says.
“What we’re seeing is those companies that invested in the technology and got ahead of the game really have thrived during this. Now it’s going to be a matter of, you know, catch up or who survives, so it’s going to be quite interesting.”
Understanding the risk
So what are smart companies doing now to avoid future disruption? Supply chain network mapping.
Kate has seen a huge influx of companies not just looking at supplier risk, but looking at suppliers’ suppliers risk and building that information through their supply chains.
Interestingly, this is largely driven by senior executive interest. Never before has supply chain resilience enjoyed such a prominent position on the c-suite agenda.
“It’s beyond just enterprise risk. There is reputational risk, there is financial risk, there are lots of different risks that are inherent in the supply chain and that is very much front and centre in many of our board conversations at the moment,” Kate says.
“The key question that we’re getting asked by boards is how they get visibility in their end-to-end supply chain risk and how they manage that resilience.”
Making it automatic
Companies are also investing more heavily in automation to improve resilience.
‘It’s been quite extraordinary. Some global areas, particularly in the US and in the UK, are seeing a lot of advantage from automation,” Kate says.
“But the investment in automation needs to be deliberate, with a very sound business case, otherwise organisations are investing but not necessarily seeing returns in some areas.”
Technology, like automation, is providing supply chain teams with new levels of influence, Kate says.
“We’re seeing supply chain organisations use digital tools to create a triage process with a front door to supply chain – a self-service functionality,” Kate explains.
“[It] enables their internal talent team to then work with their business stakeholders to drive extraordinary value.
“So, supply chain is really being impacted positively by digitisation and automation. It’s all part of a focus on resilience which elevates the conversations and, in turn, the value that supply chain can deliver.”
Working as partners
That’s why Kate says the future will be all about human decisions facilitated by technology.
“What does that mean for partnerships across your supply chain?” Kate asks. “It means that the problems that need to be solved are increasingly complex. It requires a very strategic view of your supplier base.”
The strategic view increasingly means changing the relationship to a close partnership.
“In some of the scenarios that we’re working on at the moment, the clients don’t know what the solution is and actually need to engage the suppliers to co-create solutions for problems that are new to both of them,” Kate says.
That means seeing suppliers as extensions of your own organisation, which is positive.
But as Kate points out, companies still need to maintain “control and visibility so you are not anchored to them in perpetuity. So getting that balance of control versus collaboration right is going to be really, really important.”
The right people
As Kate puts it, the bright future of procurement isn’t possible without the right people.
“All of that is very contingent on the ability to attract, retain, and grow talent – the conundrum of supply chain management for aeons,” Kate says.
“But never is it more important than now. For supply chain management to have a seat at the table it needs to be attracting the core talent that we’re seeing coming out of the universities.
“There needs to be a very strong talent pool that’s feeding into the industry.”
Kate Hart – Partner at consulting firm Kearney, overseeing the supply chain practise within Asia Pacific – can be heard in the webcast series The Future Of Supply Chain Now.
What does it take to be Super Normal? Here are the 5 must-have traits to get ahead in 2021 without driving yourself crazy.
There’s no turning back. There’s only the here and now. And whatever you call it – the new normal, now normal, the end of the world, or as we’re labeling it, the Super Normal – it no longer matters. What matters is how you adapt, move forward and make a difference.
There’s a lot of difference-making that still needs to happen. Procurement and supply chain must lead the way, just as we’ve done in the past. According to McKinsey, “in the five years immediately following the 2008 financial crisis, total return to shareholders for companies with top-quartile procurement capabilities was 42% higher than for companies whose procurement operations were in the bottom quartile.”
That’s a significant impact. Clearly, we have what it takes to succeed. But this is not the same environment as the global financial crisis. The game has fundamentally changed and we need a new playbook to win, manage stress and get ahead.
The Super Normal: Start by Owning Your Vulnerability
Resilience is core to the Super Normal. We’ve been talking about it since March, which begs a deep discussion: What actually makes us resilient?
It has nothing to do with our age, gender, ethnicity or nationality. Instead, according to a Harvard Business Review study, there are two driving factors. The first is exposure. The more exposed you are to the suffering or event, the higher your resilience levels are. As HBR puts it, “this strongly suggests that we discover our resilience only when we are forced to meet unavoidable suffering full in the face. It’s when we face that reality, and see ourselves and how we respond to it, that we find the basis for resilience.”
