Part One: Helping procurement become more strategic in supply chain businesses
The Enterprise Resource Planning (ERP) system sits squarely at the heart of business operations. With an ERP system in place, a company can manage and integrate all the disparate elements of its business to operate more effectively.
An ERP system requires significant upfront and ongoing investment; a far cry from today’s world of cloud computing. Working alongside the ERP system are three key functional areas of Sales, Human Resources and Procurement; all of which can be significantly improved by implementing cloud-based applications, closely integrated with on-premise ERP systems.
SalesForce.com has established itself as the leader for Customer Relationship Management (CRM) in the cloud for Sales teams. Human Capital Management systems (HCM), such as WorkDay, are also rapidly helping to move Human Resources departments over to the cloud as well.
Procurement, in contrast, has not completely shifted to the cloud yet and has a much broader landscape to cover. Depending on the organisation, procurement activity could be undertaken by individuals in the Procurement, Finance, HR, Operations, Shared Services, Supply Chain and Accounts Payable functions. While all functions will share the same overall business goals, they are unlikely to share the same approach to managing spend. This fragmentation has historically meant that getting all spend under management has been very difficult.
For supply chain organisations, premises, transport, personnel and other indirect costs can account for a significant proportion of their business expenses. Those organisations that are implementing spend management systems across all the business functions are now seeing the potential returns: optimising and automating spend management enables payment terms to be negotiated and discounts to be applied, providing a direct, measurable and quantifiable return on invested capital for the organisation.
While CRM and HCM installs should lead to increased productivity and therefore a return on investment, this is often based more on correlation than direct causation. The real returns on invested capital are hard to pin down with certainty, and often remain theoretical.
Why is spend so difficult to get under control?
For Procurement, spend management systems cover the automation of three types of expenditure: pre-approved (Purchase Orders), approved (Invoiced) and post-approved (Expenses). Each has its own processes and workflows that have to be followed.
In many organisations however, only pre-approved expenditure comes under management. Current thinking puts this at around 45 per cent of all spend.
The aim for all companies should be to get as close to 100 per cent of spend under management as possible. This not only allows the company to negotiate the best possible prices for what it buys, but also to manage cash flow more effectively.
A high degree of spend under management also increases the level of control, governance, and visibility the organisation has with its outlay and supply base, allowing for more strategic decision-making.
The challenge for procurement professionals is how to bring the other two elements of spend i.e. approved and post-approved, under management in the most efficient way possible, given all the potential individuals and stakeholders involved in making purchases across the business.
For companies with complex supply chains, the Procurement teams could operate independently from those employees requesting the goods or services in the first place. There may even be differences between the Procurement and Invoicing teams to consider.
Empowering the Procurement function to deliver a more joined-up process across the enterprise, with fewer opportunities for exceptions, is an important step for many companies to consider. With new levels of control over direct and indirect spend it is much easier to demonstrate the business value of procurement and to integrate it into other areas of the organisation.
Cainiao Network Launches Customer-Centric Logistics
As the logistics division of the Alibaba Group, Cainiao Smart Logistics Network has decided to provide its Southeast Asian customers with unsurpassed service during its annual shopping festival. Based on customer feedback surveys, the company will expand its real-time customer service support and speed up delivery times. ‘By expanding and deepening our services, we aim to provide a stronger logistics infrastructure that can bolster the booming eCommerce sector, support merchants’ expansion into new markets and diversify retail options for consumers’, said Chris Fan, Head of Cross-Border, Singapore, Cainiao Network.
Who Is Cainiao?
According to TIME Magazine, Cainiao ‘is far from a typical logistics firm’. The company controls an open platform that allows it to collaborate with 3,000 logistics partners and 3 million couriers. This means that merchants can choose the least expensive and most efficient shipping options, based on Cainiao’s real-time logistics analytics. The company’s goal is to ship packages anywhere in the world in under 72 hours—and for less than US$3.00.
For countless small business owners around the world, from coffee-growers to textile-weavers, this could change everything. Usually, it costs about US$100 to ship a DHL envelope from Shanghai to London in five days. Cainiao aims to change that. Said its CEO Wan Lin: ‘The biggest barrier to globalisation is logistics’.
What’s Part of the Upgrade?
Throughout the Tmall festival, Cainiao’s logistics upgrade will be divided into four critical segments:
- Real-time customer service support. Cainiao has launched a direct WhatsApp channel for customers to receive logistics updates and ask questions.
- Expansion of air freight parcel size and weight limits. Packages can now be up to 30 kilograms or 1-metre x 1.6 meters to help ship large items such as furniture.
- Daily air and sea freight connections. Shipping frequency will almost double to seven times weekly to maintain resilience and efficiency.
- Compensation for lost or damaged packages. Customers will be reimbursed up to RMB 2,000 (US$311).
Where is the Company Headed?
From June 1st to June 20th, the finale of Tmall, Cainiao will ensure that its customers feel confident in the company’s ability to deliver their packages. Despite global shipping delays due to COVID, the show will go on. Said Fan: ‘This series of customer-centric logistics upgrades reaffirms our goal of pursuing value-added services to enhance customers’ shopping experience while mitigating challenges posed by external factors’.
Furthermore, Cainiao has recently expanded its Southeast Asian operations, achieving revenue growth of 68% year-over-year. In Malaysia, the logistics operation has partnered with BEST Inc. and Yunda; in Singapore, the company has partnered with Roadbull, Park & Parcel, and the Singapore Post. And if its recent measures help retain and grow its customer base, the company will be well-poised to lead the industry in resilient and customer-centric global logistics. ‘COVID-19 made everyone realise how important the logistics infrastructure backbone is’, said Wan. ‘And it gave us a peek at what Cainiao should look like in three years’.