What’s your next move?
From the February 2019 print edition
Today’s supply chains are morphing at an unheard-of pace. Technology offers both more efficient, transparent operations but also challenges that are new to many organizations. At the same time, many companies are realizing that supply chain provides not just a way to move goods, but also a genuine business advantage. But what strategies must those organizations adopt in order to realize the benefits of supply chain as a more strategic partner?
The role of procurement specialist, for example, is evolving into a more strategic function, says Madeleine Baker, director, procurement, IT & global services at Telus. Many organizations are now recognizing the value that the role brings. That increasing importance means procurement has more responsibility to think strategically, provide information as intelligence and act as an agent for change, Baker notes. It must also work to add the most value within an organization—this can involve deselecting and enabling stakeholders to self-serve or be supported by other resources such as an offshore service desk.
“However, we still need our strong negotiators in combination with our strategic thinkers, or as a function we will not be able to maintain or increase the value we can bring,” she says. “We are constantly being asked to deliver more in a shorter timeframe—you don’t drive benefit without strong execution.”
At the same time, technology continues to shape the function, she says. The challenge lies in adopting some of the more exciting and cutting-edge applications—for example artificial intelligence (AI) to read contracts. Baker recommends having strong fundamentals, including spend analytics software, a sourcing platform and contract system. Many competent and exemplary procurement organizations manage savings and other key activities with excel spreadsheet, she says. Don’t just focus on procurement technology, Baker recommends. Look to intranet sites as well to help procurement professionals do their jobs.
“Within TELUS we relaunched our intranet site with clearer buying guidance, and how-to guides to support frequently asked questions such as ‘how does my vendor get paid?’ or ‘which vendor should I be using?’ and included videos and branding that positions the function as a professional strategic partner,” Baker says. “We created a front door for support requests through a workflow tool that already existed within the organization that mandates the information that we always need to get started, and automatically triages requests to the appropriate resource group depending on level of spend, risk and complexity.”
As technology evolves, procurement professionals must understand how to apply tools like RPAs to automate and become more efficient, Baker adds. Look to more complex analytic tools to increase category intelligence and act on any opportunities. “Within TELUS, we’ve created multiple RPAs which complete activities on our behalf from running regular reports to providing spend and reciprocity reports when you email a bot with a vendor ID,” Baker notes.
Risk remains important consideration while handling technology and looking towards the future. Risk management is something that often happens in the background and without visibility, Baker says. At the same time, procurement is responsible to inform and influence stakeholders with regards to risk. This includes running supplier financial evaluations, asking risk questions as part of the RFP process and involving other functional experts in contract discussions.
“I have always been taught that procurement’s role in managing risk is the most important role we have,” Baker says. “If your organization is on the front page of the paper because a vendor has been selected that uses unethical practices, or there’s a supply shortage that means the company revenue is impacted, it doesn’t really matter how many budget impacting savings you delivered during the negotiation.”
TELUS regularly reviews its risk management practices while updating contract templates as breadth of risks to consider increases, she says. Last year, the company updated its supplier code of conduct with cross-functional collaboration, adding new sections related to supplier diversity, data ownership and AI. Sourcing and buying decisions must consider the vendor risks that could apply. Those risks could include buying software on a corporate credit card and agreeing to a click-through agreement or single sourcing using supply chains from places with a political climate that may mean incremental cost or security implications and complexities.
Creating social value
As the role of procurement and supply chain changes in the future, practitioners must be aware of how the field can help to create social value within the communities they work with. Baker recommends developing a strong supplier code of conduct with social principles that all third parties must agree to. As well, develop a supplier diversity program.
“Within any supply base it is important that we encourage diversity,” she says. “It’s well known that a dollar spent with a local or minority business has a far stronger impact on a local community than a dollar spent with a multi-national organization headquartered outside of Canada.”
TELUS runs a supplier diversity program and Baker sits on the board of directors for WBE Canada. She also supports CAMSC and CGLCC, which advocates and accredits small, minority-owned Canadian businesses. She and Ashifa also sit on the board for Grow Your Biz, which benefits female entrepreneurs.
