Competitive advantage – full expenditure, risk and performance visibility

Competitive_Advantage.jpgReady access to accurate, timely, structured internal and external business intelligence will create unprecedented abilities to synthesize info in support of decision making, envisions a report on Ideas for Procurement in 2020, the outcome of a dialogue between Ariba and leading procurement practitioners.

“My hope,” says Dawn Evans, President and Chief Executive Officer, Sourcing Interests Group (SIG), “is to see automation technology with leading market and economic intelligence built in, alerting procurement and sourcing professionals in real time — within the context of their business processes — to the risks as well as the opportunities they have to achieve benefits.”

Debbie Manos-McHenry of Huntington National Bank believes that, “By 2020, it will be normal to reach into your system and pull out all the information you need, be it internal spend data, external performance benchmarks, market intelligence, emerging technologies, new products, best management practices and processes, and so forth. Similar to the way investment analysts use Thompson Reuters or Bloomberg to manage investment portfolios, procurement will have immediate access to everything it needs to manage supplier portfolios.”

Other project contributors agree that both the quality and depth of third-party information will continue to improve and costs to acquire it will decline. What is more, they say, companies will turn increasingly to external market intelligence gleaned through digitally networked communities of suppliers, peers, and experts. Real-time intelligence will be delivered via the web at the precise times when buying and other decisions are being made. And, while these networked communities will share roots with business and social networks such as LinkedIn, Facebook and Twitter, they will deliver information within the context of business processes and their supporting applications.

“As information quality improves and real-time delivery of information to business processes becomes more commonplace,” says Henrik Larsen, Vice President of Procurement at Maersk, “I expect negotiations and other interactions with suppliers to go in very different directions than they do today.

“Imagine being able to understand the effects of particular decisions on your company’s bottom line and your suppliers’ bottom lines instantaneously. People are starting to do this today, but I see it becoming much more commonplace in the coming decade. We will create transparent views together with our supplier networks. We will be able to see and understand what is happening at any given time.”

Risk info would need to catch up

In support of this full visibility, there will be a general awakening around supply-related risk and greater agreement around how to measure risk, more standardized, more readily available third-party info and networked communities where people pool data for operational risk assessment.

“We expect to be leveraging portals of industry and supplier data to detect control failures early,” says Manos-McHenry. “We will access operational risk data captured through industry portals and will see more shared assessments, standardized among buyers and sellers, with one-to-many sharing by members through communities.

“Supply management will have responsibility for third-party risk management, centralized governance and control over third-party risk, providing business segments with the tools to assess and monitor risks together with oversight and reporting on the entire portfolio of suppliers to identify undue concentrations of risk within a segment, process, or supply industry.”

With such rigorous information assets and tools in place, Manos-McHenry also expects to see risk management practices become more embedded into sourcing and contracting routines. “We will assess and rate supplier risk early in our due diligence process, enabling segment leaders to make informed decisions.

“Our RFP process will identify alternative sources of supply and we will see more stringent contract language, requiring strong security, disaster recovery, and third-party risk management programs to be in place with suppliers.”

Roy Anderson, Vice President of Procurement Services, Metasys Technologies, believes that acquisition, aggregation, and management of risk-related information will transition fully to third-parties and networked communities in the coming decade.

“We see an awful lot of work being done today on the risk side, but we are never going to be risk experts, so it is a waste of time to create our own supplier-risk profiles.” In 10 years’ time, Anderson believes, suppliers will be scored independently and collectively on a variety of factors: financial, ethical, and operational performance, creating 360-degree performance ratings and providing greater transparency into market dynamics, potential supply disruptions, and supplier capabilities.

The information in this article was sourced from the report ‘VISION 2020 Ideas for Procurement in 2020 by Industry-Leading Procurement Executives’.

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