“Rather than thinking you’re right, ask yourself, how do you know you’re right?” These are the sentiments of Ray Dalio, founder of Bridgewater Associates, the largest hedge fund in the world, during his recent TED Talk on enhancing decision making. Dalio believes that one of the greatest tragedies of mankind is that people arrogantly and naively hold onto opinions that are incorrect, and act on those views without any verification process.
As the role of purchasing continues to expand and as time becomes more scarce, it’s good to know that help is on the way. Though artificial intelligence isn’t “help” in the traditional sense, its capabilities for strengthening procurement aren’t either. The benefits of AI are much more significant. And if your firm delays in embracing AI, it will be giving the competition who makes it a priority a leg-up. Any company looking to perform true strategic sourcing will need AI’s assistance in tackling the challenging and nuanced task.
At the recent Spring 2017 Prime Advantage Conference, Lisa Reisman of MetalMiner gave a Metals Outlook presentation on how procurement should approach the metals market and all of its fluidity. Reisman contends that most forecasters are notoriously inaccurate and that metal production and consumption numbers are largely useless to metal buying organizations. These numbers aren’t very actionable and fail to correlate to the timing of purchases. The chances of hitting a bullseye when prophesying based off of these figures is extremely small.
The Internet of Things (Iot) and smart devices have made our lives a whole lot easier. We can put a pot of coffee on, adjust the room temperature, and turn on the lights, all as we’re pulling up to our driveway. In the workplace and on manufacturing plant floors, smart machines connect to each other to create harmony in production, use thousands of sensors to make modifications in real-time, and can even repair themselves. At the rate technology advances in the modern age, the present seems more like that future than ever before.
There are many schools of thought on how to motivate another person. Some think that it simply can’t be done. That each individual is in complete control of the fire inside and only he or she can truly push on to conquer a challenge. On the contrary, others believe that the right jambalaya of words, pitch and passion can get someone to run through a wall for them. The truth most likely resides – as it so often does – somewhere in the middle.
People in procurement use the phrase "strategic sourcing" frequently. It means using a fact-based approach for optimizing an organization's supply base to improve the overall value proposition. With this definition in mind, let's walk through some traditional procurement behaviors to see where they may be lacking the strategic component.
Raw materials are essential to making our products. Keeping your supply chain running smoothly to ensure the delivery of these raw materials is the focus of every procurement group. When you have a supplier that is struggling to keep up their end of the bargain, it is an arduous task to find their replacement.
We all know business metrics are important but the challenge is determining which ones to analyze and how to better use them to reach your company's goals. Metrics should be set by your overall company strategy and not be dictated by how easy they are to measure, or by what data is readily available. Gauging your performance in a way that doesn't support your strategy will create activities that could eventually undermine your overall performance.
If you desire more innovation from your suppliers, you need to be willing to knock down your walls and collaborate to make this happen. Supplier Relationship Management (SRM) is a journey where you set the course. There needs to be a solid organizational reason to pursue a deeper connection with a supplier. Understanding this goal before you start your process is the key. However, you don't want this type of relationship with every supplier. Many suppliers just need to deliver the product at the negotiated time. The suppliers in this category solely need to be held to the agreed upon metrics to be deemed a success.