In this MNC thought leadership article, we interviewed one of SourceSage's global client, Peter Woon, Director, Strategic Sourcing and Procurement, Supply Chain Management, C&W Services.
What are some of the key challenges in procurement?
Most procurement organisations today have to deal with direct and indirect spend. We noticed that indirect spend is becoming increasingly significant, because what is classified as indirect spend has expanded. What we found when we measured direct versus indirect spending - depending on their definitions and classification - is that they can be almost equal, and sometimes, indirect spend can be larger. The challenge lies in the classification of products and services as direct or indirect spend. Indirect spend are usually categorised as low value, low risk and high frequency while direct spend are regular activities and are probably higher value, higher risk and higher frequency.
The other is allocation and recruitment of personnel with the right knowledge and expertise to manage categories of spend. The challenge is whether to have personnel for each individual category or personnel to cover multiple categories, and it becomes a question of hiring people with deep skill sets or broad skill sets. To illustrate, utility contract is a very critical, high dollar spend but you only do that once every year or every two years. The question is, do you need to have a Category Manager for just utility or to have one person covering other categories too. So we identify categories with very deep impact, and label them as key categories, and allocate category management skills. For staff with broader skill sets we assign them to monitor five or more categories.
We also seek to outsource our non-core activities that are low impact and retain core activities in-house to optimise resources and create efficiency. We seek providers who have the expertise and are already providing it well for other customers. SourceSage is an example of how we can resolve these challenges with the right facilitating partner.
What are the new technologies or trends that are shaping the industry that are very exciting or challenging for you as a Chief Procurement Officer?
The use of technology is much more prevalent, and technology is helping to make the overall user experience and procurement and supply chain processes more effective and more efficient. Technology can be the use of enterprise-wide ERP systems or multi-platform systems. It can also be about incorporating the use of smart technology. And that's where data plays a very important role. Businesses are looking at what data is collected and for which purpose, such as for addressing business challenges and issues. Data on user usage could be looking to address consumer buying patterns and search patterns to see what users are searching for, what they intend to buy, and then we can try to see how to provide the category or the items and recommend suitable products.
We are looking at spend analytics beyond generic spend for accounting purposes to obtain a second level of intelligence. So it's not just a spend by category, by suppliers, or by project codes but to discern trends and patterns so that we can formulate better strategy to manage spending. We want to apply technology beyond price comparators to benchmark and track cost components and their drivers. For example, many suppliers have cited the recent oil price increase as a reason to increase their prices by 30 to 40%. But in reality, the oil price increase may not have any impact on the price of the product or would only account for a small percentage of increase. So, we want to be able to accurately and equitably account for the increase at the component level. This price analysis and benchmarking will give us a new capability to do cost analysis more accurately.
"So technology definitely can play a part, and it is to our own detriment if we do not leverage on technology to solve business problems."
What are some of the bottlenecks or obstacles in the course of innovating within a large organization?
Any innovation or implementation of projects is not just about technology. It is about people, process and technology. You need people to accept the purpose of the change, to be adequately trained to use the new platform, and are able to operationalise the platform. Else, the best technology will be of no use if users don't want to be onboarded to the platform or to use it - the project is then doomed. Similarly, if the workflow or processes are not clear and technology does not enhance the workflow and simplify the processes, it will likely lead to failure as well. I think this is where most companies fail - by not understanding that project success involves all three components of people, process and technology to address real business needs.
What are the challenges that you face in obtaining accurate procurement data for decision making?
So we have our existing analytics, that is through our internal ERP P2P platform and together with SourceSage’s multi-catalogue platform, we are looking at analytics holistically. We are also using the data to monitor our AVL performance, whether their products are sustainable products. In our ERP system, when we register a product, we will tag whether it is sustainable or not. In the SourceSage system, we would like to see the same information in order to obtain a consolidated picture.
So I think this will definitely help the supply chain team and procurement team to not only adopt the system, but also to see how they are using the system to make their decisions and understand their users' usage patterns. It has to be more efficient and provide a better user experience. When a new technology is implemented, most users will naturally resist the change. But if the new implementation is familiar to the users - for example, SourceSage multi-catalogue platform, where users who are already familiar with buying on eCommerce platforms, thus finding a familiar user journey and experience - it becomes easier for users to adopt.
