October 13, 2020

Solving the Procurement Data Dilemma: Using supplier data to drive successful relationships

use supplier data for successful relationships

In our second interview in the series on ‘Solving the Procurement Data Dilemma,’ which supports a full survey carried out by HICX and Raconteur on the subject, Gren Manuel speaks to Richard Wilding, OBE. Richard is professor and chair in Supply Chain Strategy at Cranfield University and has had a very distinguished career, both in Procurement and supply chain management.

The difference between failure and success

Richard Wilding opens this interview by reinforcing the importance of managing relationships, which he sees as the crucial differentiator between success and failure, as he maintains: “The procurement team’s key focus is managing relationships. Not only externally with suppliers, but also internally as well because the decisions that the procurement teams make are absolutely critical to the business success of the organization,” adding, “The ones that have failed have very much failed around the management of relationships.” He adds, “One of the definitions I use is that supply chain management is all about the management of upstream and downstream relationships.”

Data forms a vital component to the management of these relationships, as Richard clarifies, “The key thing with data is, there’s a cycle. Data that is brought in will lead to knowledge. When we have knowledge, that leads to good information as well, so we’ve got this knowledge and information [dynamic], which ultimately is there to create wisdom. So we get this cycle of data, information, knowledge and wisdom.”

This, in Richard’s view, underlines not only the importance of obtaining really strong supplier data, but also the key role that Procurement has to play, acting as the interface for acquiring this information. However, it involves more than simply recording the data that is required for transactional purposes, as Richard goes on to describe, “Other functions in the business will have other uses for [the data as well]. So it’s not just thinking about the data which is useful to them, it’s also important to think about data which is useful to the organization as a whole.”

Drastic shortcomings in handling of data

In the interview, Richard describes how utterly amazed he has been, particularly during the COVID-19 crisis, at how many organizations, including big blue chip organizations, have uncovered drastic shortcomings in their handling of data – and the lessons for Procurement to bear in mind, stressing, “Now, the point is, for procurement teams, it’s not just about knowing the location of the head office of the supplier. It’s also about knowing where their manufacturing facilities are, and the flows across the supply chain. This is incredibly important information – and data that is required.”

Richard reiterates the crucial role that the procurement function has to play, being looked upon to provide the transparency and the information needed to ensure supply chain resilience, as well as supporting the competitive position of the business in the future.

His advice is to think it through in this manner: “If I am using this bit of data, is that going to create the information that is correct, is that going to create knowledge that people can act on and is that going to guide them and give wisdom to the rest of the organization?” He urges procurement professionals to think, “If you’re bringing data into the business, it’s not just how do I use it, it’s how does the next person in the chain use that data.”

This is where data, transparency and collaboration must come together – and Richard’s view is that it is often within that collaboration aspect that procurement teams can fail.

The right tools for the job

As collaboration is so critical, it is also important to use the right solutions for the purpose. Richard points out, “If you’re talking about a very small organization, a small medium enterprise, with a limited number of suppliers, it sounds awful, but you may get away with just a good, well thought-out Excel spreadsheet.”

However, he warns, “For larger businesses, you’ve got to have an appropriate supplier data management system, which actually enables you to capture all the various data that you actually need and also communicate that effectively across the organization so that you have that one version of the truth, which everybody can use. So, you haven’t got people in warehousing actually having their own ‘special’ spreadsheet of the correct data which they need and somebody else having their ‘special’ spreadsheet of what they think is the correct data that they need.”

New demands on Procurement

Data is also crucial for being able to support wider strategic initiatives within an organization. It is therefore key that these are taken into account and monitored as part of the procurement function.

In the interview, Richard advises, “You have to think through that Procurement don’t just buy stuff, they’re also having to manage things nowadays, like thinking about the legislation which is taking place, such as modern slavery legislation, and so on and so forth. So they need to keep an overview of all those particular aspects as well. They very much have to spin multiple plates in order to do their job effectively and to help support the management of the supply chain, so the organization can really create value and maintain its competitive position.”

Procurement for resilience, not just cost

While a grossly simplified assessment, traditional KPIs for Procurement really boil down to a question of ‘how much have you saved over the last twelve months?’

However, this approach will not be fit for the future. Therefore, in order to support ‘Procurement for resilience, not just cost,’ Richard believes that success metrics for underpinning Procurement’s performance will also have to evolve. He explains, “What we’re going to start finding, for example, is that procurement professionals are going to be measured on how effectively they manage relationships. It doesn’t happen by accident, you’ve got to manage relationships, so that could be part of a ‘balanced scorecard,’ a balanced set of metrics that the procurement manager is operating under.”

In the interview, Richard highlights a number of aspects that this might incorporate:

  • Does the Procurement function have good collaboration both internally and externally?
  • How are they creating transparency?
  • How are they supporting continuous monitoring and intelligence?

Richard concludes: “It’s all about the strategic implications about how Procurement can support the business to maintain its competitive position.”

This interview was conducted as a response to the HICX publication, “Solving the Procurement Data Dilemma,” a comprehensive survey of 100 senior procurement professionals from some of the largest US and Western European manufacturing and CPG businesses, in partnership with Raconteur. Don’t forget to download your full copy to read more.

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