“In an interconnected world, the right procurement strategy is a holistic one. The only way you can achieve that is if you’re willing to try new things. But which new ideas should you be paying the most attention to?”
Sue Hope and Prerna Dhawan, two of The Smart Cube’s procurement specialists, recently spoke to Sourcing Solved to discuss this very issue, and to fill them in on the latest trends in the world of procurement intelligence, data and analytics.
Here we share the conversation, which covered many topics at the front of procurement executives’ minds – from the importance of marrying external and internal data for effective decision-making, to the evolving nature of supplier relationships, to procurement technology and the potential of AI.
Q. What added value can data-driven intelligence provide when it comes to addressing business problems?
Sue: “The world has been changing so quickly, particularly in the last decade. Supply chains have become far more complex. There’s a greater degree of volatility on every level. Alongside all of that, we have also seen the most enormous advances in technology. It’s fascinating but it also leads to a major problem, which Prerna and I are both very passionate about tackling: there is too much information in the world.
This glut of information is something every company has to try and deal with, no matter which sector you’re in. It’s very difficult for people to wade through it all, to decide what’s actually true and to make decisions based on that information. It’s impossible to get there unless you reach out and ask for help. That’s where data-driven intelligence, advanced analytics and triangulation come in.
It’s no longer a question of visiting Google, sticking in a keyword or two and getting to the actual truth. It’s going to take you a very long time to get anywhere because it’s so difficult to refine your search. Then how do you even know whether your findings are accurate? Nowadays it’s essential to take a strategic approach to data and intelligence.”
Prerna: “It’s not just a question of external information, either. Of course you need external information to underpin decision-making. You need to know what’s happening in commodity markets, about changes to policies, tariffs and regulations, about patents that are being filed and so on. But you also need to factor in all the internal data available within a business – data which is proliferating at a very fast pace.
At The Smart Cube, we enable companies to marry external and internal intelligence and in doing so, to make much more effective procurement, supply chain and business decisions. It’s all very well to look at best practice, but the approach needs to be adapted to fit the context of the internal business situation. That’s where we see real value.
While it’s always exciting to acquire the next best technology tool or to implement a sweeping new digital transformation strategy, it’s also easy to get carried away. We’ve seen that there can be more to gain from first asking, “What is the business problem and how do we use technology plus data to solve that problem?” The organisations which we see are truly winning never lose sight of that core question.”
Sue: “A really clever way to overcome a business problem is to not only think about the data which you have but also to ask, “Which data is missing?” If you can look at the problem in a holistic way, you’re much more likely to come up with a robust answer which fully informs the decisions that you need to take.”
Q. You mentioned triangulation as being key to robust intelligence. What exactly does that mean?
Sue: “The Smart Cube is home to about 600 analysts. One of the key things they are trained in very early on is triangulation. In essence, triangulation means refusing to take any piece of information at face value. You need to look for three separate sources which make sense together in order to confirm a finding and be able to stand by it.”
Prerna: “As an analyst, there are many times when you need look beyond the data that exists, or the data that’s missing, and use proxies or different datasets in order to uncover the right answer. Let’s say for example that I want to change my source of supply for a specific ingredient from Brazil to South Africa. I will need to run some analysis to work out how my cost situation will change and I will also have to include variables of risk and sustainability.
To be able to come up with the cost-modelling, I need data points around logistics costs, cost of production in each country, and so on. We need to identify many sources of data if we want to correctly estimate those costs. We can’t just go by the cost indicated by a single supplier and build our overall country model around that. We need to find other pieces of data which point in the same direction to get a more accurate reading. In a world of fake news and endlessly multiplying variables, triangulation is more crucial now than ever before.”
Q. How do you see AI coming in to play in the future of procurement intelligence?
Sue: “AI and machine-learning are advancing extremely rapidly right now, which is incredibly exciting. Given what we’ve been saying about intelligence, we very strongly believe in using these new technologies to accelerate analysis as much as possible and to make it as insightful as possible. However, we also very strongly believe that we should overlay this tech insight with human intelligence.
