Leaders in food retail are increasingly asking how they can transform the way procurement operates to improve cost control, drive efficiency and strengthen risk management processes.
Today there is endless information available at near-real-time, and these large volumes of data can overwhelm food procurement teams and result in missed opportunities and poor decision-making. Too much data can be as challenging as too little. The majority of procurement leaders claim to have access to price and commodity data. Many admit that, when looked at more closely, it's not always the data that relates to their biggest spends—often resulting in blind spots in understanding their product costs and validating their supplier prices. These blind spots are compounded when you are looking across thousands of products and raw material ingredients.
This lack of clarity into prices makes it difficult to benchmark supplier prices against the actual market cost based on current market conditions. Fragmented and incomplete data makes it difficult to create complete cost models for all products, and missing ingredients and other direct costs create a false sense of actual product costs increasing competitive risks.
Although data is often available, it takes too long for procurement teams to collate fragmented data from a wide range of data providers into the insight needed to understand food raw material or commodity market and prepare for supplier negotiations. Using technology, including Robotic Process Automation (RPA), is one of the technologies with the greatest potential to transform food procurement teams right now.
Commodity price data relating to these sources are so disparate and disorganised that the category buyer and procurement analyst are forced to focus on the top 5, or so food spends; the rest are often ignored. As a result, significant savings are missed in the tail spend.
As a result of these challenges, the procurement industry is reaching a digitalisation tipping point. Automation is transforming the nature of the supply chain to create an intrinsically connected process. While the benefits of digital transformation are widely agreed upon, the process is going to be a long-term project with many moving parts.
Food procurement professionals are under increasing pressure to evolve and innovate their buying strategy. Yet despite this, category buyers are faced with capacity and capability constraints so need to find new ways of generating productivity. Continual investment is key to improved future performance.
Both procurement and finance drive organisational success and can ultimately increase the profitability of the business. However, there is still misalignment between the two functions which typically results in:
• Procurement struggling to realize a position of strategic influence at the board table
• Budgetary requirements and forecasting abilities being disputed by these two core functions
The key to securing alignment of procurement with finance and wider business functions is a shared view of performance measurements using data analytics.
Food category buyers and procurement teams in general spend lots of time and money on research and analysis of the limited items which comprise their core spend. As a result, the tail spend remains a largely untapped resource. If equal attention could be paid to all areas of spend, organisations would be able to realize significant cost savings.
Introducing modern digital technologies into procurement will improve purchasing performance and help to realize wider business goals. Analytical tools which allow procurement teams to increase their productivity and performance, whilst also realizing cost savings in supplier negotiations, are vital to the continued development of the procurement function.
People, processes and technology will determine future Improvements in procurement capabilities. Investment in each of these three areas will play a crucial role in the evolution of procurement performance.
Improvements in procurement capabilities. Investment in each of these three areas will play a crucial role in the evolution of procurement performance.
Implemented correctly, and they will transform workflows by enabling procurement leaders to :
Track price trends –Analyse market data and react to opportunities
Remain competitive – Benchmark supplier prices to identify cost savings
Respond to market risk - Increase agility with the ability to visualise price data
Maximise profitability -Model product costs to drive efficiency
Be ready for change – Know the Market Outlook and prepare for the future
The Deloitte Global Chief Procurement Officer Survey, 2018, found that:
61% of procurement leaders delivered
better year-on-year savings performance
33% of procurement leaders believe that their digital procurement will enable them to deliver on their organisational objectives and value
Modern technology usage is low, with only 33% of procurement leaders using technologies such as predictive analytics and collaboration networks
51% of procurement leaders believe their teams
do not have sufficient capabilities to deliver on their procurement strategy
17% of procurement leaders do not have a digital procurement strategy
Technologies such as Advanced Analytics and Robotic Process Automation are at the forefront of the procurement digital transformation.
Predictive strategic sourcing, automated transactional procurement and proactive supplier relationship management are just the start of this technological revolution.
Mintec is an independent global leader and trusted provider of advanced analytics tools, insights and pricing information for raw material costs. Our mission is to help our customers achieve significant savings by providing superior commodity price data, advanced analytics tools and data-driven insights.
Mintec has been providing market leading raw material price data and business intelligence tools to leading global procurement teams for more than 30 years. The original founders saw an opportunity to bring the data and tools to market to allow others to leverage the available information in ways that had never been done before.
Our new Insight-as-a-Service platform, Mintec Analytics, is the next stage of our evolution. At its heart, Mintec Analytics is a data integration platform. We have standardized and structured thousands of different data sets and made research much easier and faster for our clients. This can revolutionize procurement productivity by providing, in a matter of seconds, a quantity of information that would take a team of analysts many weeks to collate.
The Mintec Analytics platform gives you access to raw materials, packaging, transportation and labour prices, in addition, to weather, drivers (including supply and demand), events, top producers and exporters, fundamentals and currency data. Graph and analyse the data to build and share your own dashboards, generate price alerts, cost models and much more.