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By Tatyana Shumsky
Vodafone Group PLC turned to a suite of new technologies, including data-visualization tools and artificial intelligence, to make its global procurement process faster and less expensive.
The British telecommunications giant's procurement unit issues about 800,000 purchase orders and receives around 5 million invoices a year as its 23 operating companies, including in Egypt and New Zealand, requisition everything from magazine advertising to antennas.
But tracking and analyzing the effectiveness of these buying practices hasn't always been easy. Back in 2015, a team of roughly 10 people, plus another five members of the shared service center staff, would spend three to four weeks compiling data about the prior month's purchase orders, approval rates and times, and other trends.
"We were getting very frustrated," said Ninian Wilson, chief executive of Vodafone Procurement Co. "By the time we'd have everything ready, the information was already four weeks out of date and it was time to start collecting it all over again."
The difficulty in collating the necessary figures, and the high rate of errors introduced by the extremely manual collection process, meant that the team had little time to analyze the data and make recommendations for improvement, Mr. Wilson said.
To fix the problem, Vodafone decided to build a supply-chain-analytics control center to measure efficiency and compliance metrics across its procurement function. The company also hired data scientists to help select key performance indicators and present that information visually to a broad range of users.
The project took nine months. The newly built 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 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 is one of many companies that are on the second iteration of digital transformation, where companies use a mix of new technologies to tackle increasingly complex problems, said Vin Kumar, associate principal at consulting firm Hackett Group.
"One tool by itself is not doing it," Mr. Kumar said. "You have to use a combination of technology to provide this insight," he said, adding that some of the bigger technology vendors are already trying to integrate these tools.
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, Mr. Wilson said.
Today, Mr. Wilson can 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 to when the purchase order is approved to when the invoice payment is issued.
Efficiency metrics are also at his fingertips, according to Mr. Wilson. Before the new system was installed, roughly 73% of Vodafone's purchase orders were perfect, requiring no adjustments or rework to move through the system. In the year through June 27, the company had a perfect purchase order rate of 96%.
The improved visibility and speed of analysis mean Vodafone has also improved on cost. The cost per purchase order was EUR2.7 ($3.07) in April 2017, before the system was installed; it is currently EUR2.36 per purchase order.
"That's a huge improvement," Mr. Wilson said. But the team isn't resting on its laurels and aims to get the cost per purchase order below EUR1 by April 2021, he said.
Vodafone declined to comment on how much the system cost, but representatives said it took roughly a year to recoup that investment.
The team can assign the 800,000 orders made each year to categories such as operating company or individual department or person who raised the requisition.
The new system helps identify potential bottlenecks in the procurement process, allowing his team to apply additional standardization and automation when necessary to accelerate the process. That specificity helps the team uncover process inefficiencies that, once resolved, reduce time to market by 20% and cut procurement process costs by 11%.
"We have a very granular view of the data, which we just couldn't get to before we implemented this capability," Mr. Wilson said.
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," Mr. Wilson said.
Write to Tatyana Shumsky at firstname.lastname@example.org
(END) Dow Jones Newswires
June 28, 2019 05:44 ET (09:44 GMT)
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