Future of Sourcing - The Smart Cube https://www.futureofsourcing.com/tags/the-smart-cube en Building a Risk Management Strategy: Where to Start https://www.futureofsourcing.com/building-a-risk-management-strategy-where-to-start <div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="https://www.futureofsourcing.com/sites/default/files/articles/Building%20a%20Risk%20Management%20Strategy.jpg"><a href="https://www.futureofsourcing.com/sites/default/files/articles/Building%20a%20Risk%20Management%20Strategy.jpg" title="Learn three considerations to keep in mind as you build your risk management strategy that stays ahead of the next big disruption." class="colorbox" rel="gallery-node-2184-u8B-Vq5Wdyo"><img typeof="foaf:Image" src="https://www.futureofsourcing.com/sites/default/files/styles/juicebox_medium/public/articles/Building%20a%20Risk%20Management%20Strategy.jpg?itok=krMHYHv0" width="624" height="325" alt="Learn three considerations to keep in mind as you build your risk management strategy that stays ahead of the next big disruption." title="" /></a></div></div></div><div class="field field-name-field-intro field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even"> <p><em>There are numerous factors to consider when thinking about risk management and where to start says Omer Abdullah, Co-Founder of The Smart Cube. He explores the three considerations to keep in mind as you build your risk management strategy that stays ahead of the next big disruption.</em></p> </div></div></div><div class="field field-name-field-related-news field-type-entityreference field-label-above"><div class="field-label">Related news:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/3-ways-to-empower-procurement-and-prepare-for-the-next-supply-chain-crisis">3 Ways to Empower Procurement and Prepare for the Next Supply Chain Crisis</a></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"> <p>Risk management isn&rsquo;t a new term or notion to the supply chain and procurement industry, yet it continues to be one of the least addressed priorities within organizations. KPMG recently shared a <a href="https://home.kpmg/xx/en/home/insights/2022/01/third-party-risk-management-outlook-2022.html">report</a> on fourth-party risk that notes roughly 80% of businesses say they need to urgently improve their assessment of fourth parties in their supply chain. While it&rsquo;s certainly a topic of conversation within the boardroom, preemptive action is imperative to building a resilient strategy.</p> <p>There are numerous factors to consider when thinking about risk management and where to start. We&rsquo;ll explore the three considerations to keep in mind as you build your risk management strategy.</p> <h1>1. It&rsquo;s Not a Matter of If, but When</h1> <p>While many businesses may have risk management in mind, they often don&rsquo;t have precautions in place. If the last two years have shown us anything, it&rsquo;s that risk and crises aren&rsquo;t a matter of if, but when. Between the pandemic, the <a href="https://futureofsourcing.com/procurement-gets-competitive-with-ai-technology">Great Resignation</a> and the ongoing conflict in Ukraine, risk factors continue to come from every angle. It&rsquo;s important to keep this in mind when building out budget and priorities on a quarterly basis.</p> <p>Leaders must also understand that the goal isn&rsquo;t to completely eliminate risk but to have a plan in place to monitor and mitigate ongoing risks. Risk factors will continue to live around us and nothing can diminish that fact. It is only with diligence, critical analysis and planning that we can manage these risks and achieve fluid, profitable movement of goods and services, minimize supply disruption and maximize business continuity.</p> <h2>2. Software Solutions are Not One Size Fits All</h2> <p>Purely manual risk management solutions are outdated and unrealistic with too much data to manage. At the same time, by definition, software solutions are a one-to-many solution. The reality is that every company and its supply chain is different. While software solutions can reduce the hours of manual research, a successful solution requires sifting through the insights to find the weaknesses.</p> <p>That&rsquo;s where the intersection of artificial intelligence plus human intervention (AI + HI) come into play. Advanced analytics, AI, and the availability of expertly curated datasets and insights help procurement and supply chain teams learn more than ever before about suppliers, <a href="https://futureofsourcing.com/is-it-time-to-add-ai-to-your-commodity-insights">market and commodity trends</a>, and emerging risk factors.</p> <p>Crucially, they&rsquo;ve helped procurement teams evolve from spending long periods of time analyzing historical information to enabling truly proactive procurement operations.</p> <h2>3. As the World Evolves, Your Risk Management Must Also Evolve</h2> <p>As mentioned, risk is constant in all aspects of modern business. It&rsquo;s constantly evolving and plays a role in every decision made at every level. So, it must be constantly managed and monitored too.</p> <p>After any major crisis event, teams will want to take a deep dive into available data, see the impact, and conduct a deep supply chain risk assessment to understand how they can better manage and mitigate risk.</p> <p>In addition, true risk management must be ingrained within your culture &ndash; something that&rsquo;s part of every business decision &ndash; not just looked at after the fact or at the end of every quarter. As such, supply risk management can&rsquo;t just be based on snapshot assessments, <a href="https://futureofsourcing.com/real-time-risk-intelligence-the-antidote-to-supply-chain-disruptions">it must be a proactive as well as a reactive effort</a>.</p> <p>The risk landscape is constantly shifting and only by weaving risk management into your day-to-day operations and decision-making processes can you hope to control and contain it.</p> <p>Every decision ultimately involves some level of risk but by having visibility into that risk and the potential impacts, you&rsquo;re already a step ahead within building a manageable risk management strategy.</p> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/third-party-risk-management" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Third Party Risk Management</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/supplier-risk-management" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Supplier Risk Management</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/the-smart-cube" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">The Smart Cube</a></div></div></div><div class="field field-name-field-addthis field-type-addthis field-label-hidden"><div class="field-items"><div class="field-item even"><div class="addthis_toolbox addthis_default_style " addthis:title="Building a Risk Management Strategy: Where to Start - Future of Sourcing" addthis:url="https://www.futureofsourcing.com/building-a-risk-management-strategy-where-to-start"><a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_linkedin"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_facebook"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_twitter"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_googleplus"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_pinterest_share"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_reddit"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_email"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_print"></a> </div> </div></div></div><div class="field field-name-field-region field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Region:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/regions/global" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Global</a></div></div></div> Wed, 01 Jun 2022 17:21:07 +0000 Omer Abdullah 2184 at https://www.futureofsourcing.com https://www.futureofsourcing.com/building-a-risk-management-strategy-where-to-start#comments Supplier-Enabled Innovation: Select Suppliers Carefully and Reap Big Benefits https://www.futureofsourcing.com/supplier-enabled-innovation-select-suppliers-carefully-and-reap-big-benefits <div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="https://www.futureofsourcing.com/sites/default/files/articles/Supplier-Led%20Innovation%20%281%29.png"><a href="https://www.futureofsourcing.com/sites/default/files/articles/Supplier-Led%20Innovation%20%281%29.png" title="Supplier-Led Innovation" class="colorbox" rel="gallery-node-2081-u8B-Vq5Wdyo"><img typeof="foaf:Image" src="https://www.futureofsourcing.com/sites/default/files/styles/juicebox_medium/public/articles/Supplier-Led%20Innovation%20%281%29.png?itok=jH9iV1fa" width="624" height="325" alt="Supplier-Led Innovation" title="" /></a></div></div></div><div class="field field-name-field-intro field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even"> <h1>Supplier-Enabled Innovation: Select Suppliers Carefully and Reap Big Benefits</h1> </div></div></div><div class="field field-name-field-related-news field-type-entityreference field-label-above"><div class="field-label">Related news:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/using-procurement-analytics-to-become-an-agent-of-change">Using Procurement Analytics to Become an Agent of Change</a></div><div class="field-item odd"><a href="/the-three-pillars-of-successful-supply-chain-risk-management">The Three Pillars of Successful Supply Chain Risk Management</a></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"> <p>Today, a lot of the low-hanging fruit has been picked by CPOs. But one area where there is significant scope for procurement to deliver value is supplier-enabled innovation (SEI). With 25% to 45% of revenues coming from product innovation and up to 65% of innovations sourced externally through external partners and suppliers, SEI represents a treasure trove of opportunity.