The second factor is the extent of the threat. The more tangible, the more resilient we become.
An HBR survey asked how many people had experienced workforce changes as a result of COVID-19. There were 11 possible changes to select, such as sheltering in place, layoffs and furloughs, and changing use of technology. Ninety-six percent of respondents globally said they’d experienced at least one issue. This is similar to our business study, which found that 97% of organisations experienced a supply chain disruption related to COVID-19.
This isn’t surprising – so why does it matter? Because as leaders, we need to own our vulnerabilities. Our Super Normal requires us to be open, transparent and direct. You can’t force a return to normal just to calm anxiety and stress. We have all suffered to some extent and glossing over the potential implications – whether it be layoffs, longer work hours, hard conversations with suppliers and customers, a demand for new skills, or changes at home – is counter-intuitive.
Instead, own the vulnerability, be clear about your team’s exposure and communicate what needs to change. When people understand what’s at stake, they are remarkably resilient.
The Super Normal Playbook: Heart, Brain and Vision
Resilience amidst chaos requires evolution. We need to change and adapt, even if we don’t know what the future holds. While there’s no easy button or universal blueprint, we’ve learned a lot in 2020 about how to be Super Normal.
1.Super Normal Professionals Think the Unthinkable
If we’ve learned anything in 2020, it’s that anything can happen. Pandemic, trade wars, recessions, natural disasters… the list goes on.
Being Super Normal requires us to come to terms with an inherent truth: Uncertainty is certain.
We need to engrain this mindset into our team, decisions and actions. Once we see that the big picture is cloudy and unpredictable, we can better prepare ourselves for success, and quickly overcome the shock factor when everything abruptly changes. Being ready for sudden change – and having a plan of action – puts you ahead of nearly everyone.
2.Super Normal Professional See Limitless Opportunity
Don’t let the state of our world get you down. Instead, get up, make a plan and get going. Be positive.
Changemakers see opportunity in crisis. They understand that the dynamics have completely changed, and there are limitless opportunities to improve your reputation, get noticed, move up and make an impact.
We know that procurement and supply chain operations are intrinsically linked to organisational survival and success. Whether you are at the beginning of your career or leading operations for a Fortune 100, there’s a greenfield opportunity in front of you. Thriving in the Super Normal requires you to see it and take advantage.
3.Super Normal Professionals Invest in Themselves
Warren Buffet put it best. “By far the best investment you can make is in yourself.”
This advice isn’t relatively new or unique, but it’s a game-changer for those that take advantage. What skills do you need to thrive in our Super Normal? What about the Next Normal? How will your day-to-day job change in the next 5 years?
Our recent survey found that the majority of organisations (93%) are investing big to propel procurement forward. The top three investments they are making in procurement are in data and analytics, talent development and technology.
Soft skills matter as well. According to LinkedIn, the top five most in-demand skills in 2020 are “creativity, collaboration, persuasion, adaptability, and emotional intelligence—all skills that demonstrate how we work with others and bring new ideas to the table.”
If your organisation isn’t providing the necessary training or experience you need, make the time to get it yourself. The pandemic has accelerated the global tech transformation and heightened the need for modern skills, expertise and experiences, like analytics, digitisation, emerging technology, emotional intelligence and leadership. Super Normal leaders see where the world is going and stay ahead of the transformation by investing in themselves and their teams.
4.Supper Normal Leaders See the Big Picture and Know How to Focus
Where is your organisation going and what does it need right now? Super Normal leaders are always in the know, and when they aren’t, they are confident and proactive enough to request an immediate alignment meeting with leadership.
We only have so much time and resources and need to spend them where it counts. Today, for most procurement and supply chain teams, that means cost savings, supply chain risk and business continuity. But your actual goals and priorities may be different and could change suddenly. Going above and beyond your day-to-day supply chain and procurement operations to stay fresh on the strategic priorities of your organisation is paramount to success. Similarly, bringing modern and fresh thinking to the table that breaks through traditional results and delivers compounding value on key projects, like cost containment and savings, will make C-suite stop and take notice.
