MTN leads the way, Procurement Technology 4.0

Procurement 4.0, Procurement Technology

MTN, Africa’s largest mobile network operator, has a complex supply chain serving its customers in 19 countries across Africa and the Middle East that is managed by its Global Sourcing and Supply Chain (GSSC) division. MTN has recently embarked on “Procurement 4.0” an initiative leveraging digital procurement models to redesign traditional processes.
Andrew Savage
 Andrew Savage, Global Lead: Procurement Excellence, MTN, UAE at MTN tells SmartProcurement “To operate efficiently, many of their sourcing events include a combination of products and services, span several or all of those markets and cover a large vendor base. These multimillion sourcing events tend to have a lot of variable factors that Sourcing Category Managers need to consider when making a decision, for example which supplier or suppliers to award a contract to – including lead times, prices, legal implications, logistics and delivery times.”

“When approaching these kinds of decisions, they have in the past, used conventional methods that are not agile and include a significant component of manual work. This is not uncommon in the industry, as for decades procurement operations were primarily conducted manually. However, the introduction of Procurement 4.0 creates a disruption and requires companies to rethink the way they design their procurement processes. Besides the need to adapt, procurement also has the opportunity to reach the next horizon of operational effectiveness and to leverage emerging digital procurement models. GSSC was aware of the potentials early on and started their digital transformation journey years ago and has so far made significant progress in this area. Starting with a number of data scientists operating across MTN Group and their own data science team at GSSC. With the strategy to keep the intelligence in house to optimally unleash the power of smart procurement, a dedicated data science team is crucial. The team focuses on introducing never-seen-before innovative technologies to completely transform the operations of their procurement process and move from a traditional Telco to TechCo.”

“Whilst finding and introducing the correct technologies and strategies is crucial to success, nothing will work if you don’t have the right team in place before getting started. GSSC has made sure that the shift revolutionised from the ground up, they ensured that all employees were prepared and on-boarded with a radical culture shift. Capabilities regarding digitization were built in the organization, but also required targeted recruiting of specialist profiles, such as the data science team. The second key prerequisite was to establish an innovative environment with a start-up culture. This “incubator” provided a high degree of organizational freedom and flexibility as well as state-of-the-art IT systems and new gen digital solutions to enable rapid and agile cycles of development, testing, and implementation of the solutions. By creating an innovative environment and improving the digital knowledge at the same time, GSSC ensures that the procurement experts come up with the use cases and the data scientist design the solutions based on their inputs. A dedicated team, considered their centre of excellence for the digital transformation, monitors and revisits any kind of analysis and tooling on a periodic basis. This dedicated team consists of a combination of system engineers, data scientists and procurement experts. Next to this, the CoE also helps disseminate information, provides training, and establishes /maintains governance.”

“During their digital journey, GSSC has introduced a widespread number of digitization initiatives, with the objective of using insights for fact-based decision making. They have moved from ad-hoc visualizations to big data real-time insights, from manual slicing and dicing to predictive analytics based on SMART data. The three identified high impact areas by the CoE team are GeSSiCa, The Recommendation Engine and Decision Support Application (DSA),“ says Savage

“GeSSiCa is their first female “AI assistant”, with cognitive and robotic process automation (RPA) capabilities to standardize all sourcing plans and put together a unified Sourcing Calendar view. By introducing GeSSiCa the processes are more flexible, scalable and accurate. The cycle time decreased significantly and operational efficiency was achieved through automation of processes and manual tasks. The impact of GeSSiCa goes beyond cost reduction and decreased cycle time and improved accuracy. GeSSiCa also improves the data accessibility and quality, which is an important element for fact-based decision making, as the procurement experts should have confidence in the data –driven insights. This allows the procurement team to be strategically focused and to move away from monotonous repetitive tasks such as data cleaning, consolidation of reports and data etc. Using Natural Language Processing and Machine learning, GeSSiCa reads through the status of sourcing events, analyses the common mix of vendors, and takes into account the sourcing plan to automatically create a sourcing event Bundle. The relevant category managers are automatically grouped together to negotiate the bundled sourcing events and leverage the volume for better unit prices and commercial terms. All the recommendations made by GeSSiCa to prevent value leakage, are packaged together in the ‘Recommendation Engine’.”