</p> <h2>Why is Supplier-Enabled Innovation Important?</h2> <h3>1. Expand Organizational Capabilities</h3> <p>By tapping into the capabilities and innovations of the supplier community, procurement can dramatically increase the nature and volume of research and development (R&amp;D) work being done on their behalf. In the process, an organization can tap into the skills and knowledge base of other parties who are experts in their specific fields, leveraging their learnings to help drive the business forward.</p> <h3>2. Greater Cross-Organizational Collaboration</h3> <p>SEI, by necessity, involves multiple functions within a business, such as procurement, R&amp;D and product development working together. It therefore encourages stronger cross-functional collaboration across business groups, driving internal efficiencies such as alignment of core goals, integration toward common results and more effective knowledge transfer. This both accelerates the overall innovation pipeline and reduces risk in the process.</p> <h3>3. Stay Ahead of the Competition</h3> <p>Picking supply partners that support finding new ways of doing things and doing them faster can help companies stay ahead of the competition. One study shows there is a 40% faster route to commercialization for externally sourced innovations. An effective, well-considered approach to SEI enables organizations to push beyond the competition in ways that couldn&rsquo;t be delivered from a purely internal approach without considerable time and expense.</p> <h2>Choosing the Best SEI Partners</h2> <p>As organizations look to their suppliers to collaborate and jumpstart product and process innovation, insight and intelligence are key for understanding unmet customer needs, emerging technologies and capabilities that fill these gaps, and evolving market trends.</p> <p>Diving into your existing supply base to identify the right partners will be tempting, and this approach often yields value. But the right suppliers are not always the ones you know. As such, a structured process for identifying the right partners is essential, with assessment for each of the following:</p> <ul> <li>The right skills, such as technological, quality, industrial and financial</li> <li>Collaboration ability, conveyed by strategic alignment around product/service goals, an agreement on the key values of collaboration and governance pertaining to innovation projects</li> <li>Fit, both the strategic commitment of top management and the cultural compatibility of supplier and client corporate cultures</li> </ul> <p>Demonstrated results is another selection criteria, but answers will not always be found in plain sight. In fact, one very effective, yet under-used source of information for identifying innovative suppliers is patent research. This can help a function find and benchmark companies who are innovating in strategic areas of interest for a business &ndash; from finished product to packaging components, to unique ingredients to manufacturing process innovations. Equally, the performance of existing suppliers can be assessed &ndash; are they investing and innovating as one would expect?</p> <p>Finally, it&rsquo;s worth noting that the right choice of a supplier partner is not necessarily dependent on size or breadth of offering. Oftentimes working with a specialist company that will work more collaboratively and put more at risk for a share of the long-term spoils is worthwhile.</p> <h2>Ironing Out Bumps in the Road</h2> <p>For successful SEI, several factors need consideration during the due diligence process, when selecting suppliers:</p> <h3>Start at the Top</h3> <p>Invite the executive leadership to get their buy-in. It&rsquo;s a cliché but it&rsquo;s true: Executive-level sponsorship is critical for any initiative to succeed. As an example, <a href="http://blog.bravosolution.com/us/supplier-enabled-innovation-pathway-procurement-value-creation/" target="_blank">Johnson &amp; Johnson</a> has an SEI team of 12 people who are tasked with sourcing cross-function innovations. All roles within the team are high-level (VP and above), which fosters a culture emphasizing innovation, tied directly to outcomes.</p> <h3>Sort Out the Intellectual Property Rights Ownership Upfront</h3> <p>When jointly generating ideas, it is important to decide in advance on a dedicated contract that sets the collaboration rules, primarily in terms of intellectual property (IP) and risk sharing. Many innovation attempts fail or are problematic due to unclear terms of collaboration contracts.</p> <h3>Articulate Your Innovation Goals</h3> <p>Innovation workshops are processes that require planning, cautious selection of ideas, IP management and decisions concerning resource allocation. Make sure the goals align for both parties right from the start and innovation workshops are treated as such, rather than as a sales channel.</p> <h3>Build Resources Internally to Support SEI</h3> <p>Companies typically create dedicated innovation teams or establish new roles and job functions specifically dedicated to driving collaboration. In addition, developing online innovation platforms that facilitate knowledge exchange across the supply chain, from startups to large companies, helps businesses partner more closely.</p> <h2>Reap the Rewards of Looking Out and Bringing Innovation In</h2> <p>There is a growing recognition of the value of broader partnerships and hybrid models that integrate insource with outsource, especially in areas as important as innovation. Indeed, in today&rsquo;s complex, global ecosystem, choosing the right, innovative partnership is becoming ever more critical for success. And procurement sits at the perfect point &ndash; right at the confluence and in a position to drive transformative value for the corporation.</p> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/the-smart-cube" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">The Smart Cube</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/supplier-relationship-management-srm" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Supplier Relationship Management (SRM)</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/supply-base" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Supply Base</a></div></div></div><div class="field field-name-field-addthis field-type-addthis field-label-hidden"><div class="field-items"><div class="field-item even"><div class="addthis_toolbox addthis_default_style " addthis:title="Supplier-Enabled Innovation: Select Suppliers Carefully and Reap Big Benefits - Future of Sourcing" addthis:url="https://www.futureofsourcing.com/supplier-enabled-innovation-select-suppliers-carefully-and-reap-big-benefits"><a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_linkedin"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_facebook"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_twitter"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_googleplus"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_pinterest_share"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_reddit"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_email"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_print"></a> </div> </div></div></div><div class="field field-name-field-region field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Region:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/regions/global" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Global</a></div></div></div> Sun, 01 May 2022 17:00:00 +0000 Omer Abdullah 2081 at https://www.futureofsourcing.com https://www.futureofsourcing.com/supplier-enabled-innovation-select-suppliers-carefully-and-reap-big-benefits#comments 3 Ways to Empower Procurement and Prepare for the Next Supply Chain Crisis https://www.futureofsourcing.com/3-ways-to-empower-procurement-and-prepare-for-the-next-supply-chain-crisis <div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="https://www.futureofsourcing.com/sites/default/files/articles/3-Ways-to-Empower-Procurement.jpg"><a href="https://www.futureofsourcing.com/sites/default/files/articles/3-Ways-to-Empower-Procurement.jpg" title="Today&#039;s globalized world means that organizations are more exposed to risk than ever before." class="colorbox" rel="gallery-node-2164-u8B-Vq5Wdyo"><img typeof="foaf:Image" src="https://www.futureofsourcing.com/sites/default/files/styles/juicebox_medium/public/articles/3-Ways-to-Empower-Procurement.jpg?itok=D-nB733p" width="624" height="325" alt="Today&#039;s globalized world means that organizations are more exposed to risk than ever before." title="" /></a></div></div></div><div class="field field-name-field-intro field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even"> <p><em>Today&#39;s globalized world means that organizations are more exposed to risk than ever before. From building stronger supplier relationships to proactively mitigating risk, The Smart Cube&#39;s Omer Abdullah shares three ways to empower procurement teams to prepare for tomorrow, today.</em></p> </div></div></div><div class="field field-name-field-related-news field-type-entityreference field-label-above"><div class="field-label">Related news:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/tracking-the-evolution-of-procurement-and-where-its-going-next">Tracking the Evolution of Procurement and Where It’s Going Next</a></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"> <p>When we look back at the globally disruptive events of the last 18 months, there aren&rsquo;t a huge number of positives to draw on. But one significant silver lining is that major crisis events like the pandemic and the Suez Canal blockage have helped leading procurement teams step into the spotlight and demonstrate their skills at mitigating risk and ensuring business continuity.