Intelligent supply chain – the art of “prepared procurement”

A business services partner can put in place the processes and tools you need, ensuring your key initiatives remain a priority, and you stay focused as the technology evolves.

“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” – Sun Tzu, The Art of War.

Four years ago, I wrote an article about preparedness in the supply chain. Much like Sun Tzu, 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! At that time, many of the conversations I had with my clients seemed 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.

All this was before the global pandemic, war in Europe, ships blocking the Suez Canal, increasing energy prices, significant inflationary pressures, and a potential recession looming. While many organizations tend to be reactive to these challenges, more than ever, the time is now to be prepared! Fortunately, we’re now seeing a change in the priorities from cost savings to risk management and supply chain resilience.

Preparedness is everything

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 maybe more mature, opportunities exist to improve the link between procurement upstream from the request process.

Anticipating need

The Capgemini Research Institute also published a paper four years ago entitled “The Digital Supply Chain’s Missing Link: Focus.” As its name suggests, it examined the importance for organizations to identify 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
• The ability to source earlier and possibly combine multiple purchases into one sourcing event through predicting when the items will fail
• Improved negotiation with suppliers, including payment terms
• Delivery close to need, so as not to take up unnecessary warehouse space.

But where do we start?

Getting focused

Tackling the underlying problems (which in most organizations are plentiful!) is a daunting task. But by keeping focused, we can build an ecosystem to deliver the required changes needed by:

• Onboard partners to realize maximum benefit – there are a wealth of opportunities to make this your suppliers’ challenge as well as your own. There is an even greater imperative here with a focus on risk management and topics like sustainability
• Foster collaboration across functions – by building multi-functional teams to look at these problems across the organization, it’s likely you’ll have some very clever people looking at these problems!
• Work toward establishing a data-driven organization – with data becoming easier and cheaper to collect and manage, this is a barrier that is literally being torn down in most organizations.

In addition to these three changes, I would now add one more:

• Plan, plan, plan – invest in developing models that leverage all the data available to be more predictive and deliver a more proactive procurement function. Advancements in machine learning and predictive analytics have accelerated greatly over the last few years, significantly reducing the ROI.

Eating an elephant

How would you go about addressing the points above? The answer is: in the same way you should go about eating an elephant – one spoonful at a time.

Many of our procurement and master data clients have tackled things in exactly this way – starting with one problem, solving it, moving onto the next. Being agile if you like. For example, you might begin with a specific plant or geography, developing processes and tools you can effectively support, before rolling it out further, building collaboration across the organization and with your suppliers.

In an article in Forbes Magazine entitled “Digital Transformation: Three Ways To Ensure Your Initiatives Drive Value,” one tip is to “Do things that don’t scale.” Tackling the data, one data set at a time is a good example – identify the data source and develop some analyses to solve a single problem. In some cases, the payoff is there, in others, the payoff is what you learned rather than what you gained.

This is where Capgemini helps our clients, working with them to put in place the processes and tools they need, enabling them to keep focused, ensuring their key initiatives remain a priority, and then remain focused as the technology evolves.

To quote Sun Tzu again: “To anticipate & prevent disastrous contingencies would be the part of wisdom & patriotism.”

To learn how Capgemini’s Cognitive Procurement Services helps you design, implement, and operate a digitally-enabled procurement operating model that capitalizes on your technology investment to drive business value, contact: greg.bateup@capgemini.com