Organisations are increasingly using their procurement practices and supply chain to increase productivity and profitability. An efficient functioning of both is now widely accepted as the key element of overall business strategy. Technology upgrades is the key driver for transformation in procurement processes, say the Property/Facility Management experts. The emerging technologies such as AI, blockchain and the Internet of Things (IoT) are making supply chains more transparent by delivering real time data. By effectively adapting to the supply chain digital revolution and adopting connected supply chain planning, a company can achieve lower costs and increased efficiency. Mangala Chandran gets the leading procurement professionals to join an interesting discussion.
Facilities Management (FM) is a dynamic function and is expanding. It supports business functions by creating an efficient built environment for clients, occupants and visitors. It has become critical for service providers or FM heads of different organisations to maintain cost leadership and high customer satisfaction. Traditional demand plan, procurement processes and supply chain management often do not match with the increasing needs of FM companies or FM departments of organisations in varied segments. It is found that there has been a disconnect between the FM managers’ requirements for supplies and suppliers and the way procurement personnel go about this process; companies turning towards transformation of the sourcing and procurement functions, including in the loop all stakeholders — sales, marketing, finance, product development, procurement and supply chain. As the first link in the chain, for the procurement team members to effect change, they would need to understand what the demand is, what they are buying and how they are buying.
So what are the factors that can drive this transformation?
“There are six factors,” says Aval Sethi, Executive General Manager- Procurement Embassy Services Pvt Ltd.
Foundational technologies: Timely availability of data is the key factor for procurement and sourcing activities through centralised systems or tools such as Enterprise Resource Planning (ERP). At the same time, it is imperative for organisations to implement the foundational technologies with sufficient training and development of their staff. The employees need to be sensitized and made a part of the organisational change without making them insecure due to the on-going change.
[box type=”shadow” ] It boils down to how procurement stays at the top of the corporate table, not how it reaches there. The way around it is to address talent gaps within the business in keeping with the neverending changes and the several decisions that impact the procurement process
-Aval Sethi [/box]
End-to-end process ownership: Organisational models generally are centralised, decentralised or a mix of both. In spite of the type of model, there are typical expectations of governance by an end-to-end procure-topay (P2P) process owner. It involves end-to-end managing and reporting on KPIs which support purchasing and accounts payables processes. It helps in technology implementations and drive improvements across the P2P process to ensure endto- end optimisation.
Interplay between Strategic Sourcing, P2P and Supplier Relationship Management:
It is not advisable to over-invest in one aspect as compared to the other. A data shows that if all the aspects are balanced, organisations can generate more than 10 times the ROI of other companies. Along with supporting people and technologies, it is essential to balance these aspects for successful procurement transformation.
Aid from external sources: It is important to gather valuable support in order to accelerate transformation efforts. The manifestations include benefits such as bringing external best practices, getting and setting up programme oversight, short-term resource capacity and facilitating cross-functional discussions.
[box type=”shadow” ] The most effective way is e-bidding portals where the baseline price is declared & the purchaser can decide at what level they wish to do their purchase. There need not be the need for negotiation skills as the process is on-line & does not need any face-face dialogue as both the orders & the payment is done electronically once the material receipt has been keyed into the system.
-Keith Monteiro[/box]
Identification, execution and communication of quick wins: Internal buy-in and ongoing support are essential for transformational efforts. Identifying quick wins that are in tandem with measurable benefits including those impacting the bottomline should help in achieving trust and support from the stakeholders.
Implementing sound change management practices: The whole process of transforming the procurement function requires seamless implementation of change management practices. Effective communication is always a key to success here. The change management should instil a sense of ownership amongst all the stakeholders from top to bottom and acknowledge their roles and responsibilities in a transparent manner.
Putting it briefly, Amit Kumar Verma, Director- Sourcing and Supply Chain, CBRE South Asia Pvt. Ltd, Global Workplace Solutions & Property Management adds that one of the major transformation areas in Facility Management is transformation of procurement process by going the digital way. This is the success and scalable metric for sustainable organisation of the future.
“The FM is being digitized to work on a common integrated digital platform wherein all functions such as operations, AMC’s, manpower deployment, compliances, purchase, finance are interlinked so that the system functions seamlessly and with transparent key results based on the set key performance indicators,” says Keith Monteiro, Vice President, Central Administration , Reliance Industries Limited.