To deal with changes to procurement and what the future has in store for the profession, Baker recommends considering how an organization can continue to be of value. Seek out opportunities for professional growth in order to stay relevant.
Procurement organizations should also work to deselect, Baker advises. Consider activities that take up time and get in the way of using a specialist skillset. Should a stakeholder be raising that PO? Can you put an RPA in place to run your reporting processes? Can an offshore resource support some of your low risk sourcing processes and activities?
To keep relevant as procurement looks towards the future, offer information as intelligence to stakeholders. As well, let them know about risks, sourcing options and ideas that will create value so they increasingly see procurement’s importance while viewing the field as a trusted advisor.
“Get at the forefront of the changing technology, educate yourself and your teams in order to provide the best thought partnership to the business and the organization,” Baker recommends.
In some ways, many of the challenges that supply chains face have remained the same, says Nikos Papageorgiou, vice-president of customer success at Slync.io. End-to-end visibility has remained an important issue for supply chain professionals for the past three or four decades, for example. At the same time, other challenges have become more relevant, such as the need for tighter collaboration among entities like shippers, freight forwarders and other partners to solve problems. Supply chain has seen siloed problem solving and management, Papageorgiou notes, and there’s a need to close these barriers to work together towards common goals.
“The operating model has been very reactive,” he says. “There’s been a lack of visibility across the end-to-end supply chain, limited multi-party collaboration, and perhaps, the lack of prediction, we see as the key challenges across the supply chain.”
When the topic of supply chain’s future arises, attention focuses on tools like artificial intelligence (AI) and blockchain. But there’s a lot of value to be found in technology without immediately pushing into more exotic examples, Papageorgiou says—for example through digitization and automated workflows.
At the same time, AI has already moved beyond merely hype, he adds. Supply chain professionals are now using the technology to predict exceptions. For example, when tracking shipments, the goal of freight forwarders is timeliness and customer experience, Papageorgiou notes. Within that process, AI can help predict delays. Previously, supply chain professionals would generate a model manually. But now, through harvesting supply chain data, AI can generate models that provide those predictions without the need for a human being to try to fine tune that model. “On one end, AI helps us get to those optimal models,” he says. “On the flipside it actually creates a much better digital user experience for the employees.”
The challenges associated with adopting such technology are fewer and fewer as new, low-cost solutions emerge, Papageorgiou says. Organizations can begin by test driving such technologies without too much commitment. Many of the challenges are on the organizational side, for example the maturity of the company’s technology, as well as it’s appetite for technology—so don’t underestimate the importance of operational readiness. “When you give people these new technical capabilities they will not solve problems on their own,” he says. “You want to be ready to engage in terms of, in some cases, changing the operating model, changing to new processes and engaging with partners in new ways.”
How can organizations gets started in adopting these technologies? One hurdle they face is a lack of awareness, Papageourgiou says. Before jumping in, an organization’s leadership should work to understand these technologies, their business implications as well as how they can deliver value. If necessary, bring in experts to educate the organization about the possibilities, he advises. “Let’s take a step back, let’s ask the hard questions, let’s understand what the technology is able to offer before we jump in.”
There seems to be a scarcity in skills needed to use these technologies, Papageorgiou says. At the same time, many people have recognized the value. Organizations must balance the risks of such technologies while also capitalizing on potential benefits. It’s therefore necessary to put together a cross-functional team that includes both supply chain professionals and those with technical expertise, either internally or through outside experts.
It’s often best to start small, Papageourgiou recommends. The good news is, several low-cost solutions now exist that companies can try them on a subscription basis—including cutting-edge technology options like AI and blockchain. This allows organizations to get their hands dirty by using the technologies for a while, perhaps through a short pilot, before committing fully to using any of them.
At the same time, bold transformations have their place, Papageourgiou says. Organizations that are already mature with regards to technology can often benefit from a diving into a larger-scale adoption. Whether to start small or large depends on various factors, he says. “Both plays can be part of the game,” he says.