5.Super Normal Leaders Have a Heart
They put people first – and recognise that success starts with teamwork and human connection. They recognise that vulnerability – financial, mental, physical and social – is very real, and that people need time, space and support during difficult times. They know that talent wins 100% of the time.
While putting people first may sound simple, that’s not always the case, especially amidst the chaotic nature of our world today. Super Normal leaders are intentional about it every single day, with their decisions, actions, engagements and relationships. People are core to what they do – and why they succeed.
You Have What It Takes: Embrace the Super Normal
Life is chaotic and stressful. And you have everything you need to be successful now and in the future. Everyone’s Super Normal will look a little different – but if we continue to learn from each other, share our successes and look ahead, we’ll all be more than alright.
And finally, wherever this Super Normal takes us, always remember to make time for yourself and your family. Find something you love and embrace it. We are all tired, stressed and anxious. Happiness helps solve all three. If you are looking for more inspiration, check out what your peers say it means to be Super Normal.
Procurement has seen some revolutionary changes over the last two and a half decades. From manual processes to powerful P2P Suites, there is no denying that procurement is becoming more innovative and tech savvy. But as a whole procurement tends to lag behind other professions – it’s time to lead the way for innovation, but where do we go from here?
Technology is driving industry forward at an exponential rate, globally. It’s hard to think of an industry that hasn’t adopted a new technology, at least to some extent, in the last several years. Technological breakthroughs are changing the world over, both from a consumer perspective, but also from a business one. From smart phone companies using fingerprint scanning and facial recognition to car companies implementing park-assist, adaptive cruise control, and in some cases, even self-driving capabilities. This is truly a world driven by innovation, and most industries and business sectors are investing heavily to that end. But what is procurement doing to keep up?
Where We’ve Been
To answer that, first it is important to see how far the profession has come. Although it has taken longer than other markets – the progress has been remarkable.
· Manual Processes – Like most, this is what dominated the industry for a large period of time. Everything was done manually, from drawing up contracts, to sourcing and purchasing materials. This was quite a time-consuming process at a time when procurement lacked the complexity of today.
· Emails & Spreadsheets – As technology began to become more mainstream the manual communications started to give way to emails, no longer requiring procurement professionals to travel onsite as often. The use of spreadsheets began to build the framework of an organizational system with excel becoming the main database of choice for many in procurement.
· ERPs – Enterprise resource planning (ERP) is a software that handles business process management it allows an organization to use a series of integrated applications to control and automate many functions related to technology, services and human resources. This is one of the most widely adopted pieces of technology used in procurement today.
· S2P Systems – This is the current cutting-edge procurement technology. A good S2P suite can bring cost savings, efficiencies and data visibility to your business. Our source-to-pay (S2P) platform, JAGGAER ONE, is a comprehensive suite that automates, optimizes and provides insights across the source-to-pay spectrum. Integrating seamlessly with your ERP, JAGGAER ONE can provide data transparency and visibility, while giving access to a powerful suite of end-to-end supply chain and sourcing solutions.
Procurement is at a Cross-Roads
Procurement has long been a cost-focused profession, largely relying on siloed processes and teams, taking a reactive and tactical approach. And, at one time, that was all that procurement needed to do. But it is now time for procurement to move into a new role – one that takes charge of the business and leads the way, becoming an integral part of the overall business strategy.
I believe that procurement professionals around the world stand on the threshold of a new age. The old paradigm of cost reduction, being reactive and only focusing on purchasing is drawing to a close. In this dynamic, complex and disruptive era, procurement leaders and experts the world over are searching for a secure, successful future.
With technology like artificial intelligence (AI) and robotic process automation (RPA) becoming more mainstream, the applications for procurement are virtually limitless. Technology like JAGGAER’s Smart Assistant, which is powered by AI, is one such possibility. This conversational platform designed for procurement is a powerful tool, which will eliminate much of the tedious and manual processes that still plague the procurement profession today. AI will be a driving factor in the development of the procurement profession.
Where We’re Going
The result of all these technological advances in several years’ time will be autonomous procurement. As I’ve written in a previous blog “autonomous procurement is a platform with embedded intelligence, but a system that also continues to build on those capabilities to automate the full source to pay process without human interaction. However, this will happen only in instances where human input isn’t necessary or desired, such as repetitive or time-consuming tasks”.
