Procurement must prepare for the sharing economy revolution
The sharing economy is set to have a major impact on organisations in the coming years, with PWC estimating its value will reach £335 billion by 2025. As costs associated with developing new products and services continue to rise, the sharing economy can play a role in helping organisations to share excess resources, tools and skills to collectively maximise efficiency.
Today, we’re already seeing elements of this taking place, with companies sharing knowledge, outsourcing innovation and crowdsourcing projects to a much broader group of suppliers. In the future, these suppliers could range from traditional competitors to contractors, or even freelancers, creating a much more dispersed landscape of suppliers and buyers, further complicating today’s supply chains. With a much broader range of suppliers, organisations need to make sure they are prepared to cope with the complexities the sharing economy will introduce. Those who can’t will fail to keep up with the supply chain of the future, missing key opportunities to save and innovate.
The sharing opportunity
The sharing economy as most people know it has traditionally been associated with the likes of AirBnB and Uber. However, there is a world beyond the consumer applications, which businesses have begun implementing to ensure they spread resources to help cut costs. Airline alliances, for example, have been doing this for years, sharing planes and chartered flights when space goes to waste. More recently, Marriott converted empty conference rooms into rentable work spaces through the online platform LiquidSpace, giving cheap square-footage while ensuring that empty space is providing value.
At our Ivalua NOW event in Paris earlier this year, University of Grenoble Alpes professor, Natacha Trehan outlined how the sharing economy will impact the cutting edge of innovation too, giving the example of NASA crowdsourcing technology to manage human waste in space. The bid, named the “NASA Poop Challenge”, offers anyone the chance to pitch for the contract. We will also see more “co-opetition”, as competitors share resources and equipment to maximise efficiency, or even rely on each other to provide specialised components. For example, mobile giant Apple relies on its competitor Samsung to provide most of its OLED screen tech.
Prepare to share
While many organisations may not be planning to enter the sharing economy today, more and more will look at ways to share resources and unlock innovation. It’s inevitable that it will become an important part of the future supply chain. The sharing economy will force organisations to be much more aware of the supply chain, and how they identify opportunities, mitigate risks and ensure that business leaders can make informed decisions when purchasing.
Supplier visibility will be absolutely vital in keeping up with the complex sharing economy, whether it’s identifying new suppliers or finding opportunities to share resources. Companies need to start preparing for a world where suppliers aren’t just chosen from a roster of vendors, and where organisations must compete to woo the most innovative suppliers so that they can collaborate and share resources. This means no longer looking at suppliers solely as providers of goods.
Community management teams will be needed to understand the ecosystem and engage with potential suppliers to identify areas where parts, materials, employees and devices can be utilised to benefit both parties. This in turn can demonstrate that you are worth supplying to and can offer something in return; whether it’s shared equipment, an innovative final product or a lucrative incentive scheme for partners.
Laying the foundations with smart procurement
Procurement will be vital in providing the level of visibility needed to enable the shift to the sharing economy. Over the last few years, it has evolved from a department focused solely on driving down supplier costs, to a core part of the business function. Today, it’s responsible for monitoring the supplier landscape, managing risk, identifying opportunities and continuously assessing the supply chain to find value-adds in areas such as sustainability and even R&D.
As such, procurement is ideally placed to help manage the sharing economy. Smart procurement technology provides organisations with the tools and insights required to adapt to the growing influence of the sharing economy. Adopting it will enable greater collaboration with suppliers, allowing them to easily pitch for contracts, whilst also providing a much clearer view of the supplier landscape that’s updated almost instantly, so that opportunities and risks can be assessed effectively and accurately.
By taking a smart approach to procurement, not only will organisations will be much better prepared to navigate an increasingly fluid supplier landscape, they will be one step ahead of competitors when the sharing economy comes calling. This will give organisations the advantage, allowing them to effectively collaborate with peers and share resources, ensuring the sharing economy can be embedded within supplier management from the offset.
By Alex Saric, Smart Procurement Expert at Ivalua
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.