“The recommendation engine ensures the GSSC team to benefit from every possible bundling opportunity by scanning ongoing and planned sourcing events. Bundling recommendations delivered by the Recommendation Engine have improved GGSC’s leverage over suppliers during sourcing events. This has directly impacted the commercial terms and conditions and motivated suppliers to innovate their business proposals to MTN. So far, they have introduced 5 successful bundling strategies and more than 100 bundling recommendation are in the pipeline ready to also be implemented successfully.”

“Combining the sourcing calendar with the predictive price curves, the Recommendation Engine also takes into account the ‘optimal period’ of negotiating. By analyzing the evolution of the prices and behavior of the vendor, the Engine will recommend a future-proof opportunity for bundling. This feature of the Recommendation Engine enables the procurement experts to optimize their sourcing decisions.”

“A crucial part of becoming a TechCo is moving away from reactive actions based on gut feelings, to a pro-active data driven approach. No longer damage control, but strategically using the disruptive changes in the industry to your advantage, before they even occur. In order to make fact-based decisions when negotiating strategic tenders, the CoE developed the Decision Support Application (DSA) in-house (based on open-source software). DSA manages x-functional decision making and combinatorial negotiations in complex multi-unit tenders. The application identifies cost drivers in bidding proposals and models the award scenarios for each bidder. Moreover, it enables the user to analyze the priorities of each vendor and creates recommendations on counteroffers for each vendor using game theory. All the counteroffers are now “value maximation” functions and are built using advanced machine learning models. DSA enables us to move from several million scenarios into single digits with a complete paper trail in an instant.”

Dirk Karl“The support from senior management is also critical when implementing data-driven recommendations as a part of the process. The negotiation strategy laid out by DSA was precisely followed throughout the sourcing process with the support of senior management. Senior management requested the output of DSA as a pre-requisite for any commercial discussion. The Group Chief Procurement Officer – Dirk Karl, is group ambassador of using data points and machine learning as part of not only strategic sourcing negotiations but also operational sourcing events.”

“By building this AI-powered automated scenario planning tool, GSSC has been able to dramatically increase the use fact-based decision-making by category managers as part of the tender process, strengthening their ability to make the right decisions while boosting efficiency and accountability.

The specific benefits of this approach have included:

  • Operational efficiency: The tool has reduced the time spend on scenario planning from hours to seconds, giving buyers more capacity to spend on dealing with suppliers directly.
  • Fact-based: Rather than relying on a small number of scenarios that have been analysed manually, buyers are now able to have the confidence that they have considered millions of possible scenarios based on the different variables they have input into the system and choose the right course of action correspondingly. Having tested the tool in competition with the old approach, the project team found that the excel-based model overlooked several potential scenarios that were discovered by the DSA.
  • Agile: Compared with the previous approach, the model can be quickly adjusted based on new information from the market or particular suppliers, meaning that buyers can continue negotiations based on the analysis rather than having to go away and spend time building new analyses.
  • Audit trail: The new system creates a comprehensive paper trail of inputs and calculations, which wasn’t available through Excel. This can be used by procurement staff to understand how they arrived at a particular decision and to justify this to senior management.

Having implemented the scenario analysis tool, GSSC is building upon its success with the introduction of new modules focusing on price curve modelling and market share simulation that will give it an even deeper understanding of how its decisions are likely to affect supplier behavior. These form three elements of its procurement technology “cockpit”, alongside other tools such as spend analytics, demand forecasting and a procurement chatbot.”

He concludes: “While the procurement cockpit was specifically designed for use in a TechCo setting, GSSC recognizes its potential to be deployed in any other industries that wants to embrace Industry 4.0”

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