It is incredibly important to remember that autonomous procurement is not meant to eliminate human input or the role of procurement professionals. The end goal here is to augment people, freeing up time to focus on value adding tasks and strategic thinking. Human insight is crucial in business – but this is all about using technology to eliminate mistakes, monotony and cut out repetitive patterns. The future platform will assist you at every step of the source-to-pay process and over time it will manage more & more complex activities autonomously, so we can focus on doing strategic analysis to unlock new opportunities.
The procurement leaders of the future will need to combine strategic thinking, along with an analytical mindset. Leaders are crucial in today’s times, especially with the rise of AI, algorithms and automation. In order to stay ahead of the curve procurement professionals will have to evolve – becoming more data-driven and strategic, because that is something that will always require a human touch.
Far from being a solution looking for a problem, Blockchain is revolutionising jewellery, tea and coffee, beverage, food and automotive businesses.
While there is still some question as to whether blockchain technology can live up to the hype it has generated, it is making inroads into the supply chain environment.
The diamond and gold, tea and coffee, beverage, food, and automotive industries all have participants with blockchain applications under test, operating as pilots, or implemented as digital solutions to improve supply chain operations.
In most cases, these companies are using blockchain as an aid to supply chain visibility and product tracing, but some have applied it as a tool to streamline transactions and speed up the flow of information, goods, and materials.
In addition to private enterprise, blockchain’s interest among commercial organisations, authorities, and governmental bodies is also intensifying, increasing the technology’s credibility as a useful supply chain tool, although not the cure-all or panacea that early hyperbole may seem to have suggested.
The days of blockchain technology being considered exclusively synonymous with BitCoin and other cryptocurrencies have long been behind us.
Indeed, in the last couple of years, it has been hyped by many as the next big thing in revolutionary digital developments. Meanwhile, other, less-convinced observers have suggested that blockchain is a solution looking for a problem.
So how well is blockchain living up to commercial and organisational expectations?
Let’s look at some of its real-world uses in 2020 across the public and private sectors to see which prominent players have embraced blockchain, to what end, and what kind of inroads it’s making into the supply chain environment.
Blockchain in the Jewellery Supply Chain
Technology oriented participants in the jewellery industry, or more specifically, those in the diamond and gold businesses, began to adopt blockchain-based traceability solutions a couple of years ago. Today, at least two or three platforms are well established, and being exploited by several companies.
As diamonds, and to a lesser extent, perhaps gold, are resources with origins that can sometimes be controversial, companies like De Beers have seized upon blockchain to provide evidence that their gems come from sources that don’t involve insurgency funding or forced labour.
De Beers’ Tracr can provide provenance data for diamonds and track them from the mine to the retail outlet. The system has been enjoying success throughout its early phases.
As a result, plans are now in place to spin it off into an industry-wide association accessible to any organisation needing to track diamonds through the supply chain. At least two jewellery retailers are already taking part in a pilot of the platform.
A platform similar to Tracr is in use with American conglomerate Berkshire-Hathaway. This multinational enterprise counts jewellery retail chains and precious-metals companies among its vast portfolio of holdings.
TrustChain Jewelry is a blockchain initiative focused on the gold and gemstones used in rings. Its objective is to give confidence to the 70% of consumers concerned about the ethical background behind their jewellery purchases.
Some smaller enterprises in the jewellery industry, too, are either taking advantage of blockchain technology already or planning to do so as a way to improve supply chain transparency.
The sector appears to be one that does not need to look for a problem that blockchain can solve. It already has one in the form of conflict gems, and reputable industry participants believe blockchain can help them disassociate themselves from the controversy by proving ethical sourcing and refining.
T is for Transparency, and Tea
Lest you perceive that blockchain solutions are exclusively for high-value products such as diamonds and jewels, one industry that produces a far-less-costly, but highly treasured commodity, is also using the technology to improve supply-chain transparency.
Not too many of us are prepared to go for more than a few hours without the restorative effects of a cup of tea or coffee. But are we sure we’re drinking the real McCoy and not something with somewhat less beneficial effects being passed off as the most delicate Darjeeling?
It appears that the tea industry, in particular, has a problem with counterfeiting. Unscrupulous merchants pass off inferior tea as that made from much higher-quality leaves originating in the world’s celebrated growing regions — and the more significant and well-known the brand, the more vulnerable it is to counterfeiting.
