Calculum Finalist Interview : Innovations in Sourcing
This October, the Future of Sourcing Awards will celebrate organizations and individuals that have shown innovation, leadership and transformation in categories that are critical to the sourcing industry. Interviews with the finalists provide helpful insight about their projects, the problem they sought to solve and the impact to their organizations. We will keep these organization anonymous until the event.
1. Can you outline why your team embarked on this project and the problem that needed to be solved?
Today, there are over 200 million businesses in the world, with each negotiating payment terms with suppliers and customers.
Payment terms are the agreed-upon terms when payment will be made for goods or services between a buyer and its supplier. Payment terms form an integral part of any B2B relationship and have strong implications on trading partners in terms of cash flow, profitability, sales growth, credit and supply risk impacting a company’s shareholder value.
With the aim of helping businesses grow and optimize overall company performance, we built a platform capable of analyzing, predicting and optimizing payment terms with suppliers and customers.
With Calculum's ADA Platform, we launched the first cloud-based data analytics engine on payment terms optimization leveraging Artificial Intelligence (AI) . Based on two decades of analysis of corporations around the world, it is also enhanced by collaboration partners and academia from leading institutions.
2. How were things done originally and what was the inspiration to innovate the process?
Today, there is no automated solution that provides assistance on what payment terms should be. In addition to all aspects of the process managed primarily through Excel, there is no solution that helps with analyzing, optimizing, and executing payment terms.
The only way to perform this analysis is by putting highly skilled people on it. Current solutions are all manual, laboriously produced by analysts without leveraging a centralized database, artificial intelligence, and advanced analytics.
This results in a micro view whereby only a very limited number of corporations are being reviewed and very expensive services with no systematic analytical approach.
As part of the payment terms negotiation process, Calculum's ADA Platform delivers the added value of a "mark to market" environment that allows corporations to evaluate their payment terms strategy and outcomes, relative to the market backdrop.
In addition to the above, the drivers to innovate the process also include:
● Increase in competition - not just amongst corporations but also their supply chains
● Recent supply chain disruptions increasing the need for transparency on suppliers base
● Growing interest in sustainability and ESG (Environmental Social Governance) data on suppliers
● Increasing interest rates; making external funding of a corporation more expensive, with increasing interest in finding sources of free cash flow within supply chains
3. What KPIs did you use to measure success for this project? (For example: performance, customer satisfaction, revenue, sales or relevant financial gains?)
Whilst KPIs like revenue and sales performance are clearly top of mind when it comes to measuring the project’s success, equally important indicators of progress for us also include; the increasing level of interest and positive feedback from our market, peer groups and most importantly, our customers.
4. How do you plan to ensure that the new model remains relevant and adapts to the future needs of the market?
With what Calculum offers, accuracy and timeliness is key and features as our primary focus and priority. Agility and the ability to adapt to stay relevant, is what we aim to achieve; by ensuring that the latest trends and developments in areas like technology, data, industry, customer feedback are top of mind and actively considered in all functions and incorporated in releases when applicable.
Data accuracy and data depth is key when it comes to ensuring Calculum's ADA Platform stays relevant and adapted to the future needs of the market. This will allow ADA to provide updated, in-depth payment terms and relevant information on supplier and supply chains.
In terms of features and functionality, our solutions and offerings are kept relevant by having ongoing dialogue with our prospects, and customers, as well as, listening to our partners. Their feedback is crucial for the ongoing further development of our offering.
5. What advice do you have for those who may want to implement this innovative approach in their own organizations?
When considering a solution like ours, its implementation success in corporations is highly dependent on its ability to:
a. consider and implement the solution as an on-going project, rather than a once- off tool
b. ensure stakeholder alignment and collaboration. In this instance, the involvement of the entire sourcing/procurement team throughout the whole planning and implementation process is vital
c. Allocate and prioritize sufficient resources e.g. time, budget, manpower to ensure the smooth running of the project.
d. Apply a strategic focus from the top down on the benefits and importance of a culture that prioritizes ‘Cash Flow Management’
6. What factors do you think are the most important to consider when innovating in this category?
The important things to consider in our continual drive for innovation are always about developing new approaches to solve our customers’ pain-points more effectively and efficiently, whilst ensuring the latest trends and market developments are all part of the equation.
With that as our starting point, the most important factors to consider when it comes to innovation in sourcing and procurement based on our ADA Platform are the following:
● Technology: Technology is a key enabler of innovation in sourcing and procurement. New technologies, such as artificial intelligence (AI), and machine learning (ML), can be used to automate tasks, improve efficiency, and make better decisions, especially around:
○ Benchmarking: AI can be used to benchmark payment terms against other businesses in the same industry. This information can be used to identify opportunities to improve payment terms. For example, AI can be used to compare the average payment terms for a particular product or service across different industries. This information can then be used to negotiate better payment terms with suppliers and generate Free Cash Flow
○ Automating tasks: AI can be used to automate tasks, such as sourcing, supplier evaluation, and contract management. This can free up human resources to focus on more strategic tasks.
○ Predicting demand: AI can be used to predict demand for products and services. In addition, this information can also be used to optimize inventory levels and avoid stockouts.
○ Identifying risks: AI can be used to identify risks in the supply chain. This information can be used to mitigate risks and avoid disruptions.
● Data: By collecting and analyzing data, sourcing can gain insights into their suppliers, markets, payment terms and costs. This information can be used to make better decisions about procurement and gain a competitive advantage.
● Collaboration: By working together, businesses and suppliers can share ideas, develop new solutions, and improve the overall procurement process.
● Culture: A culture of innovation is essential for success in sourcing and procurement with an environment where suppliers and procurement are encouraged to think outside the box and come up with new ideas.
● Leadership: Leaders need to set the vision for innovation and provide the resources and support needed to make it happen.
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