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PERSPECTIVES


Evolving e-marketplace technology

Our Flavio Alves shares how e-marketplaces can help natural resources companies improve procurement.
Flavio Alves
Flavio Alves
Managing Director
Natural Resources

Accenture
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How can e-marketplaces help natural resources companies drive dramatic improvements in procurement?
The e-marketplace is essentially a B2B platform for companies and suppliers. The concept has been around for a while, and it has been used in a number of industries to link companies and suppliers. But today’s digital e-marketplace platform and technology—supported by cognitive systems, advanced analytics and a tailor-made services layer—has evolved tremendously.

Now, it not only connects organizations to one another, it can also support the full lifecycle of supplier management activities, from quotations and orders to invoicing, logistics, payments and supplier performance management. These types of capabilities are especially important to mining, metals and other natural resources companies because the sector has generally tended to underinvest in procurement processes. That means that natural resources companies, and their suppliers, stand to benefit significantly from improvements.

Why haven’t natural resources companies invested more in their procurement activities?
When executives consider investments in the procurement function, they typically think in terms of operational improvements—of making procurement processes more efficient and increasing productivity. That’s important because automation and optimization can generate significant savings. In our work with clients, for example, we can help cut 30 percent to 50 percent out of the procurement function’s operating budget. However, that budget is a relatively small part of the big picture, usually accounting for just 2 percent or less of overall procurement spending. As a result, executives view investments in procurement-process improvements as a relatively low-impact move from an enterprise-wide perspective. However, in reality, the real payoff comes from looking beyond the operational budget to achieve much broader savings.

What kind of benefits are we talking about? What might companies expect?
Natural resources companies should think about impactful improvements that enable procurement to tackle overall corporate spending for goods and services. For example, based on our experience, zero-based budgeting and closed-loop cost management have the potential to reduce procurement spending by 20 percent to 30 percent. In addition, we see that companies can often increase savings by fivefold with category specialists, market intelligence and closed-loop compliance, and achieve an additional 3 percent savings through improvements in working capital and reduced payment leakage.

How does the e-marketplace enable those kinds of improvement efforts?
As e-marketplace technologies have evolved, they have encompassed more and more functionality. So, these platforms now do far more than increase the efficiency of company-supplier interactions. They fundamentally change the relationship between a company and its suppliers, which opens the door to addressing overall spend.

For example, an e-marketplace can give a company better visibility into suppliers and their performance, which helps in negotiating volume discounts and more favorable contracts. Beyond that, today’s platforms provide an extensive range of tools for collaborating with suppliers in areas such as demand planning and supply chain management. Self-service capabilities and corporate procurement portals help keep purchases in line with contracts. And with more information flowing through the platform, it becomes easier to use analytics and decision-support tools to develop a better understanding of spending and suppliers.

Overall, it’s no exaggeration to say that digital platforms and technologies are transforming the way procurement organizations do business.

Where do you see all of this that taking natural resources companies in the future?
I think that as the use of digital technology increases over the next three or four years, e-marketplaces could have a significant impact on procurement. For example, they are likely to lead to smaller, more cost-efficient procurement organizations that operate with budgets that are about one-third the size of today’s typical budgets. Or, the increased use of automation and cognitive systems to support procurement professionals is likely to increase contract and policy compliance dramatically, moving it to the 98 percent range. Analytics tools, too, will play a growing role, as virtually all of a company’s spending data moves through the e-marketplace. That could enable deeper insights into spending and performance, and ongoing improvements in cost-control efforts.

Overall, you can think of the e-marketplace as an enabler of the virtual integrated enterprise, with the platform enabling full control of relationships and close cooperation with suppliers. As that happens, the e-marketplace will have the potential to revolutionize procurement.

In addition to your role in Accenture’s mining practice, you’ve taken an active role in the company’s “Exceed.Inn” program in Brazil. Can you tell us about this new program?
Sure! I am really excited about the Executive Education for Innovation (Exceed.Inn) program, which launched last July as an important component of Accenture’s innovation strategy in Brazil. The program aims to train and prepare our executives for the new digital era, encompassing themes like innovation mindset, entrepreneurship, open innovation, new technologies and new methodologies such as design thinking, agile and DevOps.

We have more than 500 online modules that offer ongoing, anytime-anywhere learning, and we will probably deliver more than 15,000 hours of class training this fiscal year. Feedback on the program has been very positive, and we are planning to expand it to other countries in Latin America. Overall, the program allows us to keep strengthening our ability to help clients leverage digital technology to drive innovation in their organizations.