Case study: Is the Procurement Department finally ready for social media?

 procurement department

Over the past five months I have been fortunate to be immersed in a fascinating customer research project to determine how social media technologies can be applied to the supply chain. There has been a lot of buzz on this idea — how do we use social-based platforms for demand sensing, supply chain monitoring, and improved problem-solving and collaboration.

Despite all the clamor, we found little evidence that anything was actually happening in this space until we happened upon a fellow in Montreal named Tony Martins who has provided a glimpse of what a social supply chain can look like.

The future of supply chain?

Tony had been around a number of different companies in engineering and IT jobs but he found his true passion in Procurement and the opportunity to improve the supply chain. His social media journey began in 2005 when he discovered 500 batches of incoming material stuck in his pharmaceutical company’s supply chain because operators on the floor couldn’t solve anomalies discovered with an incoming inspection. They simply pushed the problematic batches aside because the people who could solve their problem were too far away.

Tony studied this problem and realized that 2/3 of the waste among knowledge workers comes from trying to find the information and people who can help resolve unexpected issues. He calculated that the average time to solve unexpected problems in his organization was four months. The working capital tied up in material sitting on the floor was just the tip of the ice berg! The real opportunity to streamline the supply chain was to keep unexpected problems from becoming a chronic burden on the organization.

Tony started doing experiments to allow the operators to expose their problems by posting them on an internal Sharepoint site. A live meeting was still required to actually solve the issues but quickly exposing the issues was the first step toward greater efficiency. Eventually he institutionalized an Enterprise Social Network to provide:

1) early detection of problems

2) an ability to “absorb” the problem so it doesn’t hurt the whole organization

3) a forum to enable quick reaction

The Enterprise Social Network

When I mention the term Enterprise Social Network, I’m not talking about blogs or Twitter. This is a private and secure Facebook-like system. Some of the leading companies in the space include Yammer, Chatter, Connections and Jive.

During the weekly problem-solving meetings, Tony emphasized that the issues had to be addressed NOW — before they left the room. Eventually his management team became so adept at solving problems quickly, the problems were addressed as soon as they were posted on the internal network — they no longer needed any live meetings at all.

The employees eagerly adopted this new technology because they saw rapid response from the management team, making everyone’s job easier and more productive.

The impact on the organization was dramatic as employees began to spontaneously associate with each other based on problems that needed to be solved instead of roles on an organizational chart.

Eventually Tony implemented systems to solve day-to-day communications problems in addition to the production exceptions, expanded the network to include outside suppliers, and developed advanced organizational thinking to scale his initiative across multiple plant locations when his company was acquired.

The results are in

Significant accomplishments included:

  • Raised service level (fulfillment) from 80 percent to 95 percent.
  • Cycle time reduced by more than 30 percent in the first six months
  • Supplier lead times dropped by 25 percent or more as months of “conversation waste” started disappearing.
  • He implemented a new SAP ERP system without any meetings after the first kick-off week. Every problem was solved through the Enterprise Social Network without a live meeting.

Tony’s journey is just beginning. He is testing new organizational ideas to enable the spontanous association that is the key to rapid problem solving. He is even thinking about models that could predict where interactions should be occurring in the supply chain and then mapping out where they are actually occurring.  This could expose personality and political hurdles as well as best practices of the people who are making this work in the very best way.

This case study is exciting to me because it connects the dots between theory, technology, and the human dynamics needed to successfully apply social networks to a complex supply chain.

Will more companies follow suit? Is the supply chain the next field of progress for social media?

This post was written as part of the IBM for Midsize Business program, which provides midsize businesses with the tools, expertise and solutions they need to become engines of a smarter planet. I’ve been compensated to contribute to this program, but the opinions expressed in this post are my own and don’t necessarily represent IBM’s positions, strategies or opinions.

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