Procurement’s future: a digitally enabled collaboration engine

Procurement’s future: a digitally enabled collaboration engine

Relationship building and collaboration, data analytics and technology. On the face of it, the connections between these two future-facing capabilities aren’t perhaps immediately obvious. The former, after all, is about softer, ‘right brain’ type qualities, while the latter calls for harder, more scientific ‘left brain’ characteristics. But for supply chain organisations and the procurement professionals within them, they are twin engines powering the journey to superior customer experience and business value.

I’ve just returned from SCM World’s sixth annual Leaders Forum event in Dublin, where C-Level executives from famous brands like Nike, Amazon and Johnson & Johnson described how they are transforming and evolving their supply chains to meet the demands – and numerous opportunities – of an increasingly digital world.

The common threads in delivering an ‘operational edge’ for each company, to use the conference’s central theme, include new levels of visibility, integration and automation to truly understand customer needs, translate these back along the value chain and then deliver winning products and services with agility.

Mike Phillips from McLaren explained how its Formula 1 team uses data analytics and predictive modelling to make key decisions about a car’s tyre selection and fuel levels in response to fast-changing race conditions. Yves Morieux from Boston Consulting Group emphasised the importance of data in fuelling co-operation and employee engagement across functional silos. And Dr Hau Lee, SCM World’s Chairman, talked about how Singapore’s Changi airport shared flight data with taxi firms to enable them to flex capacity and ensure a smooth ride into the city for business travellers.

Digitising procurement

For sourcing organisations, as our newly published research report explains, digitisation demands that CPOs and their teams move beyond visibility of third-party spend (challenging though this remains in many companies) to a forward-looking and market-facing capability that provides a steady stream of intelligence on everything from cost trends to supply-side risks.

A majority of procurement leaders recognise this. Our Future of Supply Chain study last year found that three-quarters believe analytics will be an essential skill for executives in 2020, while more than half say the same about technology enablement.

Chart illustrating the importance of skills to supply chain executives in 2020.

At the same time, they also need to trade up on the communication and interpersonal skills required to create value with, rather than squeeze value from, strategic suppliers, whether in the form of lower costs, higher quality or competitor-trumping innovation. The same survey found that in most industry sectors supplier relationship management and deeper collaboration is the number one or number two procurement value lever.

Increasingly, the data and analytical insights generated by digital procurement organisations will be used to drive this collaboration with key suppliers. These partners will, in turn, need to reciprocate by sharing their own data and being open about supply chain problems instead of hiding them, as is often the case today.

That, of course, requires a healthy degree of trust. At the Leaders Forum, John Lundgren, Chairman and CEO of Stanley Black & Decker, described how relations with its big-box retail customers had been transformed from adversarial to transactional to collaborative over the past decade. At the heart of these mutually beneficial relationships, he noted, was an open-book philosophy.

Dual development strategy

Few procurement organisations today are very well equipped with both collaborative and data-driven decision making capabilities, as the chart below illustrates. So the challenge for CPOs is to harness data analytics and cloud-based technologies effectively, while also consciously nurturing the development of “customer of choice” practices and behaviours that enhance trust and foster collaboration.

Chart illustrating procurement's capability gap.

“As leaders we need to own this,” says Remko Van Hoek, who until last month was Senior Vice President, Sourcing and Procurement, at Walt Disney.

Speaking during a webinar discussion with me, Van Hoek argued that to close these capability gaps, procurement leaders need to “create learning journeys” for their people that go well beyond traditional once-every-so-often classroom training. These journeys include mechanisms such as coaching, rotational assignments and short-term projects, which particularly appeal to technology-savvy, data-literate millennials.

CPOs also need to invest in data-capture, analysis and automation tools that both free up time for staff to focus on relationship-building activities and increase procurement’s relevance and value to internal stakeholders.

“This is our opportunity,” says Van Hoek, “to help our teams develop and to future-proof our organisations.”

 

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Author Geraint John

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