According to Sathish Rajendren, Chief Operating Officer (COO) – India Facilities & Asset Management Services, Knight Frank (India) Pvt. Ltd, the smart technology tends to be transforming the world of work and see better collaboration as a driver of workplace strategy that has services, facilities management and project services under one process and decisionmaking. One needs to consider how the balance will shift between physical to automation.
Manish Thakkar, Director- Supply Management – Sodexo India speaks of how Facility Management, as a topic has advanced from conventional housekeeping services to workplace experience management. “So, by definition, earlier the mandate for service providers like us revolved around the facilities. We were required to service and maintain v/s now, where the whole service aspect revolves around the consumers / client’s employees. What matters to them is how services have evolved and progressed over a period of time. 2019 was the first year of GenZ completing a year at the workplace. These individuals, as per Sodexo’s Workplace Trends Report consider ‘sustainability’ as an important employment consideration. As a result, workplaces are starting to ask for the appropriate products, solutions and technology that can help reduce the overall carbon footprint with elimination of single-use plastics, promote use of organic chemicals, robots and mechanization and supply chain integration for the best outcomes.”
[box type=”shadow” ]Data is the new ‘Oil’ to operate organization successfully like we need fuel for running a car. The next big wave is ‘intelligent data’ which can be culled by using right digital platform. Integrated platforms can be like icing on the cake.
-Amit Verma[/box]
In the area of cleaning, Sodexo has piloted the use of robots and automatic sensors for washroom cleaning. As a result, cleaning services are undertaken needbased v/s the earlier set pre- decided cleaning sessions. This helps optimize the use of cleaning chemicals, lesser usage of resources like water and ensures effective time management of the on-site staff.
AI, Data analytics capabilities and Digital platform shaping future of procurement
With the advent of artificial intelligence (AI) and machine learning, businesses have undergone a sea change in terms of planning, strategizing and decision-making as well. The key to digitisation lies in real-time accessible information through IoT or cloud-based predictive analytics. These solutions don’t need to be created but can be serviced from thirdparty logistics which offer supply chain strategy around shipment visibility.
Aval lists down the numerous benefits that procurement teams as well as businesses can expect. In financial terms the overall business stands to gain as more savings are made. Considering that until recently, it was difficult to arrive at organisation’s overall spending figures, AI has transformed that problem with a solid data foundation which has been analysed through multiple algorithms. This has enabled organisations to find hidden opportunities across several layers. Spent-analytics can help organisations save 15-25 per cent on the organisation’s addressable spent. AI has enabled procurement to find a solution to this huge problem and accrue financial benefits as well.
[box type=”shadow” ]Workplaces are starting to ask for the appropriate products, solutions and technology that can help reduce the overall carbon footprint with elimination of single-use plastics, promote use of organic chemicals, robots and mechanization and supply chain integration for the best outcomes.
-Manish Thakkar[/box]
Increased productivity is another benefit. Procurement teams can focus on savings if they can save needless time and efforts through analytics and AI. They no longer have to spend their time in analysing data out of spent capture systems which requires massive efforts to be linked, cleaned and sifted to be put to analysis. AI helps configure this data at a click of a button. Through advanced spent analytics solutions, procurement can gather hidden savings, quantify them and suggest ways to optimise the impact of various sourcing initiatives.
Cultural drive is the most underestimated concept but is still the most significant. AI adoption can help establish procurement to a prominent position within the organisation and help drive business decisions.
Internal stakeholder engagement is another key benefit of adopting AI technologies. Procurement teams are able to start an internal conversation at par with the other departments of the organisation with detailed data-driven analytics. This also changes the perceptions and perspectives of other internal stakeholders towards procurement and makes them realise its importance.
Negotiations with external suppliers also becomes easier owing to the presence of data that can’t be ignored. Instead of relying on verbal ways or words or personal relationships and typical bargaining methods, a category manager can show the requisite data of say, budget constraints and ask for a price drop and let the suppliers consider dialogue over terms.
[box type=”shadow” ]E-Procurement is going in a big way which addresses the concern of conventional placement of orders. While the proposals are sent to multiple vendors and quotes are received by the clients, the tool helps evaluate the proposals sent by the vendors, assess & analyse the best rate and helps in the placement of the order. This system will not only identify the lower quote but also provide data analytics on the basis of which the vendor can be selected.
