Bringing a building to life is no easy task. Beyond all the legal issues and architectural planning, the actual building of any property, from a small home to a giant skyscraper, is likely to involve hundreds of parts – be that people, tools, or just plain old bricks and mortar.
So having the right procurement system in place to manage all these functions is vital to a giant construction firm such as ISG Ltd. The construction specialist has offices on three continents, but it was facing challenges when its previous pre-qualification system for procurement began to reach its end of life.
ISG head of supply chain Robert Scriven explains: “As we began to look at our pre-qualification system, we realised that the platform could in fact be a transparent view for the entire supply chain, offering access to all that data.”
In other words, the entire business and its partners could have access to one system that allows oversight of invoicing, purchase orders, subcontracts, and audits.
“We started to see that a unified system was the best way of communicating with our supply chain,” he adds. “Rather than having to speak to accounts about an invoice being paid, we could put all of the information into one place that showcases their KPIs, highlights potential risks, and allows us to work closer on ESG goals. Our aim is for those partners to grow with us.”
Speak to most of the tech world about procurement and they will say it is all about the dollar – how much can you shave off the cost off buying and where can efficiencies be found. That was the previous model many companies – including ISG – operated on. But in the sector, core goals have changed, and new technologies are being used to support this shift.
Now, heads of procurement aren’t just tasked with finding amazing deals on supplies and services, they also need to consider ESG targets. Not just their own, either, but how these are impacted by supply partners.
“There is always that pressure to get things cheaper,” agrees Scriven, “but we’ve got to build things. Sometimes you must take the hits on costs to do the right thing. But if we can make savings in how we approach procurement, that allows us to focus on hitting those other goals.”
For ISG, its supply line and partner profile is as wide and complex as the portfolio of properties it builds. It has over 7,500 supply chain partners, and 94% of these are SMEs, with over 1,000 of these comprising companies with less than ten employees. Many of these partners themselves sub-contract work, often to even smaller firms or sole traders.
ISG is a $2.5 billion turnover company and spends around $1.8 billion per year, much of which is spent down the supply chain.
“We need to know how we can watch the material flow, so we have looked at technologies like blockchain to do this. The problem is those sole traders are operating on a cash model – so there is little-to-no transactional data.
“We are in a world where we have to rely upon the data from our supply chain and the data in our systems and make sure they are aligned, so we have got a single version of truth for everything.”
Overhauling the procurement system is the first step in a wider tech transformation at ISG, but as is often the case, the first step was one of the most difficult to take.
Starting in 2019, ISG execs identified the need to overhaul its procurement workflow system, and, after a tender process, turned to French unicorn Ivalua the following year, and launched its “Smartsource” supply chain tool.
For Scriven, that meant getting everyone in the room and convincing them that the “worst thing you can do is stay still”.
He identified several key areas that needed work including KPI modules, performance modules, subcontractor modules, and transparency along the supply chain, that needed work. This involved a massive analysis of data sets and a huge consolidation of vendor listings onto the Ivalua platform.
“If I was to offer advice to anyone about to transform their procurement system, it would be to try and understand your data first,” the former data analyst explains. “Most data probably is clean to some extent. Eventually you need to create a unique ID for your suppliers, but once you’ve created that unique ID out of any number of fields, you can start to utilise it, whether you use AI or not.”
This means linking unique ID codes to different providers, so they become much easier to track, to issue tenders to, and to pay, without duplication.
The initial adoption was “challenging” said Scriven, because it was one of the biggest IT upgrades implemented at ISG in over a decade. His team also found it challenging to determine what parts of Ivalua’s platform it needed, given the scope of the service available.
“The Ivalua solution can do a lot of things, but there is a question of how much you want to use it for and how much you want to pay for it,” he explains. “There are certain things we configured which we probably didn’t need to.”
This, he adds, was one of the biggest challenges of building out ISG’s procurement system – piecing together how each part fitted was as complex as laying out the bricks on a massive building project.
“When you’re building out complex services – from terms and conditions to verification, to integration with the relevant tax authorities, and much more – it can be a minefield.
“Now we have the foundations to build out all those workflows and make it as easy as possible for our stakeholders and our partners to use. We can push companies on to the platform and get them through pre-qualification in record time.”
One function key to the Ivalua platform for ISG is the ability to measure risk to the supply chain. It uses nine data points from integrity to construction industry schemes with the UK government, and gives project managers a red, amber or green measurement for each part of the project. This helps the team mitigate risks and, since launch, more than 1,000 members of staff have been trained to use this.
ISG’s partnership with Ivalua is set to enter “phase three” later this year which will allow the platform to manage all subcontracts under governance rules implemented by Scriven’s team.
This means that, rather than supply partners manually discussing invoicing or payments with ISG’s accounts team, there will be one, simple system they can access for contracts, data, payments, KPIs and any other interactions with the company.
This will also benefit ISG because it allows project managers to identify which partners carry the most risk in terms of delivery, or if suppliers may face problems further down the chain, so this can be pre-empted.
“It means we can be really open with them and show them their KPIs or risks,” adds Scriven. “Often in a supply chain you don’t know exactly where the risks lie, whether it comes to ESG or companies further in the chain. Our aim is to get companies to grow with us.
“It also means we can be much more selective as to who we go out to tender with.”
It also allows ISG to manage other functions, such more controls over site access. Project managers can determine which suppliers need access to the site when and manage that through the platform, as opposed to manually checking each time.
The other key benefit will be in hitting ESG goals. The firm has committed to achieving net zero carbon emissions by 2030, and is set to introduce a carbon ‘tax’ this year which will fund sustainable innovation projects across its business.
Improving the datasets used across its supply chain will help meet this goal, explains Scriven, because it is easier for the firm to track site-by-site ESG data and put it all in one place.
“Next, we will look at what problems we’re facing in engagement with our ESG goals across the supply chain and look at the trigger points for failures, and identify these earlier,” he adds.
“If we can run an algorithm behind the scenes to identify when this might happen, we can help support our partners through early payments, or look at moving them to a different plan, or even just have a frank conversation with them, as they might not realise some of the challenges they face down the road. And that helps the industry.”
Subscribe to our Editor's weekly newsletter
Newsletter
Share