</p> <p>However, the ability to proactively identify emerging risks across supplier portfolios and key categories isn&rsquo;t a given for today&rsquo;s procurement teams. It&rsquo;s something that must be enabled through the right balance of real-time intelligence, technology that helps streamline and augment how procurement works, and deep risk, category, and commodity expertise.</p> <p>In this article, I&rsquo;ll run through three ways that empowering procurement teams with those capabilities can help organizations prepare for the next major supply chain crisis, and ensure that whatever the future brings, they&rsquo;re ready.</p> <h1>1. Nurturing Stronger Supplier Relationships</h1> <p>Strong relationships with suppliers &ndash; especially strategic ones &ndash; have always been a valuable asset for organizations of all kinds. They can help you secure value-driving contracts, exclusive deals that add unique capabilities or products to your line-up, and crucially, make sure you get preferential treatment when supply becomes limited for any reason.</p> <p>When the pandemic first started to ramp up in early 2020, many organizations saw the true value of those relationships first-hand. Those fortunate enough to have them were able to maintain the supply of goods they needed, while others found themselves unable to get what they needed at the right time to continue operating.</p> <p>Procurement has always been great at building those relationships, but, because procurement teams&rsquo; time is so limited, and their attention is spread across so many suppliers, they don&rsquo;t always have the capacity to develop relationships as much as they might like.</p> <p>This is one of the &ldquo;hidden&rdquo; benefits of procurement empowerment. If you can do things like automate routine tasks for procurement teams or accelerate the delivery of category or risk insights to free teams from manual data analysis, you can buy them the time needed to build stronger relationships with suppliers.</p> <p>You&rsquo;ll free your procurement experts up to collaborate more closely with suppliers, creating opportunities for innovation and contract renegotiation, as well as helping to ensure the steady supply of essential goods when a crisis does strike.</p> <h2>2. Building a Deeper, Proactive View of Supplier Risk</h2> <p>Building and maintaining a clear view of supplier risk &ndash; and understanding its implications for the busines &ndash; is one of the most important responsibilities of any procurement department.</p> <p>It takes a huge amount of time and effort to do this effectively, which has led many teams to fall into the trap of working constantly just to maintain a retroactive view of risk that&rsquo;s very difficult to act on.</p> <p>Things like annual risk reports for specific high-risk suppliers are great at giving you an overview of that supplier&rsquo;s risk exposure and may even help you see emerging risk factors. But what they don&rsquo;t do is tell you when those risks are likely to impact the business, or what remediating actions you could take before they happen.</p> <p>Empowering procurement teams with a real-time view of supplier risk &ndash; one that alerts them to developing threats as they happen &ndash; can help the team evolve from constant reactive analysis to proactive risk mitigation.</p> <p>This fast, timely view of supplier risk helps shift the entire mindset of the procurement function. Instead of looking back at historical risk trends and making assumptions about them, teams can assess risk insights immediately, when they&rsquo;re most valuable, and act on them right away to drive value and safeguard the organization.</p> <h2>3. Helping Teams Look Beyond Suppliers and Keep a Closer Eye on Global Trends</h2> <p>Once you&rsquo;ve freed the procurement team from time-consuming, retroactive supplier risk analysis, the team also gains more time to look beyond the supplier base and keep a closer eye on global commodity trends.</p> <p>Reliable category and commodity insights can often be delivered through the same intuitive platforms as supplier risk insights. So, the procurement teams have a single source of insights, and a clear, unified view of risk across suppliers, categories and geographies.</p> <p>It&rsquo;s that complete, real-time view of risk that enables procurement teams to evolve their operations and mitigate the impacts of disruptive crisis events. Teams can immediately see where the biggest threats to their operations are emerging and quickly identify what actions need to be taken to mitigate that impact.</p> <p>And as we&rsquo;ve seen over the last couple of years, that level of insight really can be the difference between maintaining business as usual and seeing your operations grind to a complete halt.</p> <h2>Empower Procurement Teams and Prepare for the Next Major Disruptive Crisis Today</h2> <p>The last 18 months have brought immense disruption for procurement and supply chain teams. The crisis events we&rsquo;ve seen have been severe, but looking back, they&rsquo;re nothing new.</p> <p>Today&rsquo;s expansive global strategies and supplier portfolios have left procurement teams and their organizations more exposed to risk than ever before. We don&rsquo;t know what the next crisis will look like, but we can say with some confidence that it&rsquo;s coming &ndash; and history tells us that it&rsquo;s probably coming sooner than we think.</p> <p>By providing procurement teams with the time, resources and insights needed to adopt a proactive approach to risk management, organizations can take a huge step toward mitigating the impacts of events like those we&rsquo;ve seen recently.</p> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/the-smart-cube" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">The Smart Cube</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/supplier-relationship-management-srm" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Supplier Relationship Management (SRM)</a></div></div></div><div class="field field-name-field-addthis field-type-addthis field-label-hidden"><div class="field-items"><div class="field-item even"><div class="addthis_toolbox addthis_default_style " addthis:title="3 Ways to Empower Procurement and Prepare for the Next Supply Chain Crisis - Future of Sourcing" addthis:url="https://www.futureofsourcing.com/3-ways-to-empower-procurement-and-prepare-for-the-next-supply-chain-crisis"><a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_linkedin"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_facebook"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_twitter"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_googleplus"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_pinterest_share"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_reddit"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_email"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_print"></a> </div> </div></div></div><div class="field field-name-field-region field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Region:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/regions/global" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Global</a></div></div></div> Fri, 08 Apr 2022 02:00:00 +0000 Omer Abdullah 2164 at https://www.futureofsourcing.com https://www.futureofsourcing.com/3-ways-to-empower-procurement-and-prepare-for-the-next-supply-chain-crisis#comments Tracking the Evolution of Procurement and Where It’s Going Next https://www.futureofsourcing.com/tracking-the-evolution-of-procurement-and-where-its-going-next <div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="https://www.futureofsourcing.com/sites/default/files/articles/Tracking%20the%20Evolution%20of%20Procurement%20and%20Where%20It%E2%80%99s%20Going%20Next.jpg"><a href="https://www.futureofsourcing.com/sites/default/files/articles/Tracking%20the%20Evolution%20of%20Procurement%20and%20Where%20It%E2%80%99s%20Going%20Next.jpg" title="How procurement has evolved throughout its history, why 2020 was such a turning point for the function and where things are headed next." class="colorbox" rel="gallery-node-2146-u8B-Vq5Wdyo"><img typeof="foaf:Image" src="https://www.futureofsourcing.com/sites/default/files/styles/juicebox_medium/public/articles/Tracking%20the%20Evolution%20of%20Procurement%20and%20Where%20It%E2%80%99s%20Going%20Next.jpg?itok=RFF9pNnt" width="624" height="325" alt="How procurement has evolved throughout its history, why 2020 was such a turning point for the function and where things are headed next." title="" /></a></div></div></div><div class="field field-name-field-intro field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even"> <p><em>Omer Abdullah, Co-Founder of The Smart Cube, explores how procurement has evolved throughout its history, why 2020 was such a turning point for the function and where things are headed next.</em></p> </div></div></div><div class="field field-name-field-related-news field-type-entityreference field-label-above"><div class="field-label">Related news:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/4-predictions-that-will-shape-procurement-in-2022">4 Predictions That Will Shape Procurement in 2022</a></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"> <p>From the outside, procurement appears to be a relatively static department focused on one core goal: Acquiring the right goods at the right price.