Category Archives: Industries Procurement and Supply Chain

The Importance of Procurement

In any organization, the procurement department plays a vital role in the successful development of a product. The procurement department, whether related to the fast-moving consumer goods industry or retail, generally refers to the procurement of raw materials. However, the procurement department can be associated either with business continuity activities such as inventory purchasing or for business support like that done for the Information technology department. It is therefore evident that this resource needs effective management. This is where category management comes into play.

According to a study, companies that have successful category management programs have a mean lead supplier time of only 6 days vis a vis the normal time of 14 days.

Some key points associated with the global markets that are to be noted here are:

-Transportation and logistics activities account for 10-12% of global GDP.

-The United States is ranked tenth in terms of trade logistics performance.

-According to 50% of respondents, the transformative capabilities of technologies such as advanced software and AI have a significant impact on their performance.

-It is expected that by 2024, more than 60% of G2000 manufacturing organizations will use advanced technologies such as AI to cut costs by up to 20%.

What are Category Management and Category Intelligence?

Category management is a strategic approach to acquiring raw materials for manufacturing. While sourcing is all about making the right purchasing decisions, category intelligence assists an organization in making the right purchasing “yes” or “no” decisions. This not only aids in resource optimization but also cost reduction.

The term “category intelligence” is not new, but it is surprising that even after the introduction of best practices for category intelligence, category managers have failed to maintain effective category intelligence documents.

The image below illustrates four broad areas that an effective category intelligence system affects.

Category Intelligence in Supply Chain Management

Category Intelligence in Supply Chain Management

The Role of a Category Intelligence Manager

This is a specialized role in which a category manager is responsible for a specific function or category of goods or services, such as the purchasing department or stock maintenance units. The role could include a variety of responsibilities ranging from procurement to strategic sourcing, as well as developing a sourcing plan and reporting.

In general, these functions are becoming more specialized, with category managers increasingly requiring specialized degrees in their respective domains.

Process of Category Intelligence

Identifying opportunities, translating trends, understanding the factors, providing guidance, and understanding stakeholder needs are all steps in the category intelligence process. These are explained in greater detail below:

Process of Category Intelligence

Process of Category Intelligence

-Identifying Opportunities: This step helps to cut down the cost, reduce the risk of competitors and increase the efficiency of the organization.

-Translate major trends and industry events: The second most important step is to translate these events into an actionable strategy that can be broadly put into categories.

-Understand the underlying drivers: All the underlying factors must be understood completely to understand what will be their business impact.

-Timely Guidance: Time-to-time guidance is provided to reduce the risk in the long-term sustainability of the business.

-Understand evolving business needs and stakeholder demands: This is done to ensure that the strategies and approaches are fitting well.

How category intelligence helps

Intelligent procurement or having an effective category intelligence system can help an organization in several ways. Also known as intelligent procurement, it simply means managing all aspects of vendor spending in one central digital place so that one can have a holistic view of their spending.

-Access to market intelligence:

Sourcing managers will have to keep track of multiple sources of information in order to be on top of things. For example, procurement of food grains requires one to not only be up to date with the prices but also the prices in different markets, the supply and demand dynamics, and the cost implications of various decisions.

-In supplier selection:

Finding the right supplier for an organization can be a challenging task as it requires risk evaluation as well as things such as how reliable a supplier is. This can consume a considerable time as the search for the right supplier entail testing their services as well as making a decision on the long-term reliability of the supplier for an organization.

-Curbing excess spending:

A quick response to changing market dynamics is one of the core tests to check the effectiveness of an efficient procurement department. An effective category intelligence system helps curb any excessive spending by the procurement department by providing correct information and helping in making effective predictions and decisions.

According to a study random, unplanned buying can account for 30-45% of all indirect purchases while in the case of smaller organizations it can account for almost 80-90% of the indirect purchase.

Category intelligence reports empower the procurement department to better negotiate the pricing and terms of agreement with its suppliers.

-Assessing supplier performance:

Getting past data or historical information about the suppliers and establishing benchmarks to assess the performance of suppliers is a difficult challenge for any organization.

A good category intelligence system envisages correcting this situation by not only providing access to data but also benchmarking and forecasting. A good category intelligence report aids in listing KPIs and benchmarking data thereby assisting in effective supplier management.

-Tracking multiple sources of data:

Effective category intelligence helps in tracking multiple sources of data from several marketplaces thereby ensuring ease in information handling. Having an on-demand intelligence system helps with access to previously unknown sources of information such as market size, market potential, and supplier coverage for businesses seeking to grow. Such an intelligence system helps a company in taking care of decisions at a local as well as a global level.

-Time-saving:

Category intelligence systems not only help in cost savings for a firm but also saves considerable man hours required for gathering and processing data.

Magistral’s Services on Category Intelligence:

Our Category Intelligence services help clients stay on top of indirect categories like Marketing Services, Professional Services, Travel and Lodging, MRO, Information Technology, HR, Transportation, and Utilities, among others. Our insights help corporations build the right category strategy with significant cost benefits.

Our major service offerings are:

-Demand and Market Supply Analysis:

In this analysis, we make category landscape reports, create the demand drivers, identify major players and analyze through Porter’s 5 Force model of analysis.

-Pricing Movements and Forecast:

In Pricing movements, we study the various pricing strategies and perform primary research to obtain quotations and RFPs.

-Major Players and Profiles:

Major company profiles are identified and SWOT analysis is done on them to manage the risk of the companies.

-Negotiation Strategy:

In this analysis of pricing is done and also competitive analysis is taken care of.

-Newsletters:

In this service, newsletters are made, also the developments across the categories are tracked proactively.

-Custom Intelligence:

Here, we provide custom direct and indirect sourcing.

-Impact Assessments:

In this, all the events are assessed like Geo-political events, Natural disasters.

-Category Dashboards:

It is created to have a comprehensive view of category and impacting factors.