Even more nefarious practices exist in the tea trade, such as cutting real tea with other organic, or sometimes inorganic products to increase yield from a plantation’s crop.
It is against that backdrop that tea producers and even India’s government are hoping that blockchain will help deny counterfeiters access to consumer markets—and boost profits for producers and merchants that deal only with the best quality tea.
It’s Teatime for Blockchain
Unilever owns tea plantations in Africa and is using blockchain to improve sustainability and combat counterfeiting. It’s not that tracking and tracing tea through the supply chain is a new departure for the company: Unilever has been doing that for some time. However, blockchain technology is improving the speed and efficiency of the activity.
The blockchain solution, called Trado, is the result of a partnership between Unilever, Sainsbury’s, and the University of Cambridge’s Institute for Sustainability Leadership (CISL).
Initially convened as an experiment, the participants, including farmers who received a financial incentive to feed data into the system, have deemed it a success, claiming that it has increased visibility in the tea supply chain and brought down the costs of financing sustainability incentives.
In a similar experiment, the Indian government’s Coffee Board of India is using blockchain to monitor coffee supply, and has already received some 30,000 registrations from farmers wishing to participate. The Tea Board of India is now planning to introduce a similar system as an end-to-end traceability solution.
Examples of Blockchain in Food Supply Chains
The examples we’ve looked at so far illustrate the uses of blockchain to promote sustainability in the supply chain and assure consumers that they are buying ethically sourced products. However, this fledgling technology also has the potential to save shoppers from harm to their health or safety, and perhaps even save lives.
Walmart’s Blockchain Projects
Blockchain’s potential has been recognised and seized upon by consumer-goods giant Walmart, which has already undertaken several projects and proofs of concept in supply chain traceability. They include:
Tracing the origins of mangoes sold in Walmart’s US outlets
Tracking supplies of pork for sale in the company’s stores in China
A drone communication solution based on a blockchain platform
A new project in partnership with KPMG, IBM, and Merck to create a blockchain solution for tracing products in pharmaceutical supply chains
Among the objectives of these projects, is to enable fast responses on the rare occasions that quality issues arise in consumer-packaged-goods, requiring batches to be identified quickly and quarantined.
Walmart leaders believe blockchain technology can prevent, or at least minimise, the impacts of food contamination issues such as the e-coli contaminated lettuce and melamine-adulterated milk crises that rocked the US and China, respectively, several years ago.
With all movements of produce recorded immutably in a distributed ledger, tracing quality-compromised food or commodities back to the source can be achieved in hours, rather than the days, or even weeks, otherwise required for such an exercise.
Big Names are Backing Blockchain
Other opportunities presented by the use of Walmart’s blockchain solutions include the ability for consumers to scan products in-store and receive instant information about them, including their sources and the logistics processes involved in their journeys from origin to retail outlet.
Walmart has stamped its name in the blockchain early-movers hall of fame, not only with the projects already mentioned, but also as part of a partnership with several other food companies including Nestle, Dole, and Unilever, and technology behemoth IBM. The result of the collaboration is the Food Trust Blockchain, a distributed ledger solution capable of recording data associated with more than a million individual products.
Other Food Industry Blockchain Initiatives
Further examples of blockchain’s use in the food supply chain, with solutions either already operational or at the proof of concept stage, include the following:
An initiative by standards body GS1, in collaboration with IBM Food Trust, SAP, ripe.io, and FoodLogiQ, to solve interoperability challenges in food-industry blockchains.
The entry of Kvarøy Arctic, a large salmon producer, into Food Trust, as a way to facilitate the capture of provenance data for arctic salmon and the feed upon which they are raised.
The Norwegian Sea Food Association’s implementation of a blockchain for its members, enabling records about catches to be maintained relating to catch time and location, storage temperature, customs clearance, and details of fish feed used
Blockchain for Beer and Beverage
Brewing companies, both large and small, are tapping into the potential of blockchain, with benefits ranging from the visibility of ingredients and processes for interested consumers, to the empowerment of subsistence farmers in third-world and developing countries.
