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Category: Procurement and Sourcing

Supply Chain News: Update on Vodafone's Success with AI and Procurement


Two Years after First SCDigest Report, Vodafone Updates Its Impressive Procurement Metrics


July 15, 2019
SCDigest Editorial Staff

In 2017, SCDigest reported on a very interesting presentation on that year's annual CSCMP conference on how European telecom giant Vodafone had used advanced analytics that "X-rayed" huge amount of procurement data to find opportunities for process improvement.

Supply Chain Digest Says...

The cost per purchase order was €2.7 ($3.07) in April 2017, before the system was installed; it is currently €2.36 per purchase order.

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As SCDigest wrote then:

Vodafone wanted to better understand execution of its procurement processes. To do that, it sent large amounts of data from its procurement system to technology firm 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 some 10 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 is 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.

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.

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.

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Now, two years later, an update on the Vodafone's program on the pages of the Wall Street Journal.

The newly built procurement control center "includes a platform that analyzes 20 terabytes of data, or roughly two years of transactions, and a visualization tool that allows the roughly 750 users across the company spot trends and track performance on a desktop made up of speedometers," the Journal writes.

It adds to the original SCDigest story that the Vodafone system also relies on robotic process automation to simplify a variety of tasks, as well as artificial intelligence and machine learning to identify patterns and boost predictive modeling.

Vodafone procurement now has a team of six data scientists managing the platform, while the procurement staff members who previously collected this information have been reassigned to higher-value-added tasks such as strategic sourcing and negotiations, the company says.

In an upgrade since the 2017 presentation, the Vodafone system can now track nearly in real time a purchase order that's moving through the system, from when a requisition is raised by an employee in New Zealand when the purchase order is approved to when the invoice payment is issued.

And the share of perfect purchase orders continues to improve. The measure was at 87% when we wrote the article in 2017, but now the company now has perfect purchase order rate of 96%, up from 73% at the start of the program.

What's more, the Journal article notes that the improved visibility and speed of analysis mean Vodafone has also improved on cost. The cost per purchase order was €2.7 ($3.07) in April 2017, before the system was installed; it is currently €2.36 per purchase order. And Vodafone aims to reduce the cost per purchase order below €1 by April 2021.

Vodafone can also track which business units are on target and which have room to improve across all the different efficiency measures the company monitors. And since the system links all countries to the same data, "If we say Italian performance is 95%, there's no discussion because there's one source of truth," a Vodafone executive says.

What do you think of Vodafone's procurement analyzer? What would you add? Let us know your thoughts at the Feedback section below.


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