About Magistral Consulting

Magistral Consulting has helped multiple funds and companies in outsourcing operations activities. It has service offerings for Private Equity, Venture Capital, Family OfficesInvestment BanksAsset Managers, Hedge Funds, Financial Consultants, Real Estate, REITs, RE fundsCorporates and Portfolio companies. Its functional expertise is in Deal originationDeal Execution, Due Diligence, Financial ModelingPortfolio Management and Equity Research.

For setting up an appointment with a Magistral representative visit www.magistralconsulting.com/contact

About the Author

The article is Authored by Marketing Department of Magistral Consulting. For any business inquiries, you could reach out to prabhash.choudhary@magistralconsulting.com

Introduction

Transportation Analytics in a supply chain refers to the movement of products from one point to another. It starts at the beginning of the supply chain when supplies arrive at the warehouse and goes to the end-user when the customer’s order is delivered right to their door. Because of its importance, warehouse managers should investigate transportation in their supply chains. In the end, this is the only method to cut total expenses in a scenario where transportation can account for up to 60% of total operational costs or a significant amount of a company’s supply chain costs. Few activities in the supply chain have as much of an impact on business as transportation selection. Delivery techniques ensure that deliveries to and from the business go smoothly and reach their destinations on time. Because transportation is crucial to the company’s performance, it is critical to incorporate it into the supply chain management strategy. Transportation is regarded as one of the three essential components of supply chain management because of its importance.

Transportation analytics rapidly power mobility information and insights, altering transportation planning by making vital data collection and understanding more accessible, faster, cheaper, and safer. Cities, transit agencies, transportation departments, and other entities increasingly turn to transportation analytics to solve challenges, prioritize investments, and gain stakeholder support.

The transportation analytics market was worth USD 15.65 billion in 2021 and is predicted to grow to USD 77.33 billion by 2029, with a CAGR of 22.10 percent from 2022 to 2029. Because of its ability to simplify commercial and personal transportation, Predictive Analytics accounts for the most prominent type of segment in the corresponding industry.

Usage of Transportation Analytics

Big data is heavily used in supply chain management to evaluate operational hazards, improve communication, secure proprietary data, and improve supply chain accessibility. This data is used by industries in a variety of ways, including predictive analytics and the creation of more efficient cloud-based platforms.

Usage of Transportation Analytics

Usage of Transportation Analytics

Predictive Analytics

Data mining, statistics, and machine learning are used in predictive analytics to assess future supply demands, inventory, and customer behavior. Companies use predictive analytics and machine learning to forecast future physical hazards in the supply chain and financial, customer, and other operational risks.

Cloud-Based Platforms

Cloud technology will be critical in the future of transportation and supply chain management. It can help lower costs by reducing the influence of physical/geographic barriers, merging, and replacing various in-person processes, mitigating some of the consequences of market swings, and consolidating and replacing various in-person processes. Optimized data, on the other hand, is critical to the success of cloud-based platforms. Data must be effectively recorded, transmitted, and used to profit from cloud technology fully.

Cloud storage has its own set of security concerns. As more businesses and industries migrate to the cloud, fraudsters will find the technology increasingly appealing. In addition to the protections provided by cloud providers, businesses should always examine what security measures are needed. Larger companies also often use many cloud providers across their operations. Companies must have solid policies for preferred vendors, best practices, and the involvement of internal IT teams in this situation.

Role of Transportation Analytics Professionals

The growth of e-commerce has led to higher expectations on speed, agility, and visibility. Manufacturers, merchants, and consumers have pushed transportation and warehousing companies to develop quickly to meet ever-increasing service demands. Transportation management is evolving thanks to supply chain technology fueled by data and analytics—these practical tools aid businesses in being more educated, efficient, and long-lasting.

Role of Transportation Analytics Professionals

Role of Transportation Analytics Professionals

Monitoring

Technology has catapulted the business beyond simple track-and-trace data into a new world of supply chain visibility in just a few years. Customers can now not only follow their items as they travel, but they may also receive text or email notifications when delivery vehicles are stationary for an extended period. The same information can show whether delivery is within a mile of its destination, allowing receiving facility managers to plan and avoid surprises. This increased awareness has ramifications that go beyond on-time delivery. Companies will be able to carry less inventory due to this data because they can precisely pinpoint their products’ locations and when they are needed. Over time, this could result in significant cost reductions. Data is also allowing for more personalization and control in the transportation industry. Internet of Things (IoT) sensors in trailers now allow drivers and dispatchers to watch and report on temperature, humidity, movement, and other vital elements in real-time, allowing them to intervene before a problem arises.

 

Fleet Management Systems

The use of fleet management technologies is also helping to improve transportation efficiency. Vehicles communicate with systems regularly, getting information such as how long they have been on the road, where they are going, and which route would be the most efficient. These solutions cut down on idle time for drivers, improve fuel efficiency, increase safety, and cut down on paperwork. This continuous connectivity between trucks and warehouses or manufacturing facilities also allows for increased flexibility and real-time responses to unanticipated incidents. By increasing transparency in the transportation business, digital freight platforms enable enterprises to think beyond today’s shipment. Thanks to technology, shippers may see regional trends, individual lane cost information, and driver preferences, while carriers can get specifics like loading/unloading durations and lane history data. All this information can aid in lowering operating costs without compromising service.

Vehicle-to-Vehicle Communication

Finally, data will play a part in one of the most intriguing breakthroughs in transportation: platooning, in conjunction with other technologies. Platooning is a method of transporting three or four trucks through the lengthy segments of the highways. The lead vehicle requires a driver, while the other tracks follow a digital tether a short distance apart. All vehicles respond with near-zero reaction time because the lead vehicle controls its speed, direction, and braking. When the platoon is within range of a destination, it pulls over to a designated parking lot, where each truck is greeted by a driver who will guide it to its delivery location. Because only one driver will be needed for every three or four trucks on the road, this application will save money on driver labor. It has the potential to improve traffic safety by reducing human error and accelerating reaction times. The technique also reduces vehicle distance, boosting the road network’s ability. Platooning is also good for the environment. Vehicles that travel at a constant, controlled speed emit less CO2 and consume less fuel. Tests have already shown that this technology can save a three-truck platoon up to 11% on gasoline expenditures.

