The need for a new approach to complex, global supply ecosystems
The opportunities offered by global, extended supply eco-systems can help companies uncover new sources of value. But there’s a flip side; their growing complexity means businesses could be vulnerable to a whole host of risks in their quest to deliver value. While you may have your own house in order for managing business risks, and bearing in mind that on average 70 percent of a corporation’s activities are outside of its control in its supply ecosystem, can the same be said of your suppliers?
Managing risk needs to go much further than analysis of the numbers. Investors, media and customers alike are looking deeper into corporate practices and supply chains when making judgements about businesses. Success in one area doesn’t guarantee good practice in another. In a recent FT ranking of CEOs, Jeff Bezos of Amazon.com may have ranked first for financials – but only struggled in at 828th out of 907 for social and governance factors.
Increasingly forward thinking organisations realise that the focus both internally and externally among their supply chain partners needs to be on triple bottom line (TBL) outcomes – profit, people and planet – if they are serious about long term value creation for shareholders and other stakeholders alike.
A failure to embrace this holistic view of value creation has already caught many companies out, including several deemed by many to be infallible. Newspaper headline after newspaper headline illustrates all too clearly the implications of failing to align your operations with these broad outcomes. Get it wrong and your brand, reputation and market position are all at stake.
Moving beyond financial metrics is a must, not least because customers will punish companies they no longer trust. Research conducted by Proxima found that a staggering 45 percent of Americans said they would stop spending with a company whose supplier practices were called into question.
The triple bottom line may be more important than ever, however the vast majority of businesses are ill-equipped to gain visibility and control into that supply ecosystem. Risk aside, this also means they are failing to capture and exploit value creation from their suppliers.
The Catalytics® framework offers businesses a solution to the problem of supplier management, offering a roadmap to expand beyond pure financial metrics and allowing businesses to embed robust, practical procurement processes, tools and capabilities into the heart of their operations
More importantly, it enables everyone in your business to source and manage suppliers in the context of your corporate and TBL goals – transforming procurement from an administrative, back-office function to a strategic driver of value creation. This is about recognising that suppliers offer a valuable source of competitive advantage and braking down the functional silos that hamper much-needed agility.
By Jonathan Cooper-Bagnall, Executive Vice President, Global Commercial Operations, Proxima Group.
5 Minutes With: Jim Bureau, CEO Jaggaer
What is data analytics, and why is it important for organisations to utilise?
Data analytics is the process of collecting, cleansing, transforming and analysing an organisation’s information to identify trends and extract meaningful insights to solve problems.
The main benefit for procurement teams that adopt analytics is that they’re equipped to make faster, more proactive and effective decisions. Spend analysis and other advanced statistical analyses eliminate the guesswork and reactivity common with spreadsheets and other manual approaches and drive greater efficiency and value.
As procurement continues to play a central role in organisational success, adopting analytics is critical for improving operations, meeting and achieving key performance indicators, reducing staff burnout, gaining valuable market intelligence and protecting the bottom line.
How can organisations use procurement analytics to benefit their operations?
Teams can leverage data analytics to tangibly improve performance across all procurement activities - identifying new savings opportunities, getting a consolidated view of spend, understanding the right time for contract re-negotiations, and which suppliers to tap when prioritising and segmenting suppliers, assessing and addressing supply chain risk and more.
Procurement can ultimately create a more comprehensive sourcing process that invites more suppliers to the table and gets even more granular about cost drivers and other criteria.
"The main benefit for procurement teams that adopt analytics is that they’re equipped to make faster, more proactive and effective decisions"
Procurement analytics can provide critical insight for spend management, category management, supplier contracts and negotiations, strategic sourcing, spend forecasting and more. Unilever, for example, used actionable insight from spend analysis to optimise spending, sourcing, and contract negotiations for an especially unpredictable industry such as transport and logistics.
Whether a team needs to figure out ways to retain cash, further diversify its supply base, or deliver value on sustainability, innovation or diversity initiatives, analytics can help procurement deliver on organisational needs.
How is data analytics used in supply chain and procurement?
Data analytics encompasses descriptive, diagnostic, predictive and prescriptive data.
Descriptive shows what’s happened in the past, while diagnostic analytics surface answers to ‘why’ those previous events happened.
This clear view into procurement operations and trends lays the groundwork for predictive analytics, which forecasts future events, and prescriptive analytics, which recommends the best actions for teams to take based on those predictions.
Teams can leverage all four types of analytics to gain visibility across the supply chain and identify optimisation and value generating opportunities.
Take on-time delivery (OTD) as an example. Predictive analytics are identifying the probability of whether an order will be delivered on time even before its placed, based on previous events. Combined with recommendation engines that suggest improvement actions, the analytics enable teams to proactively mitigate risk of late deliveries, such as through spreading an order over a second or third source of supply.
Advanced analytics is a research and development focus for JAGGAER, and we expect procurement’s ability to leverage AI to become even stronger and more impactful.