When we’re gathering, triangulating, checking and analysing information we want to use technology wherever possible to speed up and automate some of the analysis. But it’s vital to supplement and complete that analysis with human intelligence. There needs to be some kind of sense-checking involved, and even some intuition – those human elements are still essential and they go hand in hand with AI.”
Prerna: “AI is a great enabler at the level we need in our interconnected world. The globalisation of supply markets has changed a lot of things. Many years ago, if you were producing in a country you would typically be sourcing from that country. Even though this is actually coming back as a trend now in some industries, most mid- large-size companies have plenty of exposure to markets and suppliers in different parts of the world.
Many industries are being disrupted. Let’s say an automotive supplier opens a plant in a particular country. This not only impacts on the country itself and on the automotive supply chain but also on other related supply chains, where second or third-tier suppliers are also supplying to the automotive sector. And that’s where understanding, mapping and connecting disparate data becomes essential, to unearth opportunities to optimise, strengthen and enforce decisions across your supply chain.
The world is a much more complex place, but we’re able to break down that complexity and interconnectedness thanks to the data and the computation power at our disposal. You can make predictions to enable decision-making in a way which simply wasn’t possible even just a few years ago. Organisations have a much greater ability to predict and plan for scenarios than they did yesterday and that ability will increase exponentially by tomorrow. And that tomorrow is not five years from now, it’s more like five weeks from now. There’s so much to leverage as long as you can adapt and embrace this new world.”
Q. The Smart Cube works with companies from every sector, on a global level. Have you uncovered any big-picture insights on working smarter, which we could all make more of?
Sue: “I’ve been in the procurement industry for a very long time and have seen a lot of changes over the years. One thing I’ve noticed is that there has always been a missed opportunity for companies who could be collaborating much more with their suppliers. The focus has traditionally always been on cost-based reduction. If that’s your biggest or only priority, your relationship with your supplier will inevitably be fraught. Whilst cost reduction remains a key objective for all businesses, collaboration is not mutually exclusive!
This is changing slowly but surely as more companies realise that suppliers hold the keys to a vast amount of useful information which they are often very willing to share with their customers. Many companies don’t yet leverage that because they are purely hunting for cost savings in a very structured way which doesn’t allow for open-minded and open-ended discussion with suppliers.
Both sides have a real opportunity to explore and create value together. As a third-party to the client/supplier relationship, it’s something we see a lot. It’s our job to bring the two sides together in positive, mutually beneficial ways and show them just how much is possible.
Let’s take the life sciences sector as an example. There’s so much change happening within the industry, including having to respond to a much more patient-centric focus in healthcare. It can be difficult for very large companies, in particular, to quickly and flexibly adapt to the needs of the marketplace. Their suppliers, meanwhile, have masses of ideas about innovative ways to approach the problems they face. A recent example of this is AstraZeneca partnering with a digital therapeutics company, Revon Systems, to leverage specialist technology in its bid to develop improved clinical trial infrastructure for respiratory medicine. Building proactive relationships becomes a crucial way to increase value through quality and service.”
Prerna: “We do see some companies starting supplier relationship management programmes, holding workshops and taking other positive steps. But then when it comes to the end of the year, the metrics which teams are evaluated on are still very much about cost-reduction and savings. As Sue said, there’s a major opportunity awaiting companies who can change their mindset and their measurement metrics to reflect the contribution of procurement and supplier collaboration.”
Sue: “Our work at The Smart Cube puts us in a very fortunate position because we get to see some fantastic examples of our interconnected world in action. We get asked to research or analyse the most extraordinary things in the most far-flung places. It’s amazing just how much one thing in one part of the world can impact something seemingly unrelated, incredibly far away. It’s this insight that gives us our passion for creating even more connections between companies and people, helping to identify opportunities and drive real value.”
If you would like to learn more about how The Smart Cube’s procurement and supply chain intelligence and analytics solutions could address your business challenges and help you add more value, please get in touch.