Magistral’s services on Transportation Analytics

Magistral’s services support a strong customer focus and guarantee that goods are delivered on time to customers, regardless of location. They also optimize routes and safeguard profit margins without losing delivery timeliness. They also understand and negotiate a more complex logistics landscape, with more options than ever. Other services include:

Carrier Profiles: It includes pricing, suitability, specialization, and other important parameters while deciding on the type of transportation.

Dashboards and Visualization: KPIs development and tracking help in measuring the performance of the overall business.

Logistics Management: This step includes fleet optimization, last-mile delivery, and process management. All these services help in the acquirement and storage of the goods.

Data Science: This is done to identify areas of improvement for delivery and quality while reducing costs.

Contract Management: This helps in the preparation of contracts, bid management, vendor shortlisting, and negotiations.

About Magistral Consulting

Magistral Consulting has helped multiple companies to reduce operations costs through its offerings in Procurement and Supply Chain.

About the Author

The article is Authored by the Marketing Department of Magistral Consulting. For any business inquiries, you could reach out to prabhash.choudhary@magistralconsulting.com

 

Introduction

Inventory management helps the company to decide which and how many goods to order at a particular time. It is the process of purchasing, storing, and selling the stocks of a company. This means managing the process of inventory management from start to end, such as storing raw materials as well as finished goods, keeping them in a warehouse, and finally processing finished goods. It tracks inventory right from purchase to the sale of goods.

In short, it means having the right number of stocks, at the right place and at the right time.

A company’s inventory is the most valuable asset. In retail, manufacturing, industries, and other inventory-intensive sectors, a company’s raw materials, and its finished products are the core of its business. Inventory can also be viewed as a liability due to the possibility of spoilage, theft, damage, or changes in demand. It must be insured, and if it isn’t sold, it must be cleared at a discount.

The Objectives of Inventory management

To gain a better understanding of inventory management it is important that we understand what are the objectives which it seeks to achieve first. Given below are the key objectives of effective inventory management.

Objectives of Inventory Management

Objectives of Inventory Management

-Material availability: The main goal here is to ensure that all types of items are accessible whenever the production department needs them so that production is not hampered due to their unavailability.

-Improved customer service: Having the finished product available at all points of time so that even varying demands of the customers are met satisfactorily goes a long way in ensuring great customer service.

-Avoid waste: When there is no inventory management system in place, it is common for items to be wasted. In addition, theft can also be a major preventable complaint.

-Maintaining sufficient stock levels: Effective inventory management ensures that stocks are available at all points of time to the production department as well as the fact that retailers do not run out of stocks thereby ensuring efficient delivery.

-Cost-effectiveness: Cutting down on costs in terms of inventory hoarding ensures cost-effectiveness for the company.

-Cost value of inventories reduce: Regularly purchasing the stocks in bulk, can help in negotiations and getting discounts on the inventories.

-Optimizing product sales: It helps to determine the volume of the product sales. It helps in understanding the present condition as well as future consumption of the goods.

The Types of Inventories

Inventory has different classifications under different stages of the supply chain. Typically, there are four types:

-Raw materials: This refers to the raw materials which are then turned into finished goods. There are two types of raw materials:
    -Direct materials: These are used directly in finished goods, such as leather used in making belts.
    -Indirect materials: These are part of the overhead or factory costs, such as glue, tape, and oil, which can be considered indirect materials for the factory.

-Work-In-Process: The inventory that is being used by businesses to create the final goods, whether its direct or indirect inventory, is called Work-In-Process (WIP). For example, the packaging of a finished good is WIP.

-Maintenance, Repair, and Operations (MRO): Inventory is what is needed to assemble and sell a finished product but is not built into the product itself. For example, basic office supplies such as paper, pens, and so on.

-Finished goods: This refers to the finished goods that are available for purchase by customers. This category includes any product that is ready to sell.

The Techniques of Inventory Management

Inventory management techniques can be used to control inventories regardless of the size of the business:

Techniques of Inventory Management

Techniques of Inventory Management

-Bulk Shipments: This method states that the goods are cheaper when they are bought in bulk. This is done when there are high consumer demands. This technique has the downside of keeping the bulk shipments in the warehouse, which results in higher costs overall. On the other hand, it reduces the shipping cost and it works well with the staple goods having long shelf lives.

-Backordering: It refers to the decision of taking orders and receiving the payments in advance for out-of-stock products. It’s a desire for most businesses but can be a logistical nightmare for the ones who are not prepared. Enabling backorders, increases sales and it’s just like a juggling act.

-Just in Time: Under this arrangement, finished goods are made available at just the right time. This means that the supplies of raw materials arrive as soon as the finished goods are ready to be shipped. This technique thereby helps businesses meet consumer demand without overfilling inventory and incurring any holding costs

-ABC Analysis: This is a technique based on putting the goods into different criteria in order of high importance, i.e. A being the most valuable and C being the least. Not all products are equal in value, and more emphasis should be placed on more valuable products. It improves time management and resource allocation.

-Drop shipping and cross-docking: This method completely removes the cost of maintaining inventories. When you have a drop shipping arrangement, you can transfer the client orders and shipping details to the wholesaler or manufacturer, who then ships the product.

Key statistics and facts about Inventory Management

The below points highlight some of the key statistics about the global supply chain market.

-The global supply chain market is estimated to be $15.85 Billion.

-The global supply chain is projected to grow by a CAGR of 2%

43% of small businesses in the United States do not track inventory or do so using a hands-on system

The #1 cause of U.S. supply chain disruptions is random IT shutdowns which is approximately 68%.

-The average US retail operation has an inventory accuracy of only 63%.

34 % of businesses have shipped an order late because they sold a product that was not in stock.

-Inventory losses cost an estimated $1.1 Trillion

-Prevention of stockouts can lower inventory costs by 10%.

