The Digitization of the “Cost to Service” analytics in a supply chain is one of the key initiatives that fall in the “Plateau of Productivity” or maturity level in the recently released “Gartner Hyper Cycle for Supply Chain Strategy 2020”, indicating this capability has almost reached the end of the Hype Cycle, as it is today considered foundational and a natural starting point for organizations that want to understand their supply chain performance.

In the “Cost to Service” is the total cost involved in a product's value chain- Raw material to Customer door step. In an FMCG company for a typical product, the cost of raw materials and component parts constitutes the main cost of the product and can range from 40-70% (sales and marketing would be the second highest). So, in today’s highly competitive environment, and effective supplier selection process is very important to the success of any FMCG company. Supplier selection is one of the most critical activities of purchasing management in supply chain.

Supplier selection is a complex problem involving qualitative and quantitative multi-criteria. A trade-off between tangible and intangible factors is essential in selecting the best supplier. CloudPrisma adopts the AHP(Analytical Hierarchy Process) model to create an effective matrix of vendors with a scoring model for both quantitative and qualitative parameters, normalized with a scoring point system with Analytics applied on a complex set of data’s from Historic, unstructured and structured data on the vendor to create an innovative model that makes it possible to introduce the optimum order quantity among the selected suppliers so that the Total Value of Purchasing becomes maximum.

Supplier’s inputs on various parameters is scored on a scale of 1-9 with a relative weightage and criteria that compared relative importance to the FMCG Company. The suppliers input data is collated from direct vendor at the time of procurement intent, historical data, and input from external unstructured data to create a scoring card using Advance AI analytical algorithms. A typical snapshot of a report defining an ordering criteria may have the following parameters

Capability

• Supply desired quantity
• Adherence to standards(ingredients, formula etc.)
• Delivery Network

Process

• Management & Organization
• Automation
• Delivery lead times

Packaging

• Variety of SKU base packaging
• Variety of delivery packaging

Pricing

• Margin/cost
• Minimum order quantity
• Credit period

Quality

• Production quality
• Hygiene‍‍

The CloudPrisma Technology specialist with domain knowledge in supply chain management for FMCG companies uses Artificial Intelligence along with Big Data Analytics that mine your structured and unstructured vendor data to build an Innovative Vendor selection model. The whole model is best implemented in a secured cloud and made available on infrastructure that can be scaled up or down based on requirement with negligible Capex investment in tools and resources..

The business benefits of the above model are –

1. An unbiased and objective vendor management process
2. Vendor metrics for negotiation and extracting the best deal
3. Robust framework for vendor management
4. Multi-criteria decision making process
5. Collaborative decision making
6. Automated process to avoid manual errors, saves time and provides overall productivity
7. Managing and monitoring Vendor performance with piers over a period of time and give flexibility to alterations in vendor strategy with minimum disruption.

Optimize and digitize your supply chain with CloudPrisma Advanced Analytics and Cloud expertise