August 02, 2017 | Supplier Management Strategy
Before the middle of the 18th century, one of the most powerful nations in Europe, indeed the world, was Sweden.
With a strong military and a sizable population of around 20 million, Sweden rivalled Great Britain and France in both reach and heft. Or so the Swedish authorities believed.
Then, triggered by a significant economic downturn, in 1749 the Swedish authorities conducted their first comprehensive census to find out what their economy should look like and discovered, to their horror, that the population of the country totalled no more than 2 million. Less than 10 percent of previous estimates.
In a single moment, what was thought to be one thing, was transformed into something entirely different. The data revealed a truth that was at once uncomfortable but also extraordinarily useful, in hindsight.
For a nation to operate sustainably and successfully, its policies – economic, social and international – need to be closely aligned to its capabilities. If Sweden had proceeded to conduct business-as-usual on the basis of totally erroneous population data then it may well have collapsed entirely.
But that timely insight led to an immediate reassessment of priorities, not the least of which was a sea change in public health and social policy. The discovery of a high infant mortality rate and unacceptable rates of women dying in childbirth led to a complete overhaul of the public health policy – one of the numerous factors that resulted in the modern nation that Sweden is today.
New information often demands a new approach and Sweden owes a debt of gratitude to whoever it was that had the nerve to make that call.
The object lesson here is the need to decouple the triplet of process, data and dogma.
Processes and procedures are developed and operated according to the intelligence gained from data and these can quickly become conventional wisdom. We often hear “we have this-many-thousand suppliers” or “we have this percentage of spend under management.” These self-assessments are very often, if not always, incorrect and usually to a huge degree. The procedures put in place to run a business on those bases are often inappropriate and ineffective, at best.
In one instance, we saw an accurate “census” of supplier information reduce the real number of suppliers to an enterprise to around 10 percent of the earlier assumed number based on “raw” data. The impact this had on Accounts Payable alone was immense. Moving to manage 2,000 supplier accounts instead of 20,000 lifted quite a burden because the processes involved could be redefined to suit the new operating environment.
Just knowing is insufficient. Acting on the knowledge is the key to success. Having the flexibility and open mind to consider that “how we’ve always done it” need no longer apply when the rules of the game change, can lead to real growth. A business that can reassess its processes and rules when faced with a new insight is one that can innovate and transform.
If the lesson from history teaches us anything, it’s that it doesn’t matter that your data might currently be “wrong” or even that you’ve been working inefficiently. What matters is how you can take advantage of new intel and exploit it to best effect. It requires a subtlety of understanding that forward-thinking procurement pros should nurture and value. If many processes in the supply chain are going to be automated, that human intervention will be more important than ever.