-As of June 2019, US retailers are sitting on approximately $1.36 of inventory for every $1 sold.

-The number of private warehouses in the US has risen from 15,763 to 18,182 since 2013.

-The industry in the US has moved towards having smaller warehouses – from an average of 400,000 sqft to 50,000-200,000 sqft.

Magistral’s service offerings for Inventory Management

Capital tied up in inventory leads to requirements for higher working capital. Apart from higher working capital requirements, the non-moving list also leads to wasteful inventory carrying costs. Our services span from requirement gathering, ordering, delivery and maintenance to ensure you only carry the inventory optimum for your required performance.

-ABC Analysis: This includes inventory management strategies and the services related to working capital reduction.
Inventory reduction: Working capital optimization as well as monetizing non-moving items are provided under this head.
Ordering and Refill: In this minimum order quantity is calculated, also logistics cost optimization is done.

About Magistral Consulting

Magistral Consulting has helped multiple companies to reduce operations costs through its offerings in Procurement and Supply Chain.

About the Author

The article is Authored by the Marketing Department of Magistral Consulting. For any business inquiries, you could reach out to prabhash.choudhary@magistralconsulting.com

 

 

Introduction

Supplier Risk Intelligence aims to reduce supply chain interruptions by hastening response to as many possible preset events. We now know that dangers in the supply chain can originate from anywhere. Although some risks occur more often than others, even those that seem less urgent might be harmful. These might include shifting market dynamics, rival companies expanding their market share, cutting costs, or changing consumer preferences. While checking margins, expenses, and quality, businesses must be adaptable and resilient. Customer satisfaction must continue to be a top concern, needing the ability to quickly adapt the supply chain intelligence to meet changing customer demands. No matter how little it may appear, a single supply chain disruption can affect any of these factors. Therefore, each organization that depends on others for its success must conduct a supply chain risk assessment. The main participants in the supply chain include suppliers, distributors, manufacturers, and retailers. Every part—from raw materials to parts and carriers—must function synergistically for the end-user to receive what they expected.

Factors involved in Supplier Risk Intelligence

Companies often undertake supplier risk intelligence tests to learn more about their suppliers, the risks they can present, and the risk management strategies they employ.

Factors Involved in Supplier Risk Intelligence

Factors Involved in Supplier Risk Intelligence

Regarding suppliers, there is no such thing as zero risk. Not everything is predictable, and every firm has its weaknesses—both internal and external. The goal of supplier risk assessments is to evaluate supplier risks with the company’s risk thresholds and show whether the suppliers are meeting expectations within an acceptable level of risk, not to exclude suppliers that pose any risk. Of course, in some instances, supplier risk assessments lead to a company needing to fire a supplier because there is no workable method to reduce that risk. As many businesses will attest, diversifying the supply chain enables better agility if a supplier arrangement is broken. It is vital to avoid any situations where businesses are forced to collaborate with a supplier that poses a severe risk to the company just because a replacement cannot be found. There are several factors involved in supplier risk intelligence.

Financial Stability

Businesses should create a financial risk score for each supplier using a credit bureau rather than a data source while trying to reduce threats to financial stability.

Insurance Management

Continuous monitoring is recommended for insurance management since it enables businesses to alert their management if a supplier no longer has sufficient insurance due to not paying a premium or canceling a policy.

Reputational Protection

Resources can also be used to protect one’s reputation. Prominent Supplier Risk Intelligence firms search more than 35,000 periodicals globally using adverse global media monitoring to look for reports about bad suppliers. Programs like these can help businesses in expecting lousy press.

Regulatory Compliance

Global watch-list monitoring and document validation are two methods for monitoring regulatory compliance issues. Regulatory hazards are among the concerns a corporation cannot control but should be vigilant about monitoring.

Cyber Security

Cyber security vulnerabilities are among the most significant issues businesses have been looking for help with Supplier Risk Intelligence firms. The ability to create a security rating, monitoring tools, potentially a security questionnaire, and the resources to gather and manage the information are all necessary for Supplier Risk Intelligence.

Document Management

Businesses should concentrate on document management to gather, organize, and authenticate any standardized document. Humans must review essential documents like insurance policies to ensure they are insured.

Social Responsibility

Verifying diversity, promoting sustainability, and analyzing anti-slavery and human trafficking issues should all be part of efforts to tackle social responsibility concerns. It is essential to build ties with suppliers who perform well rather than associating the business with those who do poorly on these metrics.

Health and Safety

Additionally, businesses must gather and manage data, including public safety and health statistics and other materials, to oversee their operations’ overall health and safety.

Processes in long-term Supplier Risk Intelligence

The most important thing to understand about supplier risk intelligence is that it cannot be completed in a single step. Various processes are needed to achieve it.

Processes in Long-Term Supplier Risk Intelligence

Processes in Long-Term Supplier Risk Intelligence

Documenting Known Risks

Mapping the supply chains for all the goods and services offered is the most effective method to start any risk assessment exercise. The goal is to understand each link in the supply chain and the risks. Create a risk registry for each supply chain the company depends on so that processes can be prioritized on what to watch. Any areas where risk is uncertain or the lack of data should be noted when finding and recording risks. To find out if these are unknown risks or if the suppliers need to be more forthcoming, they can flag them for further inquiry.

Creating a Framework

When conducting audits, developing a risk management framework is necessary after creating a risk register. Although the framework can be straightforward, it is vital to consistently evaluate the risks to the supply chain and business operations. Consistency allows prioritized actions based on the risk and harm they pose to the company. This strategy covers bases by enabling access to risks associated with the suppliers and the adaptability and readiness of the company to manage any problems.

Monitoring Risk

A strategy for ongoing and persistent analysis is essential once the risk management framework has been built and initial audits have been completed. Continuous monitoring not only serves as a reliable early warning system for foreseeable problems in the supply chain, but it may also strengthen the relationships with suppliers because they will know where to focus the mitigation efforts. Risk measurement and monitoring are now easier than ever, thanks to the development of digital supply chain visibility technologies in recent years. It is now possible to obtain real-time information while tailoring the metrics, watched according to the needs and risk tolerance. The latter can be beneficial if rapidly changing factors like the weather are being tracked because, for instance, a hurricane or typhoon could impair operations at a supplier’s plant.

