Traditional procurement practices can militate against supplying the right products for the job and this has significant cost and energy implications. There is, however, an answer to the problem...
We live in a time where we are surrounded by price wars and this has become the norm certainly in the B2C environment. For example, right now we are in the midst of the January sales, which somewhat ironically now start in December as businesses look to steal a march on each other. And, this focus on price is also seen in the commercial world where quite often, in fact too often decisions are made on initial cost rather than the ‘long term view’.
In a price-driven market, where short-term thinking rules, the stress is inevitably on initial purchase cost because that’s the project team’s main measure of success.
However, I believe the sector is waking up to the fact that the process of so-called ‘better buying’ will result in a switch of emphasis from lowest price to energy efficiency/whole life costing as the project moves into the procurement and construction phases.
The Better Buying initiative (https://betterbuying.org/) provides clear, relevant, transparent, and timely information and analysis about good purchasing practices that will change relationships between multinational brands and retailers (buyers), the suppliers responsible for manufacturing their products, and other intermediaries up and down supply chains.
And the procurement process is crying out for an overhaul. But what does that mean? In my view, it means convincing developers and end-user clients that it’s not in their long-term interest to allow designs to be modified purely based on initial cost savings.
Unfortunately, the current commercial environment, where designers and contractors work with different manufacturers on virtually every project, mitigates against best procurement practice. That’s why, for me, effective supply chain management (SCM) is the key to improving procurement practice.
There are, essentially, four important SCM drivers – talent, technology, collaboration (both internal and external) and change management.
Talent: In essence the term ‘talent’ refers to the ability to attract and retain highly skilled individuals who are able to fulfil a role within the business. However, recent studies have shown there is a skills shortage when it comes to filling supply chain roles due to the impact of the baby boomer generation retiring. Therefore attracting talent and retaining it is key.
Technology: There are big opportunities to improve SCM by integrating information about demand and supply. The sheer complexity and volume of this data means that no modern supply chain will work without the latest information technology.
Progressive SCM means that suppliers harness the power of the internet to get the right products in the right quantity to the right places at the right time.
But recent research from Beth Enslow, senior vice president of enterprise research for Aberdeen Group, a leading business and IT benchmarking and advisory company, reveals that companies’ top concern is the continued lack of supply chain visibility due to manually-driven processes.
Almost 80 per cent of large enterprises cited this as a major concern (https://bit.ly/2ziI9wA). One respondent at a large industrial equipment manufacturer said: “To help improve the bottom line, we need more accurate supply chain visibility.”
The second-highest concern is the un-coordinated nature of global supply chain processes across all the parties involved. “Our key pressure,” confirms the chief information officer of a mid-market retailer, “is co-ordinating the diversity of forwarders and suppliers delivering a wide collection of merchandise.”
Internal and external collaboration: The central tenet of maintaining healthy supplier relationships is good communication between all parties involved in the transaction.
I believe we need to establish a more stable supply chain platform built on long-term relationships rather than project-by-project interactions and that’s certainly what we at Brymec do with both our customers and suppliers. Within the stability of those relationships we can start to create information and models that we can share with customers so they are empowered to make informed decisions.
The answer essentially comes down to education, information flow and cost transparency. Enlightened consultants, contractors and suppliers are developing models that demonstrate to prospective clients the long-term benefits that can accrue from selecting products with a whole life view.
However, this information needs to be presented in such a way that even occasional customers can understand it, enabling them to focus on true whole-life costs throughout the procurement process rather than switching their focus towards capital cost as the project progresses. To generate detailed, accurate models, the designer needs to have intimate prior knowledge of the products that are to be used.
This is exactly where Building Information Modelling (BIM) comes in to its own. BIM is essentially the process of delivering and operating built assets (which include buildings, bridges and roads) using structured digital information to which all members of a project team have access. It does this by generating and managing digital representations of physical and functional characteristics of places. BIM however isn’t anything new and in terms of it as a way of working it is effectively the digitisation of the way any well-run project would have been run in the past. One central store of information accessible for all. The added benefit of the digital age is this central store of information doesn’t need to be physical and every project member can access at any given time. At Brymec we anticipate more and more projects being run this way and have therefore invested in developing BIM files for all of our own-branded product ranges.
So how does this all connect back to better supply-chain management? Well within the context of a genuine partnership, we can eliminate waste, drive down costs and focus on developing solutions that provide the lowest possible whole life cost for the client. Within this stable environment, we can ensure that all parties have full understanding of the solutions proposed and we can develop models and methods of communication that enable us to transfer this knowledge to our clients.
Furthermore, collaboration means agreeing on the best purchasing practices. So look at the total cost of ownership over price: We’ve covered this before but considering all factors such as service.
And a best-in-class supply chain organisation should have a measurable framework of policies and procedures designed to improve the workplace for the greater good of employees, the organization itself, and also its community.
Change management: Progress is impossible without change. It follows that effective change management is a prerequisite for business success. But, to change the face of your business, you need to bring your people with you.
The pace of change in business, levels of activity, frequency of projects, complexity of processes and volume of available data are all increasing at a startling rate. Proactive managers communicate the need for positive change in a compelling way. The more we can engage the people in change through effective communication, the more likely it is to succeed, sometimes even beyond our own expectations.
Indeed, if you want your people to be happy with your proposed change, you need to convince them it’s the right thing to do and therein lies the key challenge. In change processes, we often explain the ‘what’, maybe even the ‘how’, but don’t always talk about the ‘why’. Why is it necessary for the business and for the individual?
Change is a process of individuals. We tend to talk to people as groups and fail to connect with individuals. The more we can do this, the more likely we are to understand their needs and expectations and find a connection between these and the company strategy. And, each time we make those connections, we increase our chances of success.