</p> <p>But behind the scenes, procurement teams have been silently evolving. They&rsquo;ve been growing their capabilities, creating value in new ways and driving growth while ensuring business continuity.</p> <p>Procurement has slowly transformed from an expert cost controller into a major creator of business value, without many people outside of the function recognizing it until very recently. The disruptive events of 2020 and 2021 provided the perfect opportunity for procurement teams to step into the spotlight and show what they&rsquo;re capable of today.</p> <p>In this article, I&rsquo;ll walk through procurement&rsquo;s decades-long evolutionary journey, look at the powerful position the department has taken up today, and examine what might be next for leading procurement teams.</p> <h2>Procurement&rsquo;s Roots: Sourcing What&rsquo;s Needed at the Right Price</h2> <p>The procurement function was initially created to enable organizations to improve the consistency of supply and increase profit margins.</p> <p>By building robust supplier portfolios and making better-informed supplier choices, procurement teams had a major impact on how businesses operate. Strategies like just-in-time manufacturing were enabled by this approach, bringing previously unimaginable levels of output and efficiency to manufacturing and retail organizations.</p> <p>But procurement built its reputation with cost savings. By bringing such tangible benefits to their organizations&rsquo; bottom lines, procurement teams quickly became cost-saving heroes. It&rsquo;s a legacy that has stuck with the department and continues to have a huge impact on how teams work.</p> <h2>The First Evolution: Expanding Procurement&rsquo;s Role in Continuity</h2> <p>While cost savings caught the eye, leading organizations quickly acknowledged that procurement teams delivered value by ensuring consistent supply of goods and keeping production and output levels consistent.</p> <p>By building diversified supplier portfolios, procurement teams helped organizations overcome potentially disastrous events &ndash; things like strategic suppliers going out of business or supply of a particular resource from one region drying up.</p> <p>As supply chains went global, so too did procurement teams&rsquo; responsibilities for continuity. They were expected to build and maintain global supplier portfolios and navigate a much more complex international risk landscape.</p> <p>But with that challenge came immense rewards. The precise engineering and management of international supply strategies helped procurement teams deliver new levels of cost efficiency and enabled consistent, year-round supply of seasonal resources.</p> <p>These supply strategies formed the basis of today&rsquo;s globalized trade environment. Over time, these complex, multinational supply strategies have become the norm, with procurement teams at the center of managing global supply networks and mitigating risk across vast supplier portfolios.</p> <h2>Leveraging Relationships: Procurement Becomes a Force for Innovation</h2> <p>In their mission to build resilient supplier portfolios, procurement experts have collaborated closely with suppliers to build mutually beneficial contracts and strategic supply connections.</p> <p>Those relationships have proven hugely valuable from a risk mitigation perspective, giving organizations confidence in their suppliers&rsquo; commitment and ability to continue delivering essential goods in a crisis.</p> <p>But, more surprisingly, the relationships built and maintained by procurement teams have also become a powerful driver of innovation and a source of competitive advantage.</p> <p>Exclusive contracts and co-designed or white-labelled products have created opportunities for procurement teams to directly influence a company&rsquo;s product strategy and provide a new source of competitive differentiation.</p> <p>In many cases, the strong relationships built by procurement teams have created opportunities for organizations and their suppliers to share their expertise and innovate together, growing relationships into true strategic partnerships.</p> <p>Beyond direct relationships with suppliers, procurement has also evolved to influence product and customer strategies through its constant monitoring of category and commodity markets as well as competitors. Procurement teams keep a constant watch on what&rsquo;s happening in relevant markets, and they&rsquo;re often the first to notice important developments that could influence wider business strategy.</p> <p>That insight has enabled leading procurement teams to collaborate closely with key product strategy stakeholders. Events like the emergence of a new material or component, the growth of a new competitor, or a shift in customer preferences for particular goods can all influence product strategy and create opportunities for innovation.</p> <h2>Becoming Data-Driven: Procurement Gets Proactive</h2> <p>The most recent development in procurement&rsquo;s evolution story has been the rise of the data-driven procurement team. Using data to make informed supplier, commodity, category or risk decisions is nothing new for those in procurement, but the emergence of new data sources and sophisticated insight-delivery tools has transformed what the function can achieve.</p> <p>Advanced analytics, AI, and the availability of expertly curated datasets and insights have all helped procurement teams learn more than ever before about suppliers, market and commodity trends, and emerging risk factors. Crucially, they&rsquo;ve helped procurement teams evolve from spending long periods of time analyzing historic information, to enabling truly proactive procurement operations.</p> <p>That&rsquo;s where leading procurement teams are today. Conveniently delivered, reliable, and timely insights enable them to detect trends and act quickly to create new value, optimize supply strategies and mitigate risk proactively &ndash; transforming supply and market threats into lucrative opportunities.</p> <h2>What&rsquo;s Next: Procurement as the Number-One Driver of Strategic Business Value</h2> <p>Nobody can say for sure what the future of procurement will look like. But the disruptive events experienced in 2020 and 2021 have given us an interesting look at what the future could hold.</p> <p>By managing one of the most disrupted and complex global supply environments ever seen, leading procurement teams demonstrated the value of the capabilities they&rsquo;ve developed.</p> <p>What emerged was a powerful combination of all of procurement&rsquo;s major evolutions to date. Teams generated real-time insights and intelligence to mitigate risk, used strategic relationships to maintain supply of essential goods and proactively optimized supply strategies to turn major challenges into new value creation opportunities.</p> <p>Procurement has been pivotal in helping businesses understand their exposure to crisis events and in maintaining operational continuity amid widespread disruption.</p> <p>Procurement teams have shown why they have the potential to become the number-one driver of strategic value in the modern business. And for the first time, decision-makers across the organization are starting to see it, too.</p> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/e-procurement" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">e-procurement</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/business-continuity" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Business Continuity</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/risk-management" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Risk Management</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/supplier-relationship-management-srm" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Supplier Relationship Management (SRM)</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/the-smart-cube" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">The Smart Cube</a></div></div></div><div class="field field-name-field-addthis field-type-addthis field-label-hidden"><div class="field-items"><div class="field-item even"><div class="addthis_toolbox addthis_default_style " addthis:title="Tracking the Evolution of Procurement and Where It&amp;rsquo;s Going Next - Future of Sourcing" addthis:url="https://www.futureofsourcing.com/tracking-the-evolution-of-procurement-and-where-its-going-next"><a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_linkedin"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_facebook"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_twitter"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_googleplus"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_pinterest_share"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_reddit"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_email"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_print"></a> </div> </div></div></div><div class="field field-name-field-region field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Region:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/regions/global" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Global</a></div></div></div> Wed, 09 Mar 2022 02:00:00 +0000 Omer Abdullah 2146 at https://www.futureofsourcing.com https://www.futureofsourcing.com/tracking-the-evolution-of-procurement-and-where-its-going-next#comments 4 Predictions That Will Shape Procurement in 2022 https://www.futureofsourcing.com/4-predictions-that-will-shape-procurement-in-2022 <div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="https://www.futureofsourcing.com/sites/default/files/articles/Four%20Predictions%20That%20Will%20Shape%20Procurement%20in%202022.jpg"><a href="https://www.futureofsourcing.com/sites/default/files/articles/Four%20Predictions%20That%20Will%20Shape%20Procurement%20in%202022.jpg" title="After an immensely challenging year, the stage is set for major procurement transformation in 2022." class="colorbox" rel="gallery-node-2116-u8B-Vq5Wdyo"><img typeof="foaf:Image" src="https://www.futureofsourcing.com/sites/default/files/styles/juicebox_medium/public/articles/Four%20Predictions%20That%20Will%20Shape%20Procurement%20in%202022.jpg?itok=_WoPuBQB" width="624" height="325" alt="After an immensely challenging year, the stage is set for major procurement transformation in 2022." title="" /></a></div></div></div><div class="field field-name-field-intro field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even"> <p><em>After an immensely challenging year, the stage is set for major procurement transformation in 2022 says Omer Abdullah, CEO of The Smart Cube. Here&rsquo;s how he thinks things might change.