The future of procurement is all about people, networks, and principles.
From moleskin to fishing rods, Cirque du Soleil is a company that procures a lot of strange stuff because of the nature of their business. The bungee costumes worn by the performers of the Mystère production, for example, each have over 2,000 hand-glued sequins. Sourcing everything from crystals and buttons to logistical services around the world is a herculean task, running 24/7, 365 days per year. Automating processes and making the right procurement decisions saves time and money, so Cirque du Soleil implemented SAP Ariba to lighten the administrative burden.
But what does the sourcing team do with their time now that their old jobs have been replaced by automated processes? For one thing, they focus more on negotiating with suppliers, letting the system handle the processes and people handle the decisions.
Regardless of where they’re based or what they do, companies around the world need to make faster and more strategic sourcing decisions to retain a competitive edge. Etihad Airways, for example, morphed from regional player into the fastest growing airline in the history of commercial aviation. To deal with such growth, the company needed to consolidate systems, streamline their source to contract process and improve integration of new suppliers. Again, people played a key role.
“At Etihad, we realized we had to completely change the way we procure and source,” says Tracey Tops, a business analysis manager who helped transform procurement and supply management at Etihad Airways with SAP Ariba.
“We operate on a massive scale dealing with 28,000 suppliers and over 70,000 purchase orders per year. Previously, procurement was an inward looking, gatekeeping function with limited stakeholder engagement. To move from a governance style function to a value adding one, we needed experienced project leads, executive sponsors, change champions and plenty of training. Now, our buyers are business enablers engaging with all stakeholders to deliver the best value based on trustworthy supplier information.”
Next-Gen Buyers and Sellers
There are two aspects of procurement that will never go away, people and processes. Buying and selling is a human interaction. Traditionally, the buyer side of an organization is spend conscious. It’s a process driven B2B world, where the focus is on cost savings and margins, in other words, serious and tedious.
The sales side of the house, on the other hand, is cool and exciting, because it’s where you see the money. It’s all about doing business, driving revenue and engaging with customers. That’s changing.
“Today’s buyers and sellers come from a generation of people who need to touch what they buy. They are used to family shopping excursions,” says Mohammed AlKhotani, president of SAP Ariba Marketing in the Middle East and North Africa (MENA). “Millennials however, are using technology to get things done quickly. Today, machines are making decisions about what to buy and when to buy. But that doesn’t mean jobs will vanish! It just means jobs will change. Procurement always was and always will be about negotiation.”
Procurement and Principles
SAP Ariba is the Facebook of procurement – it’s where companies connect to do business. Buyers and sellers can collaborate, transact, and access a vibrant digital marketplace with millions of trading partners around the world. Automation takes the burden of administration off the buyers’ shoulders and frees them up to think and act more strategically in a much broader ecosystem.
For example, SAP Ariba’s online auctioning tools are widening networks and making the buying process more dynamic. Buyers can compete to obtain goods or services by offering increasingly higher prices, or in a reverse auction, the sellers compete to obtain business from the buyer and prices decrease as the sellers underbid each other. After the auction closes, buyers can simulate scenarios to find the best possible options based on specific criteria and data before making a final decision.
Equally exciting, buyers can embed rules to ensure the buying process is compliant with their procurement policies, putting procurement at the heart of fair trade and sustainable supply chains. A study by Cone Communications found that nine in 10 consumers expect companies to not only make a profit, but also operate responsibly to address social and environmental issues.
Today, many enterprises have green initiatives driven in part by the commitment of global stakeholders to the UN Sustainable Development Goals to transform the world. For many suppliers, compliance is not a luxury; it’s a business necessity. Goals like responsible production and consumption, decent working conditions, gender equality all trickle down into the supply chain.
“People want to associate with companies driven by principles,” says Mohammed AlKhotani. “Business networks provide transparency and insight into the supply chain enabling companies to take a stand and drive ethical behavior.”
So when it comes to saving money and doing good, procurement can be a game changer in the years ahead.
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