And then again, we are trying to implement a platform not only for qualified buyers, but also for any users that need to buy without the need to qualify them as buyers. So we'll make the buying process simple, easy to use, so that when they use it, they feel confident and will not stay away from it. Then we can track what users are searching for, what they add to cart, why they abandon cart. These are important data and can provide insights as to whether they don’t know the actual product they need, don’t need it in the first place or if they are facing a technical problem.
"We are happy to note that SourceSage’s mission to create a B2C experience for all B2B buyers is aligned with what we at Cushman & Wakefield is trying to achieve."
The SourceSage solution or the multi-catalogue solution is probably among a suite of solutions that C&W is using to manage costs, and also your suppliers. What are the other key features that have been proven to be beneficial?
In the initial survey of users in the pilot after a four-and-a-half-month period, it is quite positive. One is the ease of use and the experience which is similar to their individual B2C eCommerce experience, and that helped to get users onboard. The search function can be improved to return more relevant results and we are glad that this has been rectified after we highlighted that. The price comparison is one key feature to provide price transparency and also to ensure that we get the most competitive prices. The multi-catalogue platform also offers product varieties and makes product comparison much more informative.
For AVL, besides an MOQ, they also have tiered pricing based on volume. It may not be significant at this point of time, but it is something that we need to look into. Together with data on buying patterns, we can then explore ways to consolidate the purchase to qualify for better pricing at the next tier.
Could you share some insights on supplier management?
Our suppliers are classified as Non-Approved Vendors and Approved Vendors, as well as Preferred Vendors with whom we do more business with. We want to ensure that our relationship is fortified by the fact that we are actually channelling more business to them. Our expectation of preferred vendors, is that they must ensure that they provide us with better service and better competitiveness. We also create a mutually beneficial relationship beyond commercial aspects to include sharing of knowledge such as procurement processes through P2P systems or multi-catalogue platforms, technology, sustainability practices and best practices, so that they can level up their service offering to other customers.
With multi-catalogue platforms, do you see companies moving away from the need to have an Approved Vendor List?
That's an interesting question. The need for AVL is for two purposes. One is for ISO 90000 quality assurance management system, where as an ISO 9000 certified organisation, you need to have a system in place to qualify your vendors, as approved vendors. The other is risk management which is becoming increasingly important in the global trade. For example, the Ukraine-Russia conflict that happened overnight between February 24 to 25 February. If you have suppliers in that location, and if the suppliers are your single source suppliers, you are immediately at risk. But you won't know this unless you have a risk assessment system in place to identify suppliers at risk. So, besides the AVL qualification system, we have an additional layer of risk assessment looking at reputation risk, supplier risk, financial risk, and whether supplier is in a sanction list, to ensure that suppliers with high risks are not onboarded or managed pre-emptively. We also require our suppliers to declare that they abide by an ethical code of conduct and practice.
What is your experience working with SourceSage?
One of the unique things why we like working with SourceSage is that we do not see SourceSage just as a catalogue platform provider. We want to explore how we can collaborate to get more innovative solutions, driven by data analytics. We want to empower every individual person in the organisation to make a buying decision and free the more senior persons who used to do the buying to do higher value work. These are long tail spend, which are low value, low risk and high frequency where procurement and supply chain staff want to spend the least amount of time. SourceSage platform provides the opportunity for procurement staff to focus on strategic spend, which is high cost and high impact by allowing low value, low risk and high frequency buys to be completed in the fastest and most efficient way that requires minimal approval, and minimal level of intervention. Ideally, we would like to achieve what I call “zero touch” where procurement staff don't even need to get involved. We like as many users to do the buying directly.
Would you recommend the SourceSage solution to other procurement leaders?
That’s a definite yes!
*SourceSage is a global software company headquartered in Singapore founded in 2015, with presence in Malaysia, Thailand, Vietnam, Indonesia, Philippines, China, India, Japan and Australia. We are the Expedia for B2B procurement, with the mission to streamline long tail spend for companies. One of our unique advantage is that you can create a unified buying experience for your employees by placing all your approved, non-approved and marketplace suppliers in one platform in minutes with lots of configurable features like shopping list, price comparisons, 3 quotes system, DoA, smart search and many more!
