In The Art of War, Sun Tzu wrote: “We may take it then that an army without its baggage train is lost; without provisions it is lost; without bases of supply it is lost.” Whether you’re fighting a battle in ancient China, or ensuring continuity of supply of your product or service, the principle is the same – preparedness is key!
However, many of the conversations I’ve had recently with my clients seem to focus on the “how” of procurement, making the process from request to procurement more efficient, ensuring compliance and control, and even improving user experience. All very laudable pursuits, but very little discussion on how we anticipate the “Need,” which has the potential to not only eliminate requests in the first place, but also make the process more efficient, provide increased opportunities for spend savings, and in the case of MRO (maintenance, repair, and operations), for example, reduce downtime and maintenance costs.
Some of the challenges organizations face in “anticipating need,” include:
- A lack of clear visibility of current inventories available across different locations.
- A lack of understanding of real-world lead times or logistics from suppliers or internal locations to the various plants.
- Master data (for example in MRO) is not up to date, leading to a lack of clarity on part requirements and no real view on alternative items in case preferred items are not available.
- A limited view on the possibility that something in the production chain may fail.
- … and no process to determine a fix-or-replace strategy
In most organizations, these challenges are dealt with at a local or regional level, meaning information is scattered, processes are inconsistent, and there is a lack of redundancy in the process. This can range from an office manager determining stationery needs to a plant manager determining the requirement of spare parts. While specific areas such as facilities, fleet management, and IT are more mature, opportunities exist to improve the link between procurement upstream from the request process.
In a recent post, my colleague Dharmendra Patwardhan discussed some key findings from the global digital supply chain survey we published in November. As its name suggests, “The Digital Supply Chain’s Missing Link: Focus” examined the importance for organizations of identifying significant principles for development, and of concentrating on those. Among these principles is the ability to anticipate need, rather than simply to assume it.
For example, if we look at spare parts in manufacturing, we can use predictive analytics to not only to minimize stocks, but to be better prepared when something goes wrong. To take an example from the Utilities sector, we know from experience and specifications that the average life of a specific generator may be 15 years, and we may also recognize the signs of imminent failure. With these insights, we can improve the integration to procurement, and arrange for a new unit to be available when the old generator fails.
The benefits of this approach are many:
- Reduced downtime while the part is being replaced.
- We are able to source earlier, and possibly combine multiple purchases into one sourcing event – because we can predict when the items will fail.
- Improved negotiation with suppliers, including payment terms.
- Delivery close to need, so we are not taking up unnecessary warehouse space
In my Part 2 of this blog, I will discuss further how organizations can adapt to better anticipate need and drive further value.
To find out how Capgemini’s Digital Supply Chain solution standardizes and integrates supply chain master data with planning, execution and insights, based on a proven and comprehensive framework, contact: email@example.com
Learn more about Capgemini’s Digital Supply Chain can increase your competitive advantage by strengthening your business drivers and focusing on your end customers.
Read Capgemini Research Institute’s “The Digital Supply Chain’s Missing Link: Focus” report to learn more about how organizations across consumer products, manufacturing, and retail understand the digital initiatives they are adopting, the benefits they are deriving, and the way they are transforming their supply chain.
Greg Bateup has worked with clients to deliver business transformation and BPO services for almost 30 years. For the last few years, Greg has focused on the digital transformation of the source-to-pay function, and how organizations can not only drive efficiencies in the procurement function, but also drive compliance and savings.