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Can Neural Supply Chain Management Benefit Services Procurement?

By connecting and sharing intelligence across the 'neural' supply chain, an organisation can be more dynamic and responsive to market forces. But can services procurement benefit?

Posted by: Zivio Reading time: 5 minutes

Neural supply chain management is an approach to managing a complex supply chain with cloud and intelligent automation platforms to deliver better performance through resilience and adaptability, whilst reducing cost and risk. 
 
By connecting and sharing intelligence across the 'neural' supply chain, an organisation can be more dynamic and responsive to market forces.

What makes supply chain management 'neural'?

 
In an article posted on themanufacturer.com, the underlying traits of neural supply chain management are explained as:
 
Intelligent and cognitive – contextual data and knowledge is distributed within an organisation and it's supplier ecosystems.
 
Adaptive – organisations are prepared to change products, services and operations to respond to changing market demands.
 
Connected – organisations see suppliers as partners and work to build better relationships.
 
Resilient – the ability to recover from sudden changes in the market or business environment.
 
Personalised – the supply chain can adapt and deliver a tailored experience to its stakeholders.
 
Automated – technology can be used to delegate repetitive tasks allowing people to focus on higher value responsibilities.

First, consider the nuances of services procurement

 
As the focus of themanufacturer's article suggests, the concept of a neural supply chains are easier to understand in the context of ordering parts and components – 'goods'.
 
If a widget is manufactured with 200 parts coming from five suppliers, it's easy to qualify/quantify things like stock counts, delivery dates, delivery receipts, lead-times. A neural supply chain can then be built to connect and automated the various suppliers and procurement teams to ensure sudden changes in demand can be met.
 
The challenge with services procurement is the nuanced differences in delivery. Simply, it's much hard to qualify/quantify the component parts in a service. 
 
As discussed in our guide to tail spend statements of work, the detail and content of almost every statement of work is unique. Different deliverables. Different resources. Different timings. 
 
It becomes harder to build an adaptive, resilient, connected, automated, neural supply chain of services providers without an extremely detailed understanding of every supplier's capabilities and previous performance broken down by category or type of work.
 
For example, in goods procurement, finding a replacement for an out-of-stock component can be automated with a simple supplier/inventory catalogue – just find another supplier who has sufficient quantity of the component available at a specific price point.
 
In services procurement – If your best performing change management consultancy is not available to take on a new project, it becomes a lot harder to rely on automation to adapt to this change.
 

Spreadsheets compound the problem

 
In our 2020-2021 benchmarking report, the majority of organisations were found to be managing their services spend with spreadsheets and manual processes, even when they were spending hundreds of millions on outsourced statements of work, professional services and consultancy.
 
This compounds the problems an organisation may face when looking to apply neural supply chain principles to their services procurement. In short – there's no possibility of a connected, automated, personalised supply chain without technology sitting at the core of the solution.
 

Neural services supply chains could offer organisations significant benefits 

 
According to some estimates, over 1 trillion USD is spent on services every year. Ranging from company-shaping consultancy from the big 4, down to small website design projects delivered by an SME. Applying the principles of neural supply chain management to services procurement presents obvious opportunities for cost savings in addition to a number of other benefits:
 
Intelligent and cognitive – For the majority of organisations interviewed for the benchmarking report, the c-level team can see "total services spend but have very little visibility on what we're getting for it".
 
Adaptive – There is a degree of nepotism in services procurement, which could be holding organisations back from finding more cost-effective solutions. Supporting this is another excerpt from our benchmarking report, "With better supplier performance metrics, we could make sure we're getting the best results from the most agile and innovative suppliers and move away from a 'because we always use them' mentality".
 
Connected – Better supplier engagement, with a high degree of mutual understanding, enable organisations to develop better commercial relationships.
 
Personalised – As mentioned above, the vast majority of statements of work or services provision are unique and (in that sense) almost make a personalised, dynamic, services supply chain a fundamental requirement. In a recent webinar on how technology is shaping services procurement, a recurring topic was to enable organisations to dynamically engage a long-tail of specialist suppliers and surface the best performers by category of work.
 
Automated – Our guide to statement of work automation addresses some of the ways technology can provide lean (and getting leaner) procurement teams a way to scale their ability to work with more stakeholders and manage the performance of more suppliers without getting drowned by repetitive tasks. For example, automatically guiding a supplier through an onboarding process and getting contracts, NDAs and master services agreements signed.
 

Summary

 
The principles of neural supply chain management could present most organisations opportunities for improved performance and cost-savings – better understanding of supplier's capabilities and performance, being able to adapt to changing business needs faster and reducing the manual effort required. But before any of this is possible, CPOs need to insist on a best-of-breed services spend management platform and ditch the spreadsheets.
 

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