-Sathish Rajendren[/box]
“Technology like in other areas, is a boon to procurement services as well,” says Manish “ At Sodexo, we have this excellent example of how technology integration with CRM can ensure speed, accuracy and transparency is supply chain management with its West Bengal Clinical Technology Management project. An innovative mobile application-based data collection enables the company to collect structured data from field and label them using barcoding system for each of the assets. Important parameters are collected, and images of the assets are clicked for verification purpose at any point in time. With the implementation of this process, our field staff has to simply click the picture of the spares needed and use the barcoded asset details to place an order from any of the 1400 medical facilities in West Bengal. The recipient at the store, seeing the tagged asset, has exact details on which equipment, the spare needed and is therefore able to initiate the order delivery process seamlessly. Nearly 1,00,000 biomedical equipment in government setups are managed this way by Sodexo team members. The process has improved services and the order to delivery cycle has shown an improvement from earlier estimated 30 days to over a week now.”
Sathish states that digital technologies will enable a stronger procurement capability in years to come and this process will ultimately create an enhanced data platform to support the procurement requisites. “The future of procurement technology professionals is increasingly mandated to select suppliers that add greater value to their supply chains. The idea is to leverage and integrate the intellectual property of their supplier base above and beyond current arrangements.”
“The data analytics helps in understanding the minimum requirement level and helps enable the just in time supply so that the inventory level is kept at its minimum”, says Keith. “The smart buying will trigger WO/ PO’s only when required & as per seasonal needs. Also, the trends will ensure that based on the material usage FIFO is done.
The digital platform will ensure that services are enabled based on the requirement which are constantly changing with respect to the workplace & the technology deployed in the IoT equipment.
Optimal supplier analysis is found to be a key element in procurement
With the rising number of suppliers and vendors contributing to the business, it is becoming a challenging task to manage them. Though outsourcing brings in several benefits, in terms of filling the skill-gap and keeping a check on costs, often the larger number of external suppliers brings in business risks. To cope up with this, Aval suggests that companies should try to keep the number of vendors to the minimum. It is good to incur some extra costs and hire an agency which can provide diversified services and manage some more suppliers under it, instead of engaging different suppliers for each and every activity separately. “This is quite possible with the advent of technology solutions wherein one can engage with an online platform that enlists verified suppliers and can avail of services at any point in time.”
“In a strategic sourcing, supplier analysis plays a vital role by digging deep in a supplier while running discovery phase. It helps get insight about supplier not limited to operational capability, financial strength, category strength, scalability, etc.” adds Amit.
In Sathish’s opinion, supplier evaluation criteria and the key factors in conducting a successful supplier and vendor evaluation is largely founded on data and is one of the key factors for a successful vendor selection criteria. Assessment of a potential supplier’s capability of controlling quality, delivery, quantity, price and all other factors to be embodied in a contract.
Keith agrees that optimal supplier analysis is required to keep a constant watch on the quality of products being supplied along with the service & delivery schedules being adhered to. Purchasers keep looking at existing & new suppliers to ensure that they get the best deals of product quality, supply & price which are now all available through global portals & e-bizz.
Strategizing supply chain
Although procurement and supply chain are closely related to each other, they are not one and the same. These are the two disciplines which are interdependent on each other, and when they achieve the right level of collaboration, it works wonders for an organization.
However, in order to achieve that perfect level of collaboration, both the functions have to address the core activities that must work in tandem in order to keep the processes going at optimum levels. Very often, supply chain professionals are now wellversed with the procurement systems and processes within their companies and the same goes with procurement teams who are not aware of supply chain dynamics. That’s where the conflict arises.
When both these functions do not understand each other’s strengths and weaknesses, it translates soon into problems. Both these functions need to develop a sound understanding regarding their processes, especially related to these core areas:
• Demand analysis, including forecast
• Inventory management
• Product/Service life cycle management
• Supplier management
• Risk management
• Capacity building
There may be more areas for businesses depending on caseto- case basis. Although when the above areas, which are inherent to procurement and supply chain functions, are focused upon in terms of collaboration, the results are astonishingly different.
“This covers a variety of other components such as negotiations, contract management, financing, efficiencies of cost and scale, among others. Deploying technological tools could play an instrumental role in making the interplay between procurement and supply chain functions much more productive. Technologies such as Electronic Data Interchange (EDI) and Automated Data Collection (ADC), for instance, are the ones which organizations must consider sooner than later,” explains Aval.
Amit endorses that Property Management can benefit widely from supply chain management by leveraging strategic sourcing, supplier & spend consolidation, deploy technology platform, logistics management, risk management, contract management framework etc. All this will help yield significant value ranging from 3% to 25% depending upon maturity of sourcing function in organization.
