Exclusive Interview with scoutbee’s Enno Arne Lueckel
2020 was a rollercoaster for professionals dealing with supply chains. What did companies learn from this turbulent year?
Lueckel: I think they learned a lot, and quickly. The earthquakes, tsunamis, and floods of the past two decades that disrupted supply chains should have been a wake-up call. The looming trade war of the past couple of years should also have been a wake-up call. Yet, it needed a truly global pandemic to demonstrate the importance of supply chain resilience and supply market transparency.
Too many companies relied on single-source suppliers as well as complex and long supply chain networks, as this was great for short term profit seeking. Additionally, supply chain disruptions were seen as rare accidents that would only hit a few companies.
Everyone knew that diverse and multi-sourced supply chains, established through proactive scouting, can reduce risk and reliance on any one supplier, country or region and so help keep supply chains in place during a major disruption. However, not many companies invested as much as they should have into onboarding second sources, up to date supplier insights, diversified supplier networks or digitalized procurement tools. This did prove to be a wake up call or learning for many.
Do you think that many procurement teams suffer from a lack of visibility over supply markets?
Lueckel: Yes, I know so. Increasingly, organizations are looking to their procurement teams to assess risks and gauge the ideal supplier mix in a more turbulent era. However, meeting that challenge can require a wholesale change in how sourcing is done. For example, many still use simple tools like spreadsheets for supplier tracking, which prove ineffective for mapping networks with complex connections. Moreover, the traditional reliance on personal networks or simple internet searches is prone to errors, human bias and often fails to increase the breadth of supplier bases.
More than ever, procurement needs advanced digital solutions such as AI. By fast-tracking the initial scouting and discovery phases from months to weeks or even days, scoutbee enables teams to focus on the tasks that require human expertise and judgement, like assessing the trade-offs between proximity, unit and shipping costs, innovation, environmental or political conditions.
Transparency matters because organizations can only mitigate the risks they can see. Effective risk management requires greater visibility into all the interactions and movements taking place within their networks. Of course, every supply chain has blind spots; vendors may be reluctant to divulge information, and the traceability of inputs can vary. Yet most companies still only map their direct suppliers, leaving them blind to possible interdependencies or problematic practices taking place far downstream.
Do you think this issue affects all sectors?
Lueckel: Yes. An ongoing and important disruption right now is the worldwide semiconductor shortage. This is a prime example of a complex, volatile and hyper-competitive supply market – and also the huge strategic value of full visibility via supplier insights.
For major automotive makers, scoutbee has delivered valuable supply market transparency and a reliable, comprehensive view of production. A platform like ours combines AI driven accuracy with great speed – ideal for such a competitive supply scenario. The semiconductor issue shows the sheer impact that supplier insights can have – both in terms of high speed scouting needs, but also for facilitating long term strategic sourcing steps.
Is information advantage the new currency in procurement?
Lueckel: I think that is true. For example, by continuously analyzing millions of supply chain data points, scoutbee’s AI offers tangible information advantage – not only for new supply needs, but also to qualify data in existing systems, to identify alternative vendors for existing setup suppliers, and provide additional data points for negotiations. Similarly, we can extract data from publicly available sources to fill-in or verify existing supplier maps.
Additionally, AI gives teams access to the entire global markets, identifying competitive options in untapped supply markets or those only visible in different languages. Our AI search technology rapidly reviews thousands of options worldwide and only curates shortlists that meet optimal parameters for capabilities.
Sustainability is a hot issue in procurement now. Do you see many advantages?
Lueckel: There’s huge potential and also responsibility. As pressure increases on businesses to be more sustainable, procurement teams have an opportunity to lead the way within companies looking to reduce environmental impact, comply with new policies, and build resilience.
The typical consumer company’s supply chain accounts for more than 80% of greenhouse-gas emissions. Take for example, how supply chain leaders engage with their suppliers: only 25% of companies that report their greenhouse-gas emissions to CDP say they engage their suppliers in efforts to reduce emissions. This will become a costly problem for everyone if action is not taken soon. Research shows annual global GDP could fall by nearly $36 trillion in 2050 if the delayed response to climate change continues.
Within supply chain and logistics, we all need to make sustainability one of the first priorities in our decision-making process, but too often it is an afterthought. In procurement, for example, most of the buying consideration is already performed before sustainability factors are applied to the equation. Platforms like scoutbee can now make sustainability visible in supply networks from first look – and make suppliers’ sustainability easily comparable. Too often today, procurement teams are choosing between the “greenest” of two largely unsustainable options, rather than a shortlist of suppliers that all prioritize environmentally-sound practices.
Moving forward, AI will broaden the ability to discover greener supply options, and make sustainability data one of the first benchmark items a team considers alongside cost and quality. We can accelerate the adoption of suppliers that incorporate sustainable practices such as environmental certifications, innovative materials or greener logistics. We must instill confidence to build alternative supply networks that will save CO2 from shipping millions of pieces each year – a valuable for us all.
What excites you most about the market right now?
Lueckel: There is much to be excited about inside the rapidly growing procurement SaaS market. We certainly believe that every business will in time begin to use a solution like scoutbee – and we are uniquely placed to become a standard for such services.
Perhaps the procurement technology that can be most transformational moving forward are the platforms that can consolidate and enrich an organization’s existing supplier data, perhaps held in their ERP – and unlock 360 degree insights to turn supply challenges into opportunities at speed.