How subject to variability is your company's procurement process?
That was the question German wireless phone giant Vodafone's wanted to know, and it looked like a big effort, as Vodafone issues some 1.1 million purchase orders every year.
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| With this great insight, Vodafone has been able to reduce procurement cycle times by 20%, and reduce total procurement process costs by 11% |
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The traditional approach to achieving such insight would be to spend many months of time collecting and analyzing data and talking directly with procurement managers and maybe other stakeholders to gain critical insight, all likely done with the help of outside consultants.
But Vodafone, with the help of technology partner Celonis, took a very different, technology-oriented approach, using an analytics approach to “X-ray" its procurement process and thus achieving great insight and processimprovement.
Vodafone and Celonis presented the story as part of the supply chain innovations award track at the recent CSCMP Edge annual conference in Atlanta. Though Vodafone was not selected for the winner or runner-up positions, it was an excellent case study nonetheless.
The primary driver of the project at Vodafone was Israel Exposito, who was unable to make it to Atlanta due to some higher corporate priority, but in a nice touch he sent a video that kicked off the presentation that gave a good several minute summary of the project. It actually added a lot.
That left Celonis co-founder Alex Rinke to carry most of the load, and he told a good story.
Vodafone wanted to better understand execution of its procurement processes. To do that, it
sent large amounts of data from its procurement system to Celonis' process analyzer. From that data alone, Celonis was able to perform some rather incredible analysis on how the procurement process unfolds at the company.
For example, just 38% of the time did a given procurement action at Vodafone adhere to the standard process, which involved some10 steps between purchase requisition and goods receipt.
What happened the other 62% of the time? The Celonis tool told Vodafone that too. For example, in some decent percent of cases, a PO had to be reissued because the original price was wrong. That accounts for maybe another 10% of procurement cycles.
In fact, the top 10 process variations accounted for more than 80% of total variations, as the inevitable Pareto principle proved itself again.
So eventually, Vodafone could account for nearly 100% of its million-plus POs issued annually. The tool graphically showed all the "spaghetti loops" that represented process deviations. In fact, there were about 650 total versions of the process across all those POs.
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CATEGORY SPONSOR: SOFTEON |
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There is more - the tool allows root cause analysis, such as filtering any result by commodity type, vendor, buyer, region, country, etc. Often, for example, process variations are much, much higher for a given purchased item type or vendor - and remedial actions can thus be focused.
 The analysis therefore also allowed Vodafone to focus on areas of factors that were driving the largest number of variations. As it moved down that priority list, in some case the company found, for example, that a given variation or factor was rare enough it wasn't worth the effort to try to fix it.
A dashboard was also developed that allows Vodafone to see in real-time how effectively purchase execution is occurring.
One insight from the analysis was that many process exceptions were caused by issues with master data - say Vodafone's system thinks a case of goods from a supplier contains 12 units, when it actually containers 24 - and Vodafone developed a prioritized list of master data issues and developed processes to reduce those data errors moving forward.
With this great insight, Vodafone has been able to reduce procurement cycle times by 20%, and reduce total procurement process costs by 11%. It now enjoys 87% “perfect POs,” with Rinke saying 80% is considered world class performance.
The system has also allowed Vodafone to see where it can best automate procurement processes using "process robots" and what is called "cognitive computing." And the tool and dashboard allow Vodafone to track precisely how well those automated processes are executing.
Is such insight and opportunity hidden in your company's procurement data? SCDigest also wonders if this process analyzer might not be use profitably in other areas of the supply chain.
What do you think of this process analytics approach? What oher areas of supply chain might also benefits from being X-rayed? Let us know your thoughts at the Feedback section below.
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