At the Luxembourg headquarters of mobile network Vodafone's global procurement business, there's a huge touch screen where executives can pull up instant reports on any aspect of spend across the worldwide organization. Dubbed the Procurement Control Center, this high-tech information hub shows how far Vodafone has come since the days when the only way to find out its spend with any supplier was to phone the supplier and ask them. Installed after the company implemented SAP S/4 HANA a couple of years ago, it now takes just a second or two to bring up the data, says Ninian Wilson, Director of Supply Chain Management and the CEO of the Vodafone Procurement Company:
It's all touchscreen technology and the screen's about twelve feet by six feet, you can touch it and bring up data. Every time we're bringing up data into that tool, we're querying between 20 and 30 terabytes of procurement data — we've got about three and a half years' worth of data.
So you can begin to see the value of S/4 HANA because it doesn't take five minutes to bring up a screen, it's a second or a second and a half, even though it's querying such a massive amount of data.
Having on-demand access to this kind of insight raises the perception of the procurement function as a board-level partner, he adds, recalling an occasion when Vodafone's chief executive wanted to know how much was being spent with one supplier that had fallen out of favor.
We were able to provide that information within seconds to him and we could say, 'This week, last month, last quarter, last year, last three years, what do you want?' It's tremendously powerful.
That by itself helps a profession that was sometimes a little bit under-invested in to become more professional. If you haven't got the data and the analytics then you can't even sit at the same table with your CFO and say this is where we are, this is what's happening.
Vodafone's digital journey
Of course, visits to the control center have been infrequent in recent months due to lockdown measures, but Vodafone's digital infrastructure has meant it was able to make the switch to working from home with very little disruption.
My procurement team in Luxembourg is round about 350, and worldwide with all the staff who do the processing in-country the headcount is about 800. Every single one of those has been working from home, and there is no perceptible interruption in the supply chain which we've had. The procurement activity's still going ahead.
Once every two weeks, somebody drops round a couple of contracts which need to be signed under seal or under hand, but 95% of our contracts are digital. All our RFPs and RFQs are digital. So we're still continuing to do all of that work ...
You could say it's fortunate we had it or it was good planning, or it was just part of our digital roadmap. But I think having those tools in place has allowed us to flex during this very difficult period. And for us to keep what for many people is critical national infrastructure. Where would we be if you didn't have broadband or mobile and connectivity? It would be a very different proposition.
Vodafone's journey to achieve today's visibility across its global spend and its supply chain began in 2007 with a decision to standardize on a single global instance of SAP and the formation in 2008 of the procurement company to replace the federated spend landscape that had previously existed. Eliminating duplication across multiple geographies and more than two dozen different operating companies has reduced the number of suppliers from more than 60,000 to around 11,000, with a total spend of around €25 billion ($29bn) per year. Over the past ten years, Wilson estimates that the various measures to improve Vodafone's procurement capability have yielded around 3% savings per year — a significant impact.
Improving spend visibility and reporting
In the past five years, the company has standardized on a suite of SAP products around the Ariba SCM system and S/4 HANA core. It uses Fieldglass for contingent labor, and in the past two years has added Concur for travel and expenses as well as rolling out a SuccessFactors HR system. Vodafone is a "believer" in the best-of-suite model, says Wilson.
I think sometimes when people go for the best-of-breed solutions, they forget about the ongoing integration cost, when you change things, to core systems. Whereas now, once these are coming together, which SAP is doing, then that integration cost to us goes to zero effectively, which I think is one of the pluses of best-of-suite versus best-of-breed.
The massive improvement in visibility and reporting came to the fore during the COVID-19 crisis, when Vodafone took the decision to reduce payment terms for smaller suppliers to help their cashflow. Instead of the usual payment terms of 30 to 60 days, this was reduced to 15 days at the height of the pandemic. In the old days, the analysis that made this possible might have taken three months to complete, but with the tools now available, the team were able to complete it within a matter of days, says Wilson.
We took it to our Executive Committee, they agreed it, and within two days, we were then paying 6,000 suppliers, I think it was, on 15 days terms.
We just never had accurate data before. We could never have done it. We would have ended up arguing about the facts and the data, or the construction of the data or [said] this isn't correct. Now, we don't have that argument.
I think that's very powerful. The whole piece for us is transparency, visibility, and then the ability to manipulate the data in terms of analysis, so then you can draw out trends from it.
Data science in SCM
Analytics and data science will become increasingly important in procurement, Wilson believes. The Vodafone team has been building its own tools to interrogate S/4 HANA or using add-ons such as Celonis for visualization. The ability to drill down and look at metrics such as PO approval times, at a departmental or even an individual approver level, makes it possible to identify and resolve issues that previously would have remained hidden. Such capabilities can only accelerate over the next few years, he says, especially with the addition of AI and machine learning tools, requiring new skills.
It's a real data-centric organization, and it begins to change the skill sets you need in procurement. We've got a number of data scientists now in SCM, and those data scientists are helping us [to find] knowledge and understanding from the data that we've collected.
Another area where Vodafone has been gathering more data and applying data science is in its end-to-end supply chain. This year has highlighted the value of greater transparency down the supply chain and having the flexibility to respond to changing circumstances, says Wilson.
I think many companies maybe don't have the granularity and the depth of understanding of their supply chain, that perhaps I think their audit committees and their boards will now be demanding of them going forward. And I see this as an area of more focus ...
It's so important knowing where all your goods and services come from. You'd never wish for something like COVID to show the importance of supply chain, but it certainly brought it to sharp definition I think.
The other learning from this year has been the importance of digitalization. It's not something companies can afford to be half-hearted about, Wilson believes.
If you want to try and digitize your enterprise, and you want to digitize how your company works with your customers, you've also got to be digital inside. You can't be just digital on the outside ...
Don't have a digital-first strategy, have a digital-only strategy.
A powerful demonstration of what can be achieved once data is standardized and accessible for analysis.