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Outsource magazine: thought-leadership and outsourcing strategy | August 20, 2017

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The Great Data Disconnect: why business leaders and IT teams must work closer together to mitigate supply chain risk

The Great Data Disconnect: why business leaders and IT teams must work closer together to mitigate supply chain risk
Outsource Magazine

With all the supply chain data that organisations have at their disposal today they should be ready for anything, right?

Unfortunately not. New research carried out by Rosslyn Analytics suggests that anyone in procurement who thinks we’re already living in some kind of golden age of data-based decision-making is mistaken.

The research showed that well over two-thirds of day-to-day business decisions are still based on personal experience and human judgement instead of data-based insight. The fact that this is happening in industries where insight into supply and procurement data can play such a major role in reducing costs, let alone mitigating risk, is pretty incredible.

In retail in particular, we all know that fine-tuning of the logistics behind your supply chain can make the difference between major profit and heavy losses. Even shaving half a percentage point off the supply chain costs can run into the millions.

But supplier data shouldn’t just be about logistics. As the recent crises in Russia/Ukraine and now Greece have shown, it’s important that you also know exactly how you source supplies, how reliable that source is and whether there are alternative pastures that need to be explored.

That means supplier data should cover everything from political and geological data to world stock markets, currency rates and commodity prices. No single piece of supplier data can single-handedly change the way the body works, but in combination it can catalyse important reactions that energise the enterprise and in many cases maintain profitability. In other words, knowledge of your supply chain data, plus understanding of geo-political events, equals the power to mitigate disruption and stay profitable.

So is this vital data being ignored, with businesses instead relying on luck and instinct?

The problem is that there is still a fundamental disconnect between IT departments and business users in how to draw value from data. In fact, this is the same for most business and disciplines and is not specific to supply and procurement. Decision-makers don’t have easy access to the data they need, and often rely on the IT department to provide the insight they need to make strategic decisions.

It’s a classic case of cart before horse, which unsurprisingly means data projects often don’t get anywhere. In fact, the research – conducted by OnePoll – found that 71% of corporate leaders recognise the commercial importance of data, but only 11% feel they have actually generated any financial value from it at all.

To overturn this situation, there is now an urgent need for business and IT leaders to work together more effectively. Specifically, they need to collaborate to develop data strategies that define their technology purchases – not the other way around. One option of course, is to outsource some technology that is particularly expensive or complex. We have already seen some data stores move to online services such as Amazon Web Services. Now, with developments in cloud technology, analytics-as-a-service is readily available to many businesses through platforms such as Microsoft Azure.

You only need to take a look at how the world’s most successful companies handle procurement and supply for clear insight into why this is so. Take Apple, whose success is as attributable to its ability to fulfil huge consumer demand as it is to making products that people want to buy. Apple’s secret is that it takes a business-led approach to managing an extremely complex web of suppliers. Led by CEO Tim Cook, who has an uncanny ability to run a supply chain, Apple has become exceptionally adept at understanding not just the direct suppliers it buys from, but also those that indirectly contribute components or services across the extended supply chain – even in remote and politically unstable parts of the world. This not only increases efficiency, but reduces the risk that the company will be caught up in allegations of exploiting workers through association to suppliers, for example.

Although technology should not lead the strategy, it is of course hugely important when it comes to utilising data. Cloud, in particular, is offering up new ways to achieve complete supply chain visibility more quickly and effectively than ever before. In a matter of hours, you can put data in the hands of those that understand the challenges around the supply chain so they can analyse spending, supplier performance and risk, all on a single platform.

The access to data also allows decision-makers to visualise their supplier far easier than in just rows and columns, like you would on an Excel spreadsheet. Geo-location, for example, can be used for high level interaction with suppliers to easily identify those that might be affected by political unrest or a natural disaster. Tagging these suppliers with economic data and credit scores adds a further dimension and allows you to monitor their real-time financial health and identify if they fall below a pre-set ‘safe level’.

In such a turbulent market, with political and environmental issues magnifying the problem, knowing your supply chain has never been so fundamental. It will not happen overnight, but taking steps now to have this insight will become mission-critical as time goes on.

About the Author

Charlie Clark 150Charlie Clark is CEO of Rosslyn Analytics.

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