In this guest post, an extract from Procurement Leaders Magazine Issue 60, we invite Tom Linton, CPO of Flex, to share his view on the rise of real-time information and decision-making and how it will shape procurement processes.
The focus on process improvement by management teams began in the 1980s. However, with the birth of enterprise software, its expansion in the 1990s and the establishment of internet-based software, the process is about to be disrupted again.
Business history is littered with disruption. Industrial revolutions dating back to the 17th century are full of examples where one trigger started an avalanche of change: the printing press, cotton gin, telephone, automobile, aeroplane and computer. But what they all have in common is that the trigger was often pulled decades before full-scale adoption took place.
So to find out what is happening now, we need to go back a couple of decades. Today it is clear that the establishment of the internet led to the explosion of information and the subsequent procurement tools and applications that are now harvesting data. I believe this disruption, though, has not yet fully matured; in fact, it is really only just beginning.
Traditional enterprise software accumulates silos of data. This data is then called upon by managers and pulled up in reports that can be used to make decisions. It provides information in chunks or batches, which by definition is historical. In fact, almost all decisions in procurement today are based on information about things that happened in the past. Can you imagine if your car speedometer told you how fast you were going yesterday?
This is our current scenario. We know how much we quoted, sourced, contracted and paid yesterday. What if we could make all our decisions in real time? What would happen to our performance if we had data in real time?
Tools able to provide that view are being developed. New concepts, such as asset velocity will transform business balance and income statements as processes are defragmented and accelerated.
A good example is dynamic pricing: with online shopping, prices can change in a second. Why can’t businesses operate that way? As with online auctions, what if the entire economy was live and prices moved based upon the stock market like buyer-seller engagement? Bricks-and-mortar stores have
to quickly reduce prices based on what online retailers are offering. The wave is just forming.
As we increase machine-to-machine communications, it is not unthinkable that the invisible hand of capitalism envisioned by Adam Smith will become automated. Buyers and sellers will not reach a price agreement over days or weeks but instantaneously. Data that forms a price derived from materials, demand, supply, labour and location will form agreements. These agreements, or the meeting of the minds, could be reached quickly and efficiently. Business velocity will increase, leading to rises in productivity and output.
But what is today’s interim step toward that future? It is the human-machine interface. At Flex, this interface is up and running at the new Flex Pulse Center in California. In this room, 23 touch-panel screens are redefining how decisions are made with real-time information. Using Elementum software, information is not only visualised locally but is simultaneously pushed to mobile devices around the world so everyone from planners and buyers to managers can collaborate in real time. This increases speed and drives new levels of productivity.
- Procurement professionals who use
real- time information will have a head start. Use real- time software that allows visibility
so you can speed up decision-making. Think about the human-to-machine interface
- Look at the business as a whole for ways to accelerate, not just automate. Look at how fresh data is and where it is slowing the process down.
- Address new measurements of data freshness, speed and decision-making. Show how improved financial outcomes are tied to this new visibility and velocity of decision-making.
- Be impatient with old data. Collaborate with the CIO to achieve new levels of data quality in real time.
The world is changing. Procurement managers must exploit new connections and ways of harnessing data to speed up processes and achieve new levels of financial performance.
This article appears in Procurement Leaders Magazine Issue 60.
Tom Linton is CPO of Flex. He will be speaking at the World Procurement Congress in London, 17-18 May.
This contributed article has been written by a guest writer at the invitation of Procurement Leaders. Procurement Leaders received no payment directly connected with the publishing of this content.