“It is very important for businesses to ensure two things for their supply chain to be focussed. In other words, supply chain management is a network of those businesses that are with all the latest information about the various aspects of its production. There are Eight Components of Supply chain Management,” explains Sathish: These are Planning, Information, Source, Inventory, Production, Location, Transportation and Return of Goods.
Keith also stresses that supply chain is vital as a major product differentiator for both product quality and the shortest time for delivery of products. This ensures that the delivery is at the most economical mode and at the shortest time with a return of defective products which could impact the bottom line of the business.
“The movement of the goods is the key in today’s market so that warehousing & distribution centres ensure the least damage & loss. The biggest area of concern is the loss prevention which could be the difference between a good profit or loss.”
As procurement is getting transformed, there can be skill gaps
In order to achieve enhanced capabilities and improved efficiency, companies spend millions of dollars into transformation programs, software and third-party services. These goals include globally adaptable supply chains, regulatory compliance, mergers and acquisitions outcomes and stewardship of products and brands.
In fact, they are not only top-performing procurement functions but are evolving into service providers for the business. They aid in aligning with other enterprise areas in savings, sourcing and risk management efforts and help to enable capabilities with them. They help the procurement function to manage commodity volatility, source-to-pay integration and control the broader risk of systematic performance tracking.
In all of this, the individuals who make it happen are either mentioned as just a part of a team, unit or function without a name and a face. The focus is only on executive buy-in without consideration for the individuals who perform these roles with proficiency.
If the human capital is applauded for its efforts and recognised for its contribution, then a plausible intersection between human efforts and procurement can be obtained and the dynamics of procurement can be transformed though a four-step process, suggests Aval. These are
• Planning and designing a talent procurement structure
• Identify, attract and orient new talent
• Managing, developing and cultivating the skills of the existing human capital in the business
• Retaining talent
By identification and orientation of an exceptional talent pool, companies or businesses can aim for higher performance goals and drive the procurement function.
However, there are several challenges that businesses still face in regard to human capital as it is seen as a weak link in achieving and improving the business outcomes. There are several perceptions that form the basis of this analysis.
Procurement is no more about a particular department in-charge of the responsibility; it has now titled towards becoming a decentralised activity with several business units handling their own purchases themselves and not depending on a specific department for it. Companies can arrive at the actual number of people who play an active procurement role by multiplying supply chain, procurement and accounts payable resources with a factor of 10. That is where the problem lies as companies find it difficult to establish a talent management capability that suits all needs for everyone involved.
Another issue with finding and managing procurement talent is with the changing dynamics in a business environment. These have an impact on how businesses look at talent in keeping with their changing needs. In order to strengthen procurement talent management, companies often pursue initiatives such as centreled procurement organisation, training and enhancing skills, enable category management and develop specific reporting structures. If they are launched in isolation and as individual activities, they can waste time and resources of an organisation. A lasting ww impact can be achieved if businesses have a talent-centric approach, secure needed funding and gain executive buy-in.
“Today’s procurement is seen beyond the orthodox model of doing rate negotiation and going with the lowest bidder. Now one is required to possess collaboration skills besides studying deep in sourcing and there are professional courses available like CPSM from the ISM, USA, CIPS from the UK, etc. These courses help in visualizing procurement globally and setting leading industry practices,” adds Verma.
Global Trends
“Integrated digital platform, Consolidation, Leveraging local talent and expertise and making diversified global team, Outsourcing low touch procurement, Setting center of excellence in low cost countries with better talent, etc. are the notable trends according to Amit.
“The procurement industry is experiencing tremendous change. Advancements in technology, business practices, and consumer demands are driving this change and transforming procurement as we know it”, states Sathish.
“As the global economy continues to upturn, the focus is shifting away from cost savings and more towards strategic investments. The conventional stereotype of procurement professionals as “pencil-pushers” and “number-crunchers” is becoming less relevant as organizations begin to rely more heavily on them to create value rather than respond to cost pressures.”
“Digitisation is undergoing changes owing to e-commerce and consumer habits such that companies are regularly revisiting their IT plans more often. There is still a cloud over where to get started when it comes to digitisation. Though there are no certain ways of figuring out the right framework for going digital, there are certain methodologies that will help figure out digital solutions sooner, “says Aval.
Insights can be collected from sensors, distributed data and connected assets to gather actionable improvements through digital and analytical solutions. The idea is to shift from linear supply chains to nimble and connected networks characterised by a continuous flow of analytics and information. There are short phases that assess the value of certain digital capabilities which help businesses to work on them for a short time and understand how far these will go. Depending on the ones that receive a nod, their performance is assessed and investments continue.
