Preparing your business for next generation energy procurement
Simon Skillings, Head of Business Development at Open Energy Market, shares his insight on why and how the energy industry needs to ready itself for a new generation of procurement professionals who are addressing the industry’s challenges head-on.
Historically, the procurement element of a business was the sole responsibility of facilities or engineering managers. Their relationship management expertise – from the golf course to the meeting room – was instrumental in getting the signatures on energy contracts that had, at that time, a limited impact on the business. But now, processes, data, legislation, and tighter margins have made energy-buying a far more significant and demanding role within an organisation.
With energy falling into the top three costs for most companies, procurement decision makers are under greater pressure and scrutiny to deliver best results. Until now, those working in energy procurement have been the dealmakers. They have demonstrated their industry knowledge, negotiating skills and talent for fostering relationships. However, with heightened expectations coming straight from the top, they will also have to be far more analytical going forward.
What this means is that the old analogue approach to procurement won’t cut it anymore: there needs to be improvement across the board to enable greater savings, more efficient processes and better analytics to understand spending, controls and risks. To achieve this, legacy structures and approaches will need to make way for next-generation procurement.
Energy buyers are faced by a number of sticky challenges. It is imperative that the next-generation of procurement professionals not only take the traditional costs and terms and conditions into account but consider the following when creating their procurement strategy: reporting and forecasting, spend analysis, market exploration and SLAs. More recently, supplier risk is also an increasing factor given seven energy firms went bust in 2018. To help them solve their problems and drive stronger business results, a push for more tech innovation will be crucial – which will actually give way to a more simple, transparent and intuitive buying experience that users will actively embrace.
Digital procurement – and the use of bots and apps, for example – automates tasks to increase efficiency by streamlining the manual, routine procurement tasks. As well as reducing costs, it also prepares all involved with a greater understanding of real-time insights and analytics through AI and user-friendly platform tools. Ultimately, digital procurement deploys new and smarter ways to permeate data models to improve routine decision making.
The demand for tech innovation – and its benefits – is becoming clear in this field: according to consumer insights analyst, Aleksei Gontsarov, the Procurement Leaders’ Category Planning Guide indicates, for the first time, what category managers hope to achieve in 2019 and the levers they intend to use to succeed. These include e-auctions, supplier collaboration strategies and demand management. Therefore, in spite of (or because of) financial or political uncertainties facing a business, category managers will need to redefine their strategy to incorporate advances in technology if they are to be in a position where they can deliver greater savings and added value in the coming years.
Procurement and supply chain fields are now facing disruption from AI and IoT and, while there is a positive move towards embracing technology, we, as an industry, need to stay smart about the ‘how’, ‘why’ and ‘where’ investment in technology should be made, and not just join the procurement revolution through a fear of missing out.
We have put together some pointers for businesses on what they need to be thinking about to get themselves ready for next-generation procurement.
To kick start the right changes, procurement players – new and old – need to review their approach to buying. This will help them understand where sticky processes need modification. It isn’t just about driving down unit costs, it’s about divergent thinking, being smarter and removing cost from the process itself.
Make sense of the data
The world is now equipped with massive volumes of data requiring both accuracy and intelligence. Making sense of this data will be critical. And this means understanding what was purchased, as well as ‘why’ it was purchased. To do this, and to provide intelligent support, will require the right technology, especially analytics, AI and bots.
Leverage knowledge and tech:
There was a time when procurement decisions were based on past experiences and an individual’s knowledge or perceptions. But a deeper analytical approach is needed today. Implementing the right digital technology – combined with the know-how of expert energy and facilities specialists – can make this happen.
With any technology-powered change it will be vital for leaders to also focus efforts on the education and retention of their existing personnel. And it’s no different in the procurement landscape. Their knowledge and experience will be instrumental to the successful roll-out of these changes. Encouraging a more collaborative relationship with vendors will also help them to reap the real benefits the technology can deliver: stretching beyond cost savings, to delivering positive long-term financial results and ultimately a better service. If your procurement team isn’t educated on the changes or engaged, they won’t be able to deliver the results – so they shouldn’t be left behind in any digital transformation journey.