</em></p> </div></div></div><div class="field field-name-field-related-news field-type-entityreference field-label-above"><div class="field-label">Related news:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/supplier-enabled-innovation-select-suppliers-carefully-and-reap-big-benefits">Supplier-Enabled Innovation: Select Suppliers Carefully and Reap Big Benefits</a></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"> <p>2021 was an immensely challenging year for procurement teams across the globe. Not only did most of the challenges of 2020 continue, but many got significantly worse. Between major supply shortages, rising commodity prices and new variants reigniting pandemic-related disruption, teams had to work extremely hard just to keep their organizations operational, let alone achieve their strategic goals.</p> <p>But it was also an incredible year for procurement innovation. Faced with those challenges, leaders and their teams found new levers and devised new strategies to help keep costs under control, keep goods on shelves and keep their organizations moving forward.</p> <p>Now, as we look ahead to 2022, here are four key trends that are set to define the procurement landscape over the next 12 months:</p> <h2>1. Nearshoring discussions will continue, but plans to reshore sourcing strategies may be put on hold.</h2> <p>Offshoring, nearshoring and reshoring have been key topics across the procurement space over the last couple of years. As pandemic-related supply issues hit, supply base diversification was an essential strategy to keep organizations operational.</p> <p>However, since those supply issues first emerged, many more have appeared alongside them. From shipping and container shortages to ongoing geopolitical challenges, supply chain conditions haven&rsquo;t improved to the point that many &mdash; including myself &mdash; had previously expected them to by the beginning of 2022.</p> <p>Ultimately, we won&rsquo;t see reshoring start happening widely until we solve some of the more immediate supply chain issues present across a lot of key categories and commodities today.</p> <p>Of course, to the extent that procurement teams can use reshoring to improve availability without impacting prices materially, that will be the green light to go after reshoring in earnest. But until then, plans to reshore will likely remain tabled &mdash; at least until market conditions improve.</p> <h2>2. Procurement&rsquo;s role as a strategic advisor to the business will expand.</h2> <p>The challenging supply conditions that we&rsquo;ve all faced over the last couple of years have given procurement the opportunity to demonstrate a huge range of capabilities and help others see the full strategic value that it can deliver to the wider business. From mitigating supply chain risk to identifying opportunities for product innovation and supplier collaboration, we&rsquo;ve seen a huge shift in what organizations look to procurement to deliver.</p> <p>As we move into 2022, I expect to see procurement&rsquo;s role as a strategic advisor to the business expand even further. The function has always been the organization&rsquo;s eyes and ears on external markets, but senior stakeholders are only just beginning to discover what that really means.</p> <p>As inflation returns as a key variable that organizations need to manage and mitigate, procurement has the potential to prove its strategic value once again, by using market and supplier insights and deep analytics to help optimize strategies and limit the customer impact of price increases.</p> <p>Similarly, the function can also help senior decision-makers better understand the movements and decisions competitors make. With supply constrained across numerous categories and geographies, more and more organizations are recognizing the need to keep up with what others are buying, and how that might impact their own operations. Procurement is perfectly positioned to provide that insight, giving the function an even larger presence at the strategic table.</p> <h2>3. Procurement and product teams will get a lot closer.</h2> <p>With inflated prices and constrained supply omnipresent across so many commodities and categories today, organizations have had to get very creative to stay operational, control costs and keep products on store shelves.</p> <p>With supply issues so widespread, many traditional procurement levers &mdash; such as switching suppliers or offshoring supply &mdash; haven&rsquo;t been able to deliver the same kind of results and improvements that they have in the past.</p> <p>As a result, procurement teams have had to work closely with product teams to find new ways of alleviating cost and supply pressure. By collaborating closely, teams have unlocked powerful new levers like altering product sizes, switching to alternative ingredients and even creating entirely new products composed of more readily available ingredients.</p> <p>That&rsquo;s been a key component in many organizations&rsquo; pandemic survival strategies, helping them discover the power and strategic value of closer product-procurement collaboration. Now that they&rsquo;ve had the chance to see its value in action, that collaboration is only going to grow deeper.</p> <p>Equipped with the right market intelligence and insights, procurement can guide product optimization and innovation in a very meaningful way. And by involving procurement much earlier in the conversation, product teams can achieve their biggest goals in a range of innovative (and value-optimized) ways. It&rsquo;s a mutually beneficial relationship that should only grow in the years to come.</p> <h2>4. More teams will embrace hedging to help control costs and mitigate risk.</h2> <p>One of the silver linings that came out of the period of intense instability that we&rsquo;ve all been through over the last couple of years is that those conditions helped many procurement teams discover the power and value of commodity hedging.</p> <p>By securing future contracts or pre-purchasing additional commodities before they&rsquo;re needed, teams can simultaneously lock in lower commodity prices and ensure continued supply &mdash; two exceptionally valuable benefits in 2022. However, those benefits don&rsquo;t come for free.</p> <p>Incredibly strong category and market intelligence are critical to successful hedging. As more stories of hedging success during the pandemic become public, more teams will start to explore doing it themselves. However, if they don&rsquo;t have the intelligence and insights required to do it well, it could end up having the opposite of its intended impact on costs.</p> <p>Hedging requires teams to make informed decisions about the future of commodity prices. If they bet big and lock in prices on key commodities today, then those prices fall, it can have a huge negative impact on their bottom line. It&rsquo;s an incredibly powerful strategy, but the teams that embrace it this year will need to make sure they have the intelligence and insight process in place to execute it successfully.</p> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/the-smart-cube" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">The Smart Cube</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/nearshoring" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Nearshoring</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/inflation" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Inflation</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/risk-mitigation" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Risk Mitigation</a></div></div></div><div class="field field-name-field-addthis field-type-addthis field-label-hidden"><div class="field-items"><div class="field-item even"><div class="addthis_toolbox addthis_default_style " addthis:title="4 Predictions That Will Shape Procurement in 2022 - Future of Sourcing" addthis:url="https://www.futureofsourcing.com/4-predictions-that-will-shape-procurement-in-2022"><a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_linkedin"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_facebook"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_twitter"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_googleplus"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_pinterest_share"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_reddit"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_email"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_print"></a> </div> </div></div></div><div class="field field-name-field-region field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Region:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/regions/global" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Global</a></div></div></div> Thu, 27 Jan 2022 02:00:00 +0000 Omer Abdullah 2116 at https://www.futureofsourcing.com https://www.futureofsourcing.com/4-predictions-that-will-shape-procurement-in-2022#comments Is It Time to Add AI to Your Commodity Insights? https://www.futureofsourcing.com/is-it-time-to-add-ai-to-your-commodity-insights <div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="https://www.futureofsourcing.com/sites/default/files/articles/Is%20It%20Time%20to%20Add%20AI%20to%20Your%20Commodity%20Insights%3F.png"><a href="https://www.futureofsourcing.com/sites/default/files/articles/Is%20It%20Time%20to%20Add%20AI%20to%20Your%20Commodity%20Insights%3F.png" title="Is It Time to Add AI to Your Commodity Insights?" class="colorbox" rel="gallery-node-2087-u8B-Vq5Wdyo"><img typeof="foaf:Image" src="https://www.futureofsourcing.com/sites/default/files/styles/juicebox_medium/public/articles/Is%20It%20Time%20to%20Add%20AI%20to%20Your%20Commodity%20Insights%3F.png?itok=sLdMZpQd" width="624" height="325" alt="Is It Time to Add AI to Your Commodity Insights?" title="" /></a></div></div></div><div class="field field-name-field-intro field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even"> <h1>Is It Time to Add AI to Your Commodity Insights?