2017 Global SRM Research Report - Solving the value Puzzle

ARTICLE 05/05

If you are not an entrepreneur, what are you? Early adopters are already exploiting intelligent technologies to automate complex business processes. But what will be left for the procurement profession once automation is mainstream?

The robots are coming. Not just the shiny metal variety, but algorithms and artificial intelligence embedded in software able to automate all kinds of processes. Procurement has built up its value on analytical decision-making in supply markets, operational supply risk and demand forecasting. In these areas, artificial intelligence and analytics will play an increasing role. As we discussed in last year’s report, Digital SRM: Supplier Relationships in the New Technology Landscape, the advent of cloud computing and rapid software development cycles means that the business can quickly access these tools with little up-front cost. Much of the numerical decision-making that makes up procurement can becomemore efficient and effective by applying these technologies. That means fewer people are required, which potentially creates more value for the business. If numerical decision-making is a large part of what the procurement department does, then what does it do the rest of the time? If the answer is attending meetings and serving business-as-usual, then it can look forward to shrinking in size and influence (see People section on page 56 for more detail). But the same technologies that are now available to procurement are being

exploited by rival companies, even by start-ups and interlopers looking to grab market share. Companies are desperate to find new products and services that continually engage their customers and build loyalty in a world with ever increasing choice. Procurement leaders who understand where those opportunities lie and how the supply economy can be developed to take advantage of themwill be rewarded with greater influence in the business. It may be the best option for surviving the robot revolution. 

ARTICLE 04/05

Is this vision of entrepreneurial procurement realistic? It is important not to ask the impossible. Yet examples from a broad set of industries provide evidence that entrepreneurial thinking in business relationships provides a path to growth.

how they could work tomutual advantage, they developed a store in the software giant’s UK campus. It offers the Co-op first glimpse of the latest retail technologies, and Microsoft a real-world environment in which to showcase them. Global consumer foods firmKellogg says suppliers are contributing to strategic growth as it improves how it manages relationships with them, while food and agricultural supplier Cargill shows how it can help customers innovate, if the relationship with them is right. Procurement may still say it is not within its remit to come up with new ideas for the business. If that is the case, then it’s fair to ask what the future holds for procurement as the world changes. 

It’s not unusual for organisations to try to dreamof new, more efficient ways of doing business. The question is, is it realistic for procurement to take on a radical new role in the business? It will meet barriers to change: company hierarchy and stakeholders in other functions might not get the idea and feel threatened by procurement encroaching on their roles. Procurement may not have been “told” to be entrepreneurial so, inside the department, it might be a struggle to buildmomentum. But look closely, and businesses all over the world are changing their operating models and the way they serve customers to adapt and thrive in the new technological and economic landscape. For example, Brammer, a distributor of maintenance,

repair and overhaul products to industry, hit on a novel way to prevent customers “rogue stock-piling” products. It installs vending machines in customers’ premises which allow their employees to “buy” products using a code. It means the customer consumes less, while inventory is more tightly controlled and demandmore easy to foresee. Some customers have achieved a 45% cost saving with this approach, the company says. In this report, we see evidence of how relationships between suppliers and their customers can bemore entrepreneurial. When The Co-op looked for better value from IT suppliers, the UK retailer began to change its relationship with Microsoft. Once the two parties started to explore

“Agility, speed and value come from relationships that are open and strategically focused – whether it’s being first to have a new idea, product innovation, or service enhancement.” Shelly van Treeck Kellogg Company Chief Procurement Officer (see page 24)

STATEOFFLUX 2017GLOBAL SRMRESEARCHREPORT