Today’s new breed of procurement professionals are in high demand. They are equipped with creative and agile thinking, and have an innate ability to navigate technologies that can impact your margins. But demand is fast outstripping supply. To be sure you don’t miss out on accessing the right talent for your business, it’s important to adopt a culture that welcomes, not fears, technology. Because, with the right technology-powered solution you open up opportunities that will benefit your team, your business and your bottom line.
How real-time visibility of the supply chain can help mitigate food waste
In today’s market, consumer demands have not only driven supply chain efficiencies for greater speed and convenience but are increasingly now forcing retailers to address expectations of improved sustainability. The consequences of keeping up with customers’ wishes aren’t always easy and may have an adverse effect on short term business plans and processes, especially if your supply chain isn’t as seamless and transparent as it should be. Even the smallest of inefficiencies can add up and lead to all manner of waste during production, transport and even disposal.
Over recent years, the grocery market has come under scrutiny and intense pressure to re-evaluate its approach to tackling food waste, with around 88 million tonnes worth being generated yearly across the EU, a staggering 40% of food doesn’t even make it to the market.
The problem is, without real-time insight into the exact status and condition of product and inventory within the end-to-end supply chain, what options do companies have to address waste and improve customer engagement? Amir Harel, General Manager of Visibility Solutions at Zetes, explores how complete real-time, intelligence-driven visibility of the supply chain can help mitigate food waste.
The Lack of Supply Chain Visibility
The world is ready for change. According to REFRESH, an EU research project acting against food waste, resources being lost and wasted in Europe would be enough to feed all the hungry people in the world twice over. It’s a message that consumers around the world are taking to heart. From reusable bags to paper straws, and bottle-free toiletries to meat-free diets, people are taking real steps to reduce waste, and they expect the businesses they buy from to do the same.
In the UK, for instance, grocers have encouragingly pledged to halve their food waste from ‘farm to fork’ by 2030. Whilst we commend large retailers for deploying innovative ideas such as the introduction of ‘wonky veg’ - vegetables that do not meet the aesthetic requirements of supermarkets due to shape or appearance – are now being sold in supermarkets to help combat waste, it is analysing the production of waste on a more granular level that will achieve a positive environmental impact at a far greater scale and have more effect.
Yet, recent research from Sapio, on behalf of Zetes, reveals that the current levels of supply chain visibility are far from perfect, with a staggering 94% of organisations surveyed saying they lack transparency throughout their supply chain.
To implement an appropriate resolution, it is imperative that the cause of waste is understood. There are so many contributors – from the excess inventory that arises from poor and/or delayed forecasting and orders, to time lost during the distribution process coupled with inefficient transportation models can be devastating for any short shelf-life products. Just 30% of organisations have full visibility of goods in transit. As a result, addressing the food waste that occurs at every stage of the supply chain is a complex task.
Research highlights that 79% believe that improved visibility would have a material effect on cutting wastage. As a taste of the potential savings, it’s estimated that supply chains could reduce food waste alone by €240bn.
For example, reducing empty miles, improving first time in full delivery, minimising unnecessary stock movement between stores, avoiding forecasting or ordering disputes and achieving far more intelligent routing, are all critical components for an efficient supply chain that minimises waste.
Having complete visibility and traceability of products is also key to a resilient supply chain, which is especially important when recalls and faults in production can cause crisis situations and disruptions. When retailers are able to share data throughout their supplier ecosystem in real time, they can create the foundations for better collaboration based on stronger connections and highly effective dynamic forecasting.
It is also essential that companies understand how technology can be deployed and utilised to address each challenge – whether that is waste reduction through improved transportation or more accurate and dynamic levels of stock availability.
So, where to start?
Environmental consciousness in the digital age will continue to have a huge impact on retailers. The vision to transform ‘farm to fork’ and remove food waste from the supply chain is big. To succeed, retailers need to start small, identifying priority areas first, where quick and impactful wins can be realised. As they start to see results, they will be able to scale fast and ultimately achieve full end-to-end intelligence-driven visibility.
Zetes’ Supply Chain Visibility Research Report surveyed 451 respondents in the UK, France, Germany and Spain. All interviews were conducted in December 2018 and January 2019