For procurement teams to reliably deliver the goods and services their organizations need, they’re increasingly called on to move mountains. They need to be able to refine the buying process, find more savings, communicate clearly with stakeholders, mitigate supply chain risks, and anticipate the needs of their suppliers while continually analyzing their own processes in order to make improvements.
That’s a tall order, to put it mildly. To meet all of these needs, a digital transformation of the procurement function is often required. But how do you go about it? And what exactly will you be able to do once your team is digitally transformed?
In our latest webinar, we spoke to four leaders in procurement and asked them what they’ve been able to accomplish through digital transformation, and how they’ve managed to make the change. Here’s what we learned.
The central challenge for procurement is balancing innovation against risk and cost; you have to keep risk at the forefront of your mind. This was the key takeaway when Fairmarkit’s Erin McFarlane spoke to a panel of four procurement experts from Thermo Fisher, Pfizer, JPMorgan Chase, and The Hackett Group about how they approached digital innovation while ensuring the integrity of their supply chain.
Monitor risks as they rise up
Chris Shanahan manages global procurement at scientific instrumentation provider Thermo Fisher. He says that when you think about risk in terms of risk to revenue, you quickly realize that you must be able to sense and identify all evidence of risk quickly and comprehensively—no matter where it lies in the value chain. To do this, his team has set up a process which leans as much on digital tools as it does human ingenuity to gauge 13 different risk-monitoring factors.
Thermo Fisher’s process includes reactive and proactive steps. It breaks down product profiles to identify key risk areas and then determines ways to implement mitigation plans. To put the process in place, Shanahan’s team developed apps that staff can use in the field or at supplier meetings to quickly flag problems that might impact the supply chain. For instance, they can flag if a delivery will be late, or if a supplier is having production problems. The solution is a monitoring and mitigation process that could only be deployed with the use of digital procurement tools that feed real-time information to the organization.
Pfizer VP of global business services, Erik Meader, says his team has also increased its focus on the supply of direct materials within the drug company’s supply chain. The pharma giant that recently developed a COVID-19 vaccine has increased its monitoring of material lead times and capacity, so that they can better identify issues that surface from suppliers.
Meader’s team can break down information not just by manufacturing site, but also by drug product. This helps them identify mitigating actions and track them, adding transparency up and down the supply chain. The team now has a clear view all the way from identification of a problem to its eventual resolution. Pfizer has also supplemented its new process with services that monitor and raise awareness on a host of risks outside the company’s immediate control, such as geopolitical and climate risk.
The critical step in the process, says Meader, is capturing information on a centralized global dashboard where all stakeholders can see the state of play. But to do that requires an incredible understanding of the data that feeds into the system. More importantly, it requires a way to bring it all together.
The big challenge is the data
At JPMorgan Chase & Co., where Holly Miller-Downour manages global supplier services, there’s a big focus on supplier diversity. It’s a commitment to including minority-, veteran-, and women-owned businesses in their supply chain. Like many organizations, JPMorgan realizes that supplier diversity is important for risk mitigation and supply chain health. It broadens the supplier base and increases the number and quality of bids.
JPMorgan has a dedicated team responsible for supplier relationship management and has established a program to help diverse suppliers partner up with the organization. With help from a third-party oversight team, its internal staff evaluates diverse prospects. If they find a diverse supplier they want to work with, but the business doesn’t meet JPM’s strict compliance standards, the team works with the supplier to help get them on the roster.
But like many facets of the procurement function, Miller-Downour has identified data as one of the biggest hurdles to success. Specifically, obtaining access to data and ensuring its consistency across all applications used in the sourcing and compliance processes. The bank is currently working on trying to identify how to unearth the diversity data (such as supplier certification and ownership) that they need. For procurement to successfully fulfil its diversity goals, this data needs to be readily available so that it can drive RFPs, quotes and contracts. It also needs to be in a form that can be used by both their procurement team and other departments throughout the organization.
Chris Sawchuk, a principal and global procurement advisory practice leader at The Hackett Group, is well-acquainted with the importance of data in the digitization of procurement. His company is a digital transformation leader and supplier of enterprise analytics and applications.
He impresses upon CPOs and change management officers that upgrading the data infrastructure within their organizations is foundational for the successful digital transformation of the procurement function. But unfortunately, a lot of organizations start with the technology—building or buying procurement tools—and then realize that to enable that technology, they need better data.
Instead of focusing on the technology, Sawchuk recommends CPOs start by analyzing the data they have, then create the capability to gather the data they need. The focus should be on increasing the organization’s pool of data—not only from internal resources, but also from suppliers. Other external sources can also be considered for the mix—like market data and even social media feeds. The key is to find data that informs the CPO about performance and risk throughout the supply chain.
Once you have the data, then you can start looking for the right technology that engages with your data.
Of course, getting the data can be a real challenge. If it even exists, it’s probably fragmented—hidden away in multiple departments around the organization on different platforms. If it can be found, it could also end up being trapped in a format that wouldn’t be useful to the procurement team. Sourcing data from outside your organization can also be problematic, requiring suppliers to trust you with their data and to collaborate on how to share it.
Yet all is not lost. Our experiences of the pandemic may have taught us all a relevant and useful lesson: cooperation and collaboration helps everyone. At the peak of the pandemic, when companies were faced with supply chain disruption and lockdown measures, the silos in which people had previously been working inside of suddenly came down. Colleagues and external suppliers alike banded together to come up with solutions. Doing things differently and thinking differently to get better outcomes has become the new normal. And that’s good news for digital transformations. Sharing and collaboration is the new normal.
Watch our webinar to learn how your team can digitally transform the procurement function to identify and mitigate risks and help your organization better manage your supply chain.
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