NextGen: The Interview with Rob Handfield

This month we spoke with Rob Handfield about procurement analytics. Handfield is the Bank of America University Distinguished Professor of Supply Chain Management at North Carolina State University. He is also executive director of the Supply Chain Resource Cooperative. He serves as faculty lead for the manufacturing analytics group within the International Institute of Analytics, and is on the faculty for operations research curriculum at NC State. Handfield's latest book is The Living Supply Chain: The Evolving Imperative of Operating in Real Time.

NextGen Supply Chain: One of the hot topics in procurement these days is analytics. What's the state of analytics in procurement?

Handfield: Quite simply, procurement analytics is nascent. People get ahead of themselves very quickly here. It seems many go right to artificial intelligence. As if AI is already on the shelf and ready to go. It's not. We are much earlier in the development of procurement analytics.

That said, it's worth noting that AI will have a strong hand in the future. In fact, procurement analytics will rely on other nextgen supply chain technologies including the cloud, big data, cognitive analytics and mobile technology.

But today, we are at the stage of establishing the base for procurement analytics – data. And we're in the early stages of data organization and governance.

First, you have to be able to capture, store and use data to produce any analytics, whether they are KPIs or other decision-making measurements. We're still learning how to do that.
To that point, most data scientists today spend the majority of their time checking and cleansing data to ensure the database is clean in the first place. Little of their time is spent on identifying dots in the supply chain let alone connecting them to create new insights.

But it's not just about the data itself. The source matters too. Procurement analytics require not just internal data but external data. We have to consolidate and link these data sources. And all of the data needs to be in real time. Now it's easier to understand how nascent procurement analytics really are.

NextGen Supply Chain: Internal data and external data? This must give some people qualms about data security.

Handfield: It sure does. We are moving to the idea of building trusted, protected databases. Think of them as cloud-based data lakes with rules. Not just anyone can contribute data. And there is governance as to who can pull data from the lake.

Data governance is the base of the procurement analytics pyramid. The next level up is business intelligence. This is a technology-driven process for analyzing and making decisions. This is where AI starts to enter the process. Without AI, it would be enormously difficult to analyze the streams of data coming into the data lake. And whenever we can automate procurement analytics, that's a good thing.

At the top of the three-level pyramid is business analytics. It needs the output from business intelligence to operate. Business analytics evaluates supply and demand trends to develop new insights into future sourcing obligations and supplier relationships, to name two. The ability to link supply and demand characteristics and anticipate how the supply chain will operate is the true nirvana of procurement analytics.

NextGen Supply Chain: What are some of the current areas of focus for procurement analytics?

Handfield: I would identify five at this point. And as you will see, they become incrementally more complex.
At the base is simple sourcing followed by spend analysis. Then there's the matter of contract management, which, of course, includes risk exposure all the way down to raw materials by country.
Supplier risk is also part of the mix. For instance, how does a natural disaster affect the supply chain? And of course, there's corporate strategy. How do you build a supply chain to gain a corporate advantage?

NextGen Supply Chain: Why is all this important?

Handfield: We are moving into a new environment. Nextgen technologies from the cloud to AI are gong to have a big impact on changing how companies manage procurement. Those who figure out first how to use these technologies will pre-empt others. Going forward, it's all about how to get information that can make predictions that will allow you to move before your competition.

NextGen Supply Chain: What kind of a trajectory do you see for procurement analytics in the next few years?

Handfield: Like I said, we are in the very early stages. That means leading companies will take the next five years to set up centers of excellence. These will pilot how to manage and use data to drive analytics. And young people will be a major part of making it possible.

In terms of what is accomplished early on, it's ok to go for easy wins. Once people start to get a sense of how much their supply chains can be helped with procurement analytics, they will demand more of it. Real-time data will be our new fingerprints in the supply chain.

Gary Forger is the special projects editor for Supply Chain Management Review. He can be reached at [email protected].

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