</h1> </div></div></div><div class="field field-name-field-related-news field-type-entityreference field-label-above"><div class="field-label">Related news:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/using-procurement-analytics-to-become-an-agent-of-change">Using Procurement Analytics to Become an Agent of Change</a></div><div class="field-item odd"><a href="/the-role-of-a-procurement-center-of-excellence">The Role of a Procurement Center of Excellence</a></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"> <p>Over the last few years, we&rsquo;ve seen artificial intelligence (AI) being used for a host of procurement applications, from spend analysis to supplier risk monitoring. Now, the same technology is increasingly being applied to commodity forecasting.</p> <p>In the right situation, this can provide invaluable insights. AI makes it possible to look at larger, more complicated data sets over a longer period of time, helping to improve the accuracy of predictions and supercharge decision-making, near real-time.</p> <p>While commodity producers and traders are both investing heavily in this technology, commodity buyers are lagging behind.</p> <p>In this article, we look at what AI commodity forecasting involves, who&rsquo;s using it and who isn&rsquo;t, and how you can tell whether or not it&rsquo;s the right investment for you.</p> <h2>The Two Technologies Behind AI Forecasting</h2> <p>AI forecasting in commodities normally involves the use of natural language processing and machine learning to automatically break down structured and unstructured data and create models that predict commodity prices with minimal human intervention.</p> <p>In doing so, things that otherwise wouldn&rsquo;t be apparent to the human eye can be brought to the fore, making it easy for producers to predict production, traders to forecast pricing and buyers to plan more strategic sourcing.</p> <p>Natural language processing uses rendered algorithms to interpret written data, fueling techniques like sentiment analysis to garner insights from news articles, emails and social media posts. It&rsquo;s often used by traders to analyze current events and anticipate changes in markets.</p> <p>Machine learning, on the other hand, involves algorithms that can be trained over time to act and think like humans with the goal of improving forecasting. A &ldquo;supervised learning&rdquo; approach means that as these algorithms are exposed to more sources, specialists training the models can ensure their continual improvement.</p> <p>For example, at The Smart Cube, we use a combination of supervised learning algorithms and techniques, namely random forests, support-vector machines and boosting algorithms to forecast commodity prices.</p> <h2>Producers, Traders and Buyers: Who&rsquo;s Leading the AI Race?</h2> <p>There are three main audiences when it comes to AI solutions in commodities: producers, traders and buyers. For the purposes of this article, we are focusing on the procurement function, so we&rsquo;re leaving investment funds out of the picture for now.</p> <p>Today, commodity producers are increasingly adopting AI to improve decision-making and forecast output. For instance, large farming corporations are incorporating things like Geospatial AI, soil analysis data and weather data (satellites) to better predict crop yields. Similarly, oil companies are using satellite data to gain a real-time view of tanker locations and storage capacity, and how that will impact supply in the immediate future.</p> <p>Elsewhere, traders are using their existing experience with high-frequency algorithmic trading in their commodity assessments, adopting natural language processing and machine learning to make faster and more accurate decisions based on market shifts, traded volumes, market sentiment (chatter) and intraday price movements.</p> <p>In April 2020, we saw these speculative algo-trading systems cause the WTI crude market to trade at negative $37/bbl. We&rsquo;ve seen similar commodity price upsets, more recently with the negative FX sentiment (from COVID-19) pushing sell-offs in agri-commodities when supply data indicates otherwise.</p> <p>For companies with the right financial resources, these AI investments have provided vital insights. But, the end-consumers of commodities&mdash;manufacturing companies, for instance&mdash;are a bit behind the curve when it comes to AI adoption for commodity forecasting. And this can mean that a certain percentage of their price risk is subject to the whims of the market.</p> <p>For this reason, your inbox is probably overflowing with AI companies offering their services in this area. But rushing to the latest tech might not always be the best approach.</p> <h2>Three Questions to Ask Before You Invest in AI</h2> <p>AI can be a powerful tool for commodity forecasting. It can be the key to making better, faster purchasing decisions, budgeting more accurately, predicting risks and opportunities and controlling costs. But there&rsquo;s still a place for traditional methods, too. In fact, in some circumstances traditional modelling may provide a greater advantage than a knee-jerk investment in AI.</p> <p>The question then, is how do you know whether AI provides the right capabilities for your forecasting needs, or if you should continue with the proven processes you know?</p> <p>Before you make any decisions, you should ask yourself a few important questions. Firstly, what is your remit for commodity risk management and how much control do you have to manage your commodity-linked exposure?</p> <p>If you&rsquo;re only reviewing commodity information every six months to a year and are locked into long contracts, then an AI investment won&rsquo;t provide much benefit.</p> <p>However, if you have shorter buying cycles, or contracts that can be updated in line with commodity information, then it could provide the perfect ammunition for better negotiations. In fact, you may even choose to change your buying cycles if you decide that AI could provide enough timely information to make that worthwhile.&nbsp;</p> <p>The other thing to think about is whether you&rsquo;re considering the use of AI for budgeting or hedging. If you&rsquo;re only interested in gaining insights into set price direction, then multi-linear regression modelling (and other traditional forecasting methods) will still prove incredibly effective.&nbsp;</p> <p>Finally, it&rsquo;s important to look at what data is available to support any AI investments you might make. The more data you can feed an AI algorithm, the more effective it will be. So, is there enough data available about your commodities to make investments in AI worthwhile? And do you have access to the right external sources? Or would you be investing in an engine you don&rsquo;t have the fuel to power?</p> <p>For example, an AI forecasting model of Brent crude oil will map historical crude futures with +200 cost drivers (macro-economic data, FX, bond yields, equities, exchange traded volume, other asset classes, derivative demand, supply and demand, etc.) and will be complemented with daily sentiment analysis (geopolitics, natural disasters, social media, etc.) to predict a price move. But not all commodities have globally recognized benchmarks and traded contracts, or even fundamental data/news, which means AI can&rsquo;t be applied in all cases.</p> <h2>The Future of AI in Commodity Management</h2> <p>With greater volatility and uncertainty affecting commodities, and more data sources available to support decision-making, one thing is clear: AI will play a huge role in the future of commodity intelligence. And that&rsquo;s why there is currently no end to organizations offering AI solutions for commodity managers.</p> <p>However, we also know that chasing after the latest tech isn&rsquo;t always the right thing &ndash; adoption, applicability and ROI come into play &ndash; and hence traditional approaches to commodity management still provide a huge amount of value.