Implementing Governance

It is excellent practice to ensure a governance framework to help review supply chain risks and continuously watch hazards. Companies choose internal champions to oversee each supply chain node as part of the supply chain governance strategy. When risk levels change, or mitigation is needed, each person would then collaborate with the suppliers to offer ongoing support and follow-up. Creating a governance board for the company that consists of the people in charge of the various supply chain nodes can be done. The governance board might meet regularly to update the company’s risk profile and forecast and assess the risk ratings related to the supply chain. The procurement and sourcing teams would receive help from these efforts since they always have the latest standards when creating questionnaires and other materials for onboarding potential new suppliers and partners.

Magistral’s Services on Supplier Risk Intelligence

Magistral’s Supplier Risk Intelligence delves more profoundly than just financial risk markers. They offer Custom insight dashboards and Flexible solutions to support the business, regulatory, and sustainability goals. Other services offered by Magistral on Supplier Risk Intelligence include:

ESG Scorecard:

This includes evaluating a supplier on 49 detailed ESG parameters and also preparing a carbon footprint for the client.

Compliance Monitoring:

This is the important step in compliance data collection, analyzing, and reporting it.

Dashboards and Visualization:

This consists of preparing risk dashboards and then highlighting the concerns associated, with the client.

Custom Research:

Risk Analysis is done on the customized parameters as suggested by the clients.

Risk Evaluation:

Quantification of the impact of potential risk is done here.

Supplier Monitoring:

This has newsletters, data collection, and reporting, vendor scorecards, etc.

About Magistral Consulting

Magistral Consulting has helped multiple companies to reduce operations costs through its offerings in Procurement and Supply Chain.

About the Author

The article is Authored by the Marketing Department of Magistral Consulting. For any business inquiries, you could reach out to prabhash.choudhary@magistralconsulting.com

Introduction

The practice of employing quantitative methodologies to obtain actionable insights and outcomes from data is known as procurement analytics. It entails gathering and analyzing data to enable fact-based decision-making and competitive advantage. It usually reports on what has happened in the past and makes estimations based on historical data using predictive analytics to predict what will happen in the future.

Procurement analytics uses quantitative methodologies to obtain meaningful insights and outcomes from data to provide companies and firms with better visualization of their procurement budget. Predictive analytics software gathers data from internal and external sources and organizes it in procurement dashboards. They enable businesses and organizations to use procurement data to make informed decisions and obtain strategic, competitive benefits.

Procurement analytics is critical for enhancing the efficiency of a company’s overall business operations and providing helpful market knowledge to aid strategic business choices. Without it, organizations often miss cost-cutting opportunities, do not meet KPIs, encounter supply chain disruptions, and pay higher costs.

Importance of Procurement Analytics

Analytics is often recognized as one of procurement’s most valuable resources and disruptive forces. Most Chief Procurement Officers (CPOs) consider analytics the most crucial technology in their organizations.

Procurement Analytics Importance

Importance of Procurement Analytics

Over the next decade, analytics has also been identified as the most disruptive force in procurement. It is a prevalent misperception that procurement analytics is limited to spend analytics. In truth, analytics affects all aspects of a company’s operations, from strategic sourcing to category management and procure-to-pay. Here are the reasons why analytics are so vital in procurement.

Category Management

When applied correctly, analytics provide category managers with superpowers. Category managers can use procurement analytics to find cost-cutting possibilities, segment and prioritize suppliers, address supply risk, and foster innovation.

Strategic Sourcing

Data informs the most effective company strategy. Analytics aids strategic sourcing by finding the ideal dates and locations for sourcing events and proposal requests. It can decide which suppliers to include in sourcing projects and provide detailed information on their quality and risk levels.

Contract Management

Analytics is beneficial throughout the contract lifecycle management process. It can send notifications when contracts need to be renegotiated and provide information for supplier discussions. Furthermore, analytics can find maverick spending to increase contract coverage and compliance.

Procure-to-Pay

The transactional part of procurement can benefit significantly from procurement analytics. Purchase order cycles may be tracked, and analytics can enhance payment terms. Payment accuracy, rebate opportunities, and mistaken payments can be checked while eliminating fraud.

Sustainability and CSR

Companies increasingly recognize the benefits of analytics in assessing sustainability, corporate social responsibility, and associated risk in the supply chain and procurement. Procurement decisions can have an environmental or social impact, and analytics can reveal opportunities for more sustainable options.

Steps of Procurement Analytics

During the projected period, the procurement analytics market is expected to increase from USD 2.6 billion in 2021 to USD 8.0 billion in 2026, with a Compound Annual Growth Rate (CAGR) of 25.3 percent.

Procurement Analytics Process

Procurement Analytics Process

The use of procurement analytics technologies and services is projected to be driven by several factors, including increased expenditure on marketing and advertising by businesses, a changing landscape of consumer intelligence to drive the market, and the expansion of customer channels.

Procurement analytics provides insight into spending, supplier performance, and prospects for cost savings. However, even if spending data is already stored in systems, making sense of it is typically tricky. Before insights can be discovered, three data processing procedures are needed.

Data Extraction

It begins with data extraction from all sources and consolidation into a single central database. Data is ready to be enriched and sanitized once it has been extracted. Data extraction is converting obsolete and jumbled data sources into a clear, unified format that is easy to understand and analyze.

Data Cleansing and Categorization

The data must then be classified into distinct and well-defined groups. A precise data classification is needed for practical expenditure analysis, making the heterogeneous spend data easier to oversee and manage across the company. This procedure unifies all purchase transactions into a single taxonomy, allowing customers to see their total spending in one place. This step can also enrich data by using automatic translations or consolidating suppliers.

