Please welcome part 2 of this guest post from Kate Delimitros, a senior director at enterprise business intelligence provider Birst.
Yesterday we looked at Prediction 1 - The supply chain ecosystem will drive after-market offerings. Today we look at the remaining two predictions:
Prediction 2 – Performance goals will be linked more closely within the enterprise
Another shift in 2017 is that procurement teams will share common objectives and goals with the broader enterprise. From procurement, planning and production, to distribution, fulfilment and customer service, the ability to achieve a unified view on trusted insights will change priorities. These departments have had ad hoc analytics for years in some cases, but they operated individually in disconnected silos. When each node of the supply chain is working from the same data and sharing insights, the linear nature of processes will evolve into a synchronised network. With connected teams viewing updates in real-time, decisions can be improved in context as well.
As a result, focus will shift from maximising departmental KPIs to optimising across sales, cost of goods, and inventory in concert for better enterprise profitability. For example, identifying a lower-cost supplier would normally be counted as a win for procurement. However, if that supplier takes twice as long to fulfil its orders, will it affect delivery times and lead to lost sales? Balancing decision parameters will ensure that all business functions are aligned with each other’s objectives.
For procurement, this shift presents an opportunity to operate strategically, by ensuring that decisions are oriented toward predicted business impact, not just short-term cost.
Prediction 3 – The answer to everything will be in flux
In the past, many decisions came down to the old “Fast / Cheap / Good” equation. The old adage was always, “pick two.” In 2017, competitive pressures mean you have to find ways to achieve all three.
Here, the options will be more complicated than just picking “Fast and Cheap,” compared to “Fast and Good.” Rather than binary trade-offs, we face more sliding scales in 2017, due to constantly shifting constraints. The flexibility to respond to changing demand and supply signals will drive value for customers and the business at large. As a result, the answer to this question should be “What is right for right now?”
For example, when a weather event cuts supply in half, you have two options: produce less at a higher price, or switch suppliers and maintain production with different components. If the material is for a finished good, the smaller production at a higher price may be the only feasible path. If so, then sharing the adjusted forecast and setting clear expectations with customers and wholesalers gives everyone a chance to react. Learning this information will help you prioritise orders based on existing service-level agreements, customer negotiations and expertise in managing existing relationships.
If, on the other hand, materials or components can be swapped out for other commodity parts, many suppliers likely exist for those parts and you may already work with them. You can easily expedite approval and on-boarding, if your purchasing system data is consolidated and automated.
Analytics can also help with changes that are not expected – modelling various scenarios and conducting analysis can help prepare for different forks in the road. Perhaps the customer you calculated to have the highest lifetime value is less willing to pay than you anticipated when their market conditions shift (e.g., volatile energy prices). This development may scupper some carefully thought-out plans; if you are locked into a specific and unalterable path, then you end up with two problems to solve rather than one.
In a volatile market, understanding the impact of decisions enables you to adjust rapidly across the faster, cheaper, better spectrum, depending on where priorities lie. By networking people, information and businesses together, all the players involved should be able to achieve their goals profitably.
Looking ahead to 2017
Companies have been collecting data for years, and many are now looking critically to say, “Where’s the value?” The emphasis for the future should not be on simply amassing more data to create new reports. The focus should be on how information can be shared and combined within the business and across the ecosystem of partners, suppliers and customers. Over the next year, planning, adjusting to changing conditions, and predicting potential new ones should help procurement teams make the best possible decisions for all scenarios.