Farmers Can Bank on Blockchain Benefits
Anheuser-Busch Inbev is the largest brewer globally. With the help of blockchain software, this giant of a company is helping subsistence farmers in Africa become more commercially capable, and connecting them directly to its supply chain without the need for expensive intermediaries.
Working with a blockchain startup called BanQu, AB Inbev is using a distributed ledger solution to build a relationship of trust with some 2,000 farmers in Zambia that supply raw materials for its beers.
The blockchain serves two primary purposes. The first is the one most commonly acknowledged as a supply chain benefit—transparency.
The second has a direct impact on the welfare of these impoverished farmers. The immutable records generated by the blockchain allows them to prove creditworthiness, open bank accounts, and develop their farms into commercially viable businesses.
Blockchain Passes the Alpha Acid Test
Other projects in the beer industry highlight the value and suitability of blockchain for SME’s supply chains. For instance, in the United States, a regional brewer in the San Francisco Bay area, Alpha Acid, has teamed up with tech giant Oracle to develop a blockchain-technology platform that’s accelerating and automating supply chain transactions.
The venture has provided Alpha Acid with an end-to-end dashboard view of its supply chain. It allows digital sign-offs for each stage in the beer-production process, from hop harvesting, through malting, brewing, and maturation.
This level of visibility is invaluable in brewing supply chains. The consistency of beer products depends on always following a precise formula, using ingredients that are inherently volatile in their chemistry, such as yeast, hops, and malt.
Alpha Acid’s blockchain solution receives sensor data from the brewery’s fermentation vessels and the company’s yeast, hop, and malt suppliers.
With all this information on record, any issues with a finished batch of beer can quickly be traced, enabling it to be isolated for problem resolution. Before the availability of blockchain, a much broader product recall would have been necessary, as it would not have been possible to quickly identify the affected batch.
Blockchain in the Automotive Supply Chain
Vehicle manufacturers have long been among the most avid adopters of digital supply chain technology, so penetration of blockchain into the sector should come as no surprise. Ford, BMW, Renault, General Motors, and, most recently, Tesla, all have solutions either in their sights or already in use.
Ford and BMW Among the Early Movers
For Ford, the blockchain is a potential answer to assuring the ethical procurement of cobalt — a mineral increasingly used for the batteries in electric-powered cars. Like several of the companies already mentioned in this article, Ford has teamed up with IBM to develop a blockchain for end-to-endsupply-chain transparency.
Currently running as a pilot, the platform traces the provenance of cobalt and records all supply-chain events—from the bagging of the mineral at the mine, through refining and shipping, to delivery at car manufacturing facilities.
BMW, meanwhile, has piloted its PartChain platform, initially using it to track the supply chain movements of vehicle headlights, including all raw materials and components, and intends to broaden the scope to include suppliers of several other car parts.
Tesla is Trying it Too
As for Tesla, a blockchain partnership with port and shipping companies is all about improving supply chain speed and effectiveness. The progressive carmaker, known for its focus on clean fuels and electric power, has tested a blockchain application for imports to its factory in Shanghai, China.
Working alongside COSCO Shipping and Shanghai International Port Group, Tesla successfully used the technology to streamline the inbound supply chain to its production plant, achieving the following benefits, according to a report by Business Blockchain HQ:
Accelerated cargo pickup processes
Shortened release times for cargo offloaded at Shanghai port
Faster delivery times to the factory
Improved efficiency in the supply chain
All these gains arose because the blockchain solution enables faster transactions, helping materials move through the supply chain faster than would be possible using conventional handoffs.
Blockchain Gaining Real Traction in the Supply Chain
From high-value products such as jewellery and motor vehicles, through to everyday commodities like tea and packaged consumer foodstuffs, enterprises are finding thatshared ledger systemscan solve some of the issues they face, at least those relating to visibility and information flows.
Blockchain is proving itself a versatile solution, as applicable in the small-business environment as it is among the corporate giants. The examples we’ve looked at in this article are just a few of many projects, pilots, trials, and tests that companies across the world are undergoing.
Blockchain might not be a silver bullet to end all supply chain ills, but, like many other emerging digital technologies, it appears to be a welcome tool toaid supply chain management in most, if not all, industrial sectors.
We’ll be sure to keep an eye on its progress here at Logistics Bureau, and will continue to update and inform you about the growth and development of blockchain in the supply chain.