Reporting and Analytics

The data is now ready to be analyzed after it has been categorized. Expenditure analysis gives the spend visibility that helps deliver intelligent analysis for faster opportunity identification, better sourcing decisions, and complete spending management. Access to dependable spend analytics is essential for significant cost savings and the realization of potential opportunities.

Advanced Procurement Analytics

Advanced analytics approaches employ computers to find patterns in large data sets, allowing procurement analysts to query their data, find statistically significant pricing drivers, and cluster the data based on those drivers. The clusters show a group of purchases with no notable cost driver changes, revealing the variances in vendor performance. One significant advantage is that, unlike individuals, advanced analytics algorithms do not make conclusions based on gut instinct or place disproportionate emphasis on data outliers. The tools also make it possible to evaluate thousands of permutations fast to see which statistical clusters best suit the data.

Negotiation

Preparing a fact base with information on prior transactions is the first step in effective negotiations. By inputting a description of the prospective transaction, advanced analytics allows the manufacturer to find a cluster of providers at once. The average price of similar purchases is highlighted in a summary of cluster data and a list of accessible vendors and their prices. The manufacturer can come to the bargaining table with prices based on historical data and information on vendors who work in this market armed with a solid, quantitative fact basis.

Vendor Management

Vendor segmentation and management are all about building relationships. As a result, it is more susceptible to the various biases that affect human interaction. While the personal element of the relationship should be respected, decisions about vendor performance should be based on facts rather than emotions. Advanced analytics can help reduce biases from the evaluation because it is especially beneficial in isolating vendor performance within a cluster.

Yearly Planning

Advanced analytics can be handy in assessing purchasing data to support a comprehensive sourcing strategy. Inventory-carrying decisions can also be influenced by modeling. Based on the data, the procurement team may decide whether to pay the carrying cost for more inventory or pay a premium for spot purchases.

Magistral’s Services on Procurement Analytics

Procurement is recognized as a crucial business contributor by many firms. Procurement expenses account for 40 to 70 percent of all costs and are a variable source of competitive advantage. Effective organizations use data to manage supplier relationships, grow their businesses, and even bring innovative ideas to life. In the last two years, more data has been created than in humankind’s history, posing unfamiliar problems for procurement analytics. Developing analytical technologies speeds up the data-to-insights process and opens new possibilities. Procurement analytics can boost operational efficiency throughout the sourcing and supplier management process. The following are the most common services offered by Magistral for procurement analytics:

-Spend Analytics

-Low-Cost Country Sourcing

-Sourcing Strategy

-Vendor Rationalization

-Bid Management

-RFP Management

About Magistral Consulting

Magistral Consulting has helped multiple companies to reduce operations costs through its offerings in Procurement and Supply Chain offerings

About the Author

The article is Authored by the Marketing Department of Magistral Consulting. For any business inquiries, you could reach out to prabhash.choudhary@magistralconsulting.com

Introduction

Because it is impossible to foresee the outcome of an uncertain occurrence, commodity intelligence entails lowering uncertainty by regulating risk variables. To effectively manage commodities risks, however, a clear perspective of the status of the business and the risks associated with it is needed, as well as a suitable risk management framework with the right people and the necessary tools.

Pricing, supply, and demand instability in commodity markets directly and significantly affect the company’s procurement budget, ability to save money, and overall profitability. The problem is that many commodity markets are incredibly volatile. Monitoring commodity price predictions and trends are integral to procurement teams’ and organizations’ strategic plans. It enables them to make data-driven planning and choices, foresee pricing-related risks, and manage suppliers proactively while avoiding supply chain disruption caused by price fluctuation.

Commodity price risk refers to the likelihood that price variations in commodities can result in financial losses for commodity purchasers or producers. Buyers are exposed to the possibility of higher-than-expected commodities prices. Commodity producers face the danger of lower commodity prices. Commodity producers and consumers can both use commodities markets to mitigate risk. Commodity price risk is a severe concern for businesses and consumers, not just commodity dealers, as the purchase and processing of diverse commodities, ranging from metals and energy to agricultural and food goods, is needed for everything from raw materials to finished products.

Methods of Measuring Commodity Risks

Producers most vulnerable to price drops earn less money for the commodities they create. Commodity consumers most vulnerable to rising prices increase the cost of the commodities they produce. The time lag between placing an order and receiving goods and exchange rate variations pose a risk to exporters and importers. Such risks should be effectively controlled for a firm to focus on its core operations without being exposed to unnecessary hazards. The methods used for measuring commodity intelligence include:

Methods of measuring commodity risks

Methods to measure commodity risks

Sensitivity analysis

Sensitivity Analysis is performed by selecting arbitrary commodity price movements or basing commodity price movements on historical data. The risk is estimated by adding the currency and commodity price changes if the commodities are priced in a foreign currency.

Portfolio Approach

The company analyses commodities risk and a more extensive examination of the potential impact on financial and operational activities using a portfolio approach. The risk is calculated using stress testing for each variable and a combination of variables in a portfolio approach.

Value at Risk

When doing a sensitivity study known as “Value at Risk,” some businesses, particularly financial institutions, adopt a probability method. In addition to the sensitivity analysis of pricing changes outlined previously, the corporations assess the likelihood of the event occurring. As a result, sensitivity analysis is used to simulate the potential impact of commodity price movements on its exposures by analyzing historical price history and applying it to current exposures.

 

Commodity Intelligence for Profitability

Even though the costs of raw materials, services, and other commodities fluctuate so often in today’s dynamic market environment, it is astonishing to see that the end product’s price is virtually always consistent. Procurement managers continuously look for the most cost-effective products but may have to buy even if the price is high to meet the production schedule. On the other hand, Procurement managers can boost the company’s profitability by monitoring commodity price volatility and altering sourcing strategy. Adjusting the sourcing strategy does not imply buying in quantity when prices are low, as this could result in waste.

Profitability by Commodity Intelligence

How to attain profitability using commodity intelligence?