</p> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/artificial-intelligence-ai" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Artificial Intelligence (AI)</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/machine-learning" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Machine Learning</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/the-smart-cube" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">The Smart Cube</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/digital-transformation" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Digital Transformation</a></div></div></div><div class="field field-name-field-addthis field-type-addthis field-label-hidden"><div class="field-items"><div class="field-item even"><div class="addthis_toolbox addthis_default_style " addthis:title="Is It Time to Add AI to Your Commodity Insights? - Future of Sourcing" addthis:url="https://www.futureofsourcing.com/is-it-time-to-add-ai-to-your-commodity-insights"><a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_linkedin"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_facebook"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_twitter"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_googleplus"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_pinterest_share"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_reddit"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_email"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_print"></a> </div> </div></div></div><div class="field field-name-field-region field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Region:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/regions/global" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Global</a></div></div></div> Tue, 30 Nov 2021 02:00:00 +0000 Omer Abdullah 2087 at https://www.futureofsourcing.com https://www.futureofsourcing.com/is-it-time-to-add-ai-to-your-commodity-insights#comments Using Procurement Analytics to Become an Agent of Change https://www.futureofsourcing.com/using-procurement-analytics-to-become-an-agent-of-change <div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="https://www.futureofsourcing.com/sites/default/files/articles/Using%20Procurement%20Analytics%20to%20Become%20an%20Agent%20of%20Change.png"><a href="https://www.futureofsourcing.com/sites/default/files/articles/Using%20Procurement%20Analytics%20to%20Become%20an%20Agent%20of%20Change.png" title="Using Procurement Analytics to Become an Agent of Change" class="colorbox" rel="gallery-node-2063-u8B-Vq5Wdyo"><img typeof="foaf:Image" src="https://www.futureofsourcing.com/sites/default/files/styles/juicebox_medium/public/articles/Using%20Procurement%20Analytics%20to%20Become%20an%20Agent%20of%20Change.png?itok=N5hbYfIp" width="624" height="325" alt="Using Procurement Analytics to Become an Agent of Change" title="" /></a></div></div></div><div class="field field-name-field-intro field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even"> <h1>Using Procurement Analytics to Become an Agent of Change</h1> </div></div></div><div class="field field-name-field-related-news field-type-entityreference field-label-above"><div class="field-label">Related news:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/the-three-pillars-of-successful-supply-chain-risk-management">The Three Pillars of Successful Supply Chain Risk Management</a></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"> <p>The role of procurement is changing. Okay, I know &ndash; you&rsquo;ve heard that before. But after the events of 2020 and the ongoing repercussions, that change has been hugely accelerated.</p> <p>Increased market volatility and a high risk of supply chain disruption have placed pressure on procurement teams to maintain profitability, better manage working capital, mitigate third-party supplier risks and drive business sustainability. As a result, those teams are playing a more central and strategic role in their organizations.</p> <p>This role requires the latest tools, technologies and insights to succeed. And at the forefront of those technologies is procurement analytics.</p> <h2>The Changing Role of Procurement</h2> <p>It&rsquo;s hard to find many positives in a global pandemic. But for procurement teams, the last year&rsquo;s events have seen the function elevated to a new standing in many organizations.</p> <p>Departments are now expected to drive value beyond savings. They are responsible for effectively managing category and supplier risk, guiding supplier-enabled innovation, ensuring organizational agility, and steering digital adoption and sustainability initiatives.</p> <p>During a recent webinar we hosted on how procurement leaders become an agent of change, attendees echoed these sentiments. When asked about the top three impacts on their business environment, we saw a relatively even spread across a range of drivers:</p> <ul> <li>Budget pressure to recover profitability and preserve cash &ndash; 64%</li> <li>Higher risks of supply chain disruption &ndash; 55%</li> <li>Changing ways of working &ndash; 52%</li> <li>Increased market volatility and complexity &ndash; 51%</li> <li>Drive for sustainability &ndash; 43%</li> <li>Skills evolution &ndash; 32%</li> </ul> <p>At the heart of each of these demands, whether it&rsquo;s reducing risk or improving profits, is the need for insight-led procurement. And that&rsquo;s where procurement analytics comes in.</p> <h2>What is Procurement Analytics?</h2> <p>Simply put, procurement analytics is the process of turning data into actionable insights to address procurement priorities.</p> <p>At its most basic level, procurement analytics can help us make data-driven decisions to better manage spend and supply chain risks among other things. But there&rsquo;s a great deal more to it than that. There are four stages of procurement analytics maturity that make up a roadmap for change, from the basic use of data to more advanced modeling and insight.</p> <ul> <li>Data management &ndash; The first step of a procurement analytics journey is to build a robust and standardized repository of data that can provide insight into your organization&rsquo;s purchasing.</li> <li>Descriptive analytics &ndash; Descriptive analytics can then help you understand the story that data tells and provide insight into real-time reporting metrics and KPIs.</li> <li>Diagnostic analytics &ndash; Using external and internal benchmarks, category levers, and risk and root-cause analysis, you can then begin to understand precisely <em>why </em>these things are happening.</li> <li>Prescriptive and predictive analytics &ndash; Finally, using predictive and prescriptive analytics alongside forecasting and simulation models, you can gain insight into what will happen next &ndash; and optimize strategies to get ahead of the game.</li> </ul> <h2>Roadblocks, Key Considerations and Readiness</h2> <p>During our recent webinar, only 9% of attendees said they&rsquo;re currently implementing predictive and prescriptive analytics. And 29% said they were still largely focused on spend analytics.</p> <p>So, what&rsquo;s slowing adoption? Most organizations are aware of the value of analytics &ndash; more on that later &ndash; but they often struggle with data-, insight- and adoption-related challenges.</p> <p>There are four common obstacles:</p> <ul> <li>Lack of quality data &ndash; Any analytics solution is only as good as the data that fuels it. But many organizations struggle to access clean and reliable data from the numerous systems across their IT landscape.</li> <li>Legacy technology &ndash; Obsolete tech, including the multiple, home-grown custom ERP systems that many Procurement organizations rely on can also prove a substantial barrier to actionable insight. Even today, many procurement functions rely heavily on spreadsheets, which makes extracting data a mammoth challenge.</li> <li>Insufficient support<strong> &ndash; </strong>For analytics projects to work, you need the proper support and funding. But convincing stakeholders and proving ROI can be difficult. That said, there&rsquo;s perhaps never been a better time to put a business case together than right now.</li> <li>A shortage of talent &ndash; Finally, driving effective analytics requires relevant skills. But a shortage of talent can make those skills hard to come by.</li> </ul> <h2>Are You Ready for Procurement Analytics?</h2> <p>With these factors in mind, it&rsquo;s essential to assess your readiness before embarking on any procurement analytics project. You need to evaluate the current level of technology adoption in your organization, and whether your team is tech-savvy enough to adapt to new technologies quickly.</p> <p>From a business perspective, you need to consider whether or not you have the stakeholder buy-in and company culture required to adapt to change and relinquish outdated practices and technologies.</p> <p>Finally, you need to have the right policies and processes in place to support the adoption of your analytics strategy.</p> <p>Check out our <a href="https://www.thesmartcube.com/resources/videos/using-procurement-analytics-to-become-an-agent-of-change/" target="_blank">webinar on-demand</a> to learn more about each of these projects, and get a 10-point checklist to ensure success in your own analytics journey.