Digital capabilities can be developed through a bottomsup approach and not a topdown mentality. “It is time companies take the help of digital technologies like Artificial Intelligence (AI) and blockchain to sort certain supply chain issues like product traceability,” adds Aval. The idea is to use appropriate technologies only after assessing the gaps in the company’s capabilities. AI can be much more effective if the future vision and goals are in place. A SWOT analysis or strengths, weaknesses, opportunities and threat analysis can help companies to assess supply chain needs.
Though set standards have to be followed in procurement management, each company has its own strategies keeping in mind the workability and profitability.
There can be challenges though. Robust Change Management is one of the critical aspects of facing challenges feels Amit.
Sathish says, “It is crucial to develop a procurement strategy to have better business and purchasing practice. Purchases that are made based on inaccurate data lead to problems like dissatisfaction deliverables, wrong assessment on the requirement itself and delay in deliverables. Just like customer relationship management, a supplier relationship is also crucial for better client relationship and business sustainability.
Some industries set standards to make the specification process easier to ensure there is an easy flow in the vendor and client relationship and deliverables.”
Keith’s view is that traditional process sometimes works best for non-tangible products & services but for normal over-the-counter products the online portals are the most effective. The challenges are putting in the correct requirement scope details & of course, the return policy/damaged products which need to be replaced/ rectified.
Manish states that the biggest challenge is balancing sustainability with profitability. “And that is where organizations like us can and will make a difference. We do things, not because we are asked to do, but because we believe it is the right thing to do. This attitudinal change in the corporate world is slowly and positively coming. We work with like-minded global partners, for instance, EcoLabs and Diversey who have from time-to-time introduced innovations promoting portability, sustainability and high standards of health and safety. In the area of cleaning services, for example, with Diversey, we have moved to using concentrated chemicals. With its accurate dosing and the use of a dispenser for dilution of the chemical on-site, ease of use, tremendous portability, space savings, lesser plastic usage and above all its tamper proof design, we are able to introduce CO2e Savings of 74% which is equivalent to annual greenhouse gas emissions from 1.6 cars or CO2 emissions from 3367.6 litres of petrol consumed. Plastic consumption is estimated to reduce by upto 50% per annum.”
Sustainable sourcing in food service is an important aspect of having a conscience and sustainable business. Thakkar adds, “We believe that our services should benefit our clients and also the community to which we all belong to. Sodexo’s intent to provide fresh, local and seasonal produce to our clients’ sites led us to work with Devnadi Valley Agriculture Producers Company Ltd.
Located near Nasik, the Devnadi Valley Agriculture Producers Company is the first producer company and was established in 2011 with the farmers themselves as the primary stakeholders. Today it has over 1000 farmers spread across 30 villages who are a part of this growing company. The crisis that most small farmers face today is that they don’t have adequate bargaining power to trade their produce, reflecting in their plummeting incomes. Sodexo’s initiative to work with the organization began in June 2019. We support them by buying 40000 kgs of fresh vegetables every month for our healthcare site in SMBT – Ghoti, Maharashtra. Through this, we ensure that small farmers can reap higher and more stable incomes and can continue farming. Besides nutritional advantages, there are savings in transportation costs, less wastage (perishables) and shorter turnaround time.”
A survey conducted on a community of procurement professionals recently found out that only 5% believed digital transformation is knocking on the doorsteps of their business. The rest 95% of professionals believed that digital transformation would change the landscape in the next five years. Interestingly, only 66% of these participants were found strategizing to cope with the future, while the rest had faith that they were capable of braving the changes with their present capabilities.
“Procurement experts believe in order to embrace the change, the brands would have to undergo changes from the digital aspect. This may alter how these businesses conduct themselves, but in order to sustain a futurecompatible business strategy and also to gather the resources for the same, these brands have to overcome the lack of vision,” asserts Aval.
In order to cope with the future, businesses can follow certain rules to shape their business in the years to come: Even if the business is not ready for the digital age, the business must be first aware of the leaps and bounds in the technology that are occurring in its industry. Companies that do not usually embrace technology as a means of delivering productivity must embrace the digital advancements in their respective fields or perish. Also, it is important to focus on skill development and on creating a synchronized team of resources as opposed to expecting a single individual to embrace the bulk of the scope of technological advancements. Businesses have to be transparent to their teams with respect to the business’s vision of the future.