Futures Procurement Contract

Signing a formal agreement to buy a specific commodity at a predetermined price at a specific period in the future is one of the best strategies to limit risks associated with commodity price volatility. The oil and gas industries and other commodities such as industrial metals, precious metals, seeds, cattle, and grains use futures contracts extensively. Such signed agreements allow the organization to manage better the risks associated with shifting commodity prices while increasing income predictability.

Price and Technology Trends

Companies may not always have the option of passing on higher commodity prices to their customers. Based on past data and projected patterns, significant commodity prices can be watched and predicted. Observing current market patterns and the global economy and employing standard forecasting tools can be a good signal for predicting commodity prices.

Bundling Services

Procurement managers who cannot limit risk due to variable commodity prices may use product and service bundling with a dependable supplier. Bundling products or services together hold the end product’s price by stabilizing the commodity’s ultimate price.

Price Forecasting Models

With the introduction of big data, purchase managers now have access to enormous data and information. An exact prediction of future commodity prices can be produced with proper prediction and study of elements influencing commodity prices. Purchase managers might use this data to make bulk purchases or postpone the procedure to increase overall profitability.

Future of Commodity Intelligence

At various periods, commodity markets have shown high price volatility, with unanticipated changes in demand or supply causing significant price fluctuations. It is not always easy for a commodity trader to keep track of every tiny change in a commodity price or other factors that affect that price. With commodity volatility and unpredictability increasing, and more data sources available to support decision-making, one thing is sure: AI will play a significant part in commodity intelligence in the future. It is possible to supply commodity intelligence unlike any other using artificial intelligence (AI).

Natural language processing (NLP) and machine learning (ML) are commonly used in commodity forecasting to automatically break down organized and unstructured data and construct models that predict commodity prices with minimal human interaction. Things that would usually be invisible to the naked eye can be brought to light, allowing manufacturers to foresee production, traders to forecast pricing, and buyers to plan more strategic procurement. NLP employs rendered algorithms to analyze written material, allowing techniques such as sentiment analysis to extract information from news articles, emails, and social media postings. Traders often use it to analyze current events and forecast market developments. On the other hand, machine learning (ML) involves algorithms that can be trained to act and think like people over time to improve predictions. A supervised learning approach means that as these algorithms are exposed to more data, experts who train the models can ensure that they keep improving.

Magistral’s services on Commodity Intelligence

Magistral’s services help companies to get an exact picture of their market position by accessing the correct forecasts and analytical reports, cutting through the market’s noise, and figuring out which risk indicators threaten their category and overall procurement strategy. Continuous insight programs that allow them to reach their full potential as strategic advisors to the rest of the company are also created. The services provided by Magistral are as below:

Predictive Price Analytics: All the services like Predictive Price Modeling, Price Tracking, Should-Cost Modeling, and Data Analytics are included under this head.

Expert Interviews: Niche Area Reports and Interviews of Specific Commodity Experts help in understanding the prices and other factors related to that commodity.

Risk Management Support: In this, Risk Intelligence reports and Custom reports are made to analyze the risk and reduce it further.

Price Tracking and Visualizations: Various MIS, Dashboards, and Data Analytics with layouts are prepared.

Business Impact Analysis: All those factors which affect the business are identified like supply disruptions, price changes, and volatility. Proper reports are made to explain how and what impacts it can cause to the business.

About Magistral Consulting

Magistral Consulting has helped multiple companies to reduce operations costs through its offerings in Procurement and Supply Chain offerings.

About the Author

The article is Authored by the Marketing Department of Magistral Consulting. For any business inquiries, you could reach out to prabhash.choudhary@magistralconsulting.com

Introduction to Supply Chain Analytics

The application of high-level insight gained from an organization’s data at multiple stages in its supply chain, procurement and processing, inventory management, distribution, and beyond is known as supply chain analytics. This analysis technique is essential for conveying a complete story concerning operational processes and laying the groundwork for initiatives to automate and optimize logistical operations. It can aid businesses in improving and optimizing overall effectiveness and efficiency in their supply chains in many ways. Data collected throughout all touchpoints of the said supply chain, from sourcing and manufacturing to shipping and customer support, is used in supply chain analytics. This information is then used to make crucial operational choices like purchasing, scheduling, holding, carrying ability, and staffing, among other things. Analytics usually refers to the ability to make data-driven decisions based on a review of relevant, reliable data, which is commonly shown using graphs, charts, and other tools. Massive amounts of data are generated by supply chains regularly. The Supply chain analytics space aids in the deciphering of all this data, revealing trends and providing insights.

Evolution in Supply Chain Analytics Space

The worldwide supply chain analytics market is expected to increase from USD 3.5 billion in the year 2020 to an amount of USD 8.8 billion in 2025, with a projected Compound Annual Growth Rate (CAGR) of 19.8%. Four out of five merchants seek real-time automation for demand planning and forecasting by 2025, with a more significant percentage aiming for the same in inventory processes

Supply Chain Analytics Market Size

Supply Chain Analytics Market Growth

. In 2021, the sales and operations analytics segment had more than 29% market share, while the cloud segment had more than 62% market share. The large enterprise sector dominated the market, accounting for more than 60% of total sales in 2021, and the manufacturing segment had the most significant market share, with over 24% for the supply chain analytics space.

Supply chain analytics will expand in tandem with analytics models, data structures, technology, and the ability to combine data across application silos. Improvements in IoT, CEP, and streaming architectures will also allow businesses to gain insight from various data sources. People’s ability to create more detailed and relevant predictive insights that can be implemented into workflows will continue to increase as AI develops. The next frontier in supply chain analytics, according to studies, is cognitive technology or artificial intelligence. Information preservation and process automation are not the only benefits of AI technology. Artificial intelligence software can think, reason, and learn like a human. AI can also process massive volumes of data and information — both structured and unstructured — and deliver quick summaries and analyses of that material. Blockchain, Graph analytics, Hyperautomation, EDI-as-a-Service, Agile supply chains, Cloud computing, and Big data are among the other technologies and trends predicted to play a significant role in supply chain analytics and management.