</p> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/procurement-analytics" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Procurement Analytics</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/the-smart-cube" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">The Smart Cube</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/risk-management" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Risk Management</a></div></div></div><div class="field field-name-field-addthis field-type-addthis field-label-hidden"><div class="field-items"><div class="field-item even"><div class="addthis_toolbox addthis_default_style " addthis:title="Using Procurement Analytics to Become an Agent of Change - Future of Sourcing" addthis:url="https://www.futureofsourcing.com/using-procurement-analytics-to-become-an-agent-of-change"><a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_linkedin"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_facebook"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_twitter"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_googleplus"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_pinterest_share"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_reddit"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_email"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_print"></a> </div> </div></div></div><div class="field field-name-field-region field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Region:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/regions/global" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Global</a></div></div></div> Tue, 28 Sep 2021 17:00:00 +0000 Omer Abdullah 2063 at https://www.futureofsourcing.com https://www.futureofsourcing.com/using-procurement-analytics-to-become-an-agent-of-change#comments The Three Pillars of Successful Supply Chain Risk Management https://www.futureofsourcing.com/the-three-pillars-of-successful-supply-chain-risk-management <div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="https://www.futureofsourcing.com/sites/default/files/articles/The%20Three%20Pillars%20of%20Successful%20Supply%20Chain%20Risk%20Management.png"><a href="https://www.futureofsourcing.com/sites/default/files/articles/The%20Three%20Pillars%20of%20Successful%20Supply%20Chain%20Risk%20Management.png" title="The Three Pillars of Successful Supply Chain Risk Management" class="colorbox" rel="gallery-node-2043-u8B-Vq5Wdyo"><img typeof="foaf:Image" src="https://www.futureofsourcing.com/sites/default/files/styles/juicebox_medium/public/articles/The%20Three%20Pillars%20of%20Successful%20Supply%20Chain%20Risk%20Management.png?itok=8nNZPMEN" width="624" height="325" alt="The Three Pillars of Successful Supply Chain Risk Management" title="" /></a></div></div></div><div class="field field-name-field-intro field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even"> <h1>The Three Pillars of Successful Supply Chain Risk Management</h1> </div></div></div><div class="field field-name-field-related-news field-type-entityreference field-label-above"><div class="field-label">Related news:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/the-role-of-a-procurement-center-of-excellence">The Role of a Procurement Center of Excellence</a></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"> <p>Risk plays a role in every decision that is made by every business &ndash; and the supply chain is certainly no exception. Every supplier choice, contract negotiation and procurement transaction involves an unavoidable element of risk.</p> <p>But just because risk can never be fully eliminated, that doesn&rsquo;t mean it&rsquo;s ok to leave it up to chance. Effective supply chain risk management demands continuous attention, careful planning and thoughtful execution.</p> <p>It&rsquo;s built on three pillars &ndash; each of which plays a fundamental role in helping you mitigate the impacts of unforeseen crisis events, and maintain stable, resilient supply chain operations.</p> <h2>Pillar #1: Commitment</h2> <p>Supply chain risk management isn&rsquo;t a one-time exercise. Even when you&rsquo;re responding to a major supply crisis event like the COVID-19 pandemic, simple snapshots of conditions and operations offer limited value when it comes to mitigating risk and safeguarding the supply chain long term.</p> <p>Instead, it demands a constant commitment at all levels of the procurement organization. But it can&rsquo;t stop there. Ideally, ongoing risk management needs to be embraced by the wider enterprise too &ndash; gathering, interpreting and acting on signals from the multiple departments that touch, monitor or otherwise impact the supply chain.</p> <p>Embedding and upholding that enterprise-wide commitment to supply risk is a challenge for many organizations, and represents a significant cultural shift for most. You can&rsquo;t expect people to fundamentally change how they think overnight, but there are a few ways you can support and enable this shift, and give your team the best chance of adapting successfully.</p> <p>Largely, that enablement hinges on how well you manage, share and operationalize risk-related data. If you want your people to factor risk into their decision-making, you need to equip them with the insight to do that effectively. That means evaluating and applying signals at scale to give everyone a precise view of risk factors and their potential impact on performance.</p> <h2>Pillar #2: Rigor and Discipline</h2> <p>At all times &ndash; before, during and after a disaster or risk event &ndash; action is essential. But so is organizing that action in a thoughtful and structured manner. It&rsquo;s critical to ensure that the actions you take are the right ones, or your attempts to re-establish stability could see you descend further into supply chain chaos.</p> <p>To make the right decisions and take the right actions, you need access to reliable supply chain insights. Again, not just a snapshot of today, but a deep, relevant and accurate view of operations and conditions, maintained and evaluated on an ongoing basis.</p> <p>By applying rigor and discipline in how you collect, monitor and evaluate supply chain data you&rsquo;ll always have access to insights you can rely on. And when a crisis strikes, your team won&rsquo;t need to frantically pull together data to learn what&rsquo;s going on &ndash; accidentally introducing errors in the process. They&rsquo;ll already know, enabling you to act quickly and appropriately without missing a beat.</p> <h2>Pillar #3: A Probabilistic Mindset</h2> <p>Risk is one of the few reliable constants in business. Managing it is never a question of whether risk is present, but how much risk there is. And when it comes to disruptive crisis events, it&rsquo;s not <em>if</em> one may happen, but <em>when</em>, and how much it will impact your operations.</p> <p>Leaders and teams managing supply chain risk need to factor that into their mindset. No decision will ever be truly risk-free. Your job is not to eliminate risk, but to understand its potential impacts and make decisions that minimize it wherever possible.</p> <p>In a 1999 speech at the University of Pennsylvania, former United States Secretary of the Treasury Robert Rubin summed this approach up succinctly as he distilled his four principles for decision making:</p> <p>&ldquo;First, the only certainty is that there is no certainty. Second, every decision, as a consequence, is a matter of weighing probabilities. Third, despite uncertainty, we must decide and we must act. And lastly, we need to judge decisions not only on the results, but on how they were made.&rdquo;</p> <p>Managing a global, complex procurement function requires this same weighted and disciplined approach, a concerted effort to minimise the impact when &ndash; not if &ndash; disaster strikes.</p> <p>Risk abounds all around us and nothing can diminish that fact. It is only with diligence, critical analysis and planning that we can manage these risks and achieve fluid, profitable movement of goods and services, minimised supply disruption and maximized business continuity.</p> <h2>Take a Deep Dive into the Fundamentals of Supply Chain Risk</h2> <p>Want to learn more about the fundamentals of supply chain risk management and prepare your team for the next big supply chain crisis? Get your copy of <a href="https://www.riskandyoursupplychain.com/" target="_blank"><em>Risk and the Supply Chain: Preparing for the Next Global Crisis</em></a> today and discover expert insights from The Smart Cube&rsquo;s Omer Abdullah and Subash Chandar.</p> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/third-party-risk-management" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Third Party Risk Management</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/risk-mitigation" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Risk Mitigation</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/the-smart-cube" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">The Smart Cube</a></div></div></div><div class="field field-name-field-addthis field-type-addthis field-label-hidden"><div class="field-items"><div class="field-item even"><div class="addthis_toolbox addthis_default_style " addthis:title="The Three Pillars of Successful Supply Chain Risk Management - Future of Sourcing" addthis:url="https://www.futureofsourcing.com/the-three-pillars-of-successful-supply-chain-risk-management"><a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_linkedin"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_facebook"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_twitter"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_googleplus"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_pinterest_share"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_reddit"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_email"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_print"></a> </div> </div></div></div><div class="field field-name-field-region field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Region:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/regions/global" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Global</a></div></div></div> Wed, 25 Aug 2021 02:00:00 +0000 Omer Abdullah 2043 at https://www.futureofsourcing.com https://www.futureofsourcing.com/the-three-pillars-of-successful-supply-chain-risk-management#comments