Types of Supply Chain Analytics

Five forms of supply chain analytics are used to build a capability hierarchy for distribution executives, supply chain managers, and other decision-makers:

Supply Chain Analytics

Types of Supply Chain Analytics

Descriptive Analytics

Descriptive analytics examines the events of the past. They can spot patterns in past data. This data could come from internal and external supply chain execution software that provides insight across suppliers, distributors, sales channels, and customers. Analytical techniques can examine the same sort of data from various periods to spot patterns and speculate on reasons for change. However, even though descriptive analytics is widely regarded as the foundation of analytics, many firms are only beginning to integrate it into logistics.

Predictive Analytics

Predictive analytics is typically seen as demand projections, often subdivided by product, region, and consumer. These figures provide a heads-up so one may ramp up production, staffing, and raw material purchases to meet demand. They can also point out the impact of changes in operating policies. Predictive Analytics builds on the foundation of descriptive analytics but extends its capabilities. Predictive analytics for inventory management incorporates demand projections into models of inventory policy operation, which then generate estimates of essential performance measures such as service levels, fill rates, and operating costs.

Prescriptive Analytics

Prescriptive analytics is concerned with what should be done next rather than what is being done now or any plans about the future, i.e., they prescribe decisions geared at maximizing inventory system performance. Prescriptive Analytics could be used to optimize the complete inventory policy. Prescriptive Analytics builds on the foundation of predictive analytics and adds optimization capabilities.

Diagnostic Analytics

Diagnostic supply chain analytics equips supply chain managers with the knowledge to recognize when data gives them a story they do not understand. When combined with solid visualization technology, it can explain data anomalies and better understand departures from averages, trends, expectations, or norms. It varies from other types of analytics, such as descriptive analytics, in its ability to isolate individual supply chain events and answer crucial concerns managers may have, such as how and why sales in a specific region have been affected.

Cognitive Analytics

As the name implies, cognitive analytics is the process of integrating artificial intelligence and machine learning to aid retailers in making quick business choices. Unlike linear data distribution systems, cognitive analytics continuously watches data across all parts of the supply chain to make fast decisions that minimize risk.

Importance of Supply Chain Analytics

The Supply chain analytics space can help a company make better informed, prompt, and efficient decisions.

Importance of Supply Chain Analytics

Importance of Supply Chain Analytics

Cost Management

The complete data is accessed to get a continuously integrated planning strategy and real-time visibility into diverse data that fosters operational efficiency and actionable insights.

Risk Management

By recognizing patterns and trends throughout the supply chain, supply chain analytics may help predict future hazards and find known issues.

Precision Planning

The supply chain analytics space can help a company better estimate future demand by studying client data. It helps a company decide which items can be reduced in price when they become less profitable and figure out what the client wants after the first order.

Lean Supply Chain

Companies can use supply chain analytics to watch warehouses, partner reactions, and consumer needs for better-informed decisions.

Future Planning

For supply chain management, companies are now offering advanced analytics. Advanced analytics can analyze both structured and unstructured data, giving businesses an advantage by ensuring alerts arrive on time, allowing them to make the best decisions possible. Advanced analytics can also create correlations and patterns between multiple sources, resulting in alerts that reduce risk with minimal cost and environmental impact.

Companies may see other benefits as technologies like AI become more ubiquitous in supply chain technology. Because of the constraints of evaluating natural language data, information that could not previously be processed can now be studied in real-time. AI can read, understand, and correlate data from various sources, silos, and systems quickly and comprehensively.

It can then perform real-time analysis based on the data interpretation. Companies will have access to far more information about their supply chains. They can improve their efficiency and reduce disruptions while supporting new business models.

Magistral Supply Chain Analytics Services

Magistral’s outcome-oriented services enhance the required supply chain to be more flexible, precise, granular, and efficient. The numerous services provided include:

1. Category Intelligence

2. Commodity Intelligence

3. Procurement Analytics

4. Supplier Engagement

5. Supplier Risk Intelligence

6. Transportation Analytics

Category Intelligence

The value of category information has grown over time as procurement intelligence has evolved from a cost-cutting function to a strategic business one. Category managers are now expected to generate value throughout the supply chain, and as a result, they can no longer rely on direct procurement categories’ typical cost-cutting optimization strategies.

Commodity Intelligence

Monitoring commodity price predictions and trends is an integral part of strategic plans for procurement teams and organizations. It helps make data-driven planning and choices, foresee pricing-related risks, and manage suppliers proactively while avoiding supply chain disruption caused by price fluctuation.

Procurement Analytics

Procurement analysis gathers data and applies analytical tools to gain actionable insights and enhance decision-making to optimize S2P processes. It can help perfect every stage of the process, reduce related risks and operational costs, and gain a competitive edge if adequately studied.

Supplier Engagement

Supplier negotiations are typically done in person, but modern technology that allows for two-way communication can also be used. Supplier risks are identified and negotiated to find any supply chain risks associated with the product or service. Participation in price discussions using the information and insights obtained throughout the negotiation is vital.

Supplier Risk Intelligence

Critical insights on sourcing and supply chains throughout the industry could be better understood by evaluating the advantages and disadvantages of each supplier’s performance. Supplier risk analysis can proactively aid the company by continuously evaluating each supplier’s performance and health and their associated operational value chain to watch and minimize supplier risk.

Transportation Analytics

Transportation management is evolving thanks to supply chain technology fueled by data and analytics. These practical tools aid businesses in being more educated, efficient, and long-lasting. With end-to-end visibility provided along with the supply chain and its moving pieces, a data analytics solution provides better order fulfillment, shipment and delivery tracking, and future planning accuracy.

About Magistral Consulting

Magistral Consulting has helped multiple companies to reduce operations costs through its offerings in Procurement and Supply Chain offerings.

About the Author

The article is Authored by the Marketing Department of Magistral Consulting. For any business inquiries, you could reach out to prabhash.choudhary@magistralconsulting.com