Control of unconscious bias towards suppliers

Supply chains are built on partner and supplier relationships, but they are often not as strategic as they should be.

Companies typically have large numbers of suppliers and hundreds of items to source, making manual selection of suppliers for each item of the line practically impossible. Instead of continually reassessing and improving supplier arrangements in an effort to ensure the best value continues, many companies slip into a pattern that typically relies on the same limited set of supply chain partners. This unconscious bias towards particular suppliers can cause organizations to overlook more innovative or cost-effective alternatives that may provide more favorable terms, improve margins and efficiencies, among other benefits.

The hidden number of unconscious bias

Bias comes in many forms across the organization, including instances of conscious prejudice and intentional discrimination. However, there are more subtle cases of bias that may go unnoticed. One such situation lies in the procurement process, where an unconscious bias towards certain well-known groups of suppliers can lead to organizations losing options in search of the lowest prices, most reliable delivery options and other favorable conditions.

Unconscious bias manifests itself in the supplier selection process in a number of ways, including automatically switching to recommendations from co-workers or relying on networks of other supply chain partners. While these word of mouth referrals may be useful as a starting point in choosing a supplier, problems can arise because procurement professionals may act on these recommendations without fully implementing due diligence and cost-benefit analysis. Left unchecked, the costs of these unconscious biases can be significant to a business and put unfamiliar supplies at a disadvantage, even if they offer a better product or price.

Excessive reliance on a fixed subset of suppliers is likely to blind purchasing teams to new market players who may provide better or more cost-effective services or products in the supply chain. Working with a small number of suppliers also makes an organization more vulnerable to potential supply chain problems, something many industries have had to contend with over the past couple of years. Issues such as material shortages, capacity challenges in fulfilling high volume orders, and logistical issues can lead to production issues and delivery delays. More unscrupulous suppliers may take advantage of the bias to arbitrarily raise prices or be tempted to reduce quality. The bottom line is that all these factors can adversely affect the operations of the organization, leak spending and lead to higher costs.

Recognizing that there are unintended biases, strategies must be developed and put into practice to identify and root out any biases in existing supply chain and partner arrangements. Here, data collection, analysis and reporting can add real value to operations. The ultimate goal is to move to an automation system that can match items to the best supplier. Gathering as much organizational context as possible about how and where biases arise across the buy-to-pay cycle is the basis for developing a more comprehensive process of end-to-end supplier analysis and evaluation.

As companies develop clearer and more comprehensive criteria for establishing diverse supplier relationships, they can support more fair and standardized evaluation of suppliers. A more objective and data-intensive assessment can be the basis for purchasing managers to assign specific reliability and confidence scores to individual suppliers. Some companies consciously prioritize incubating a wider range of suppliers to bid on a larger scale and get better quotations.

Organizations should also make sure that policies are reviewed and revised often. Reassessing supplier performance at regular intervals, ideally on an ongoing basis as technology now allows, and comparison with alternative suppliers, helps identify any policy gaps or deficiencies. This gives supply chain managers the opportunity to make adjustments and adjustments as needed to keep partner networks optimized and more resilient in the face of changing supply chain conditions.

Fighting bias with purchasing analytics

As organizations transition to fully digital operations, technology plays a major role in providing supply chain visibility into the procurement process. The field of procurement analytics applies artificial intelligence (AI) and machine learning techniques across enterprise systems in real time, collecting historical procurement data and applying advanced algorithms to detect patterns and identify potential risks and discrepancies. Today, we are seeing the industry move away from periodic (monthly, quarterly or annual) analysis of purchases, where problems are identified only retroactively, to more flexible continuous monitoring and analysis. This indicates in real time the key factors such as market changes that can affect the performance of the supply chain, so that they can be addressed in a short time.

Using a continuous intelligence approach, organizations can set parameters and thresholds, and the procurement analytics platform can perform advanced market, supplier, and pricing analysis to detect any discrepancies in availability, price, delivery times, and other specific data points. He can then recommend the best options to save you time and money. Other analyzes can point to unconscious bias associated with suboptimal business processes, duplication of resources, or unnecessary delays in production. The best solutions provide easy-to-use accessibility that allows business users to conduct their analysis without having to rely excessively on data scientists.

A well-executed procurement analytics solution can reap many benefits for an organization, as it removes unconscious bias in supplier selection. Many organizations are surprised to learn that they can increase savings through up to 40% annually of eliminating unmanaged spending associated with unconscious bias. Risk management, budgeting and compliance are all made simpler and more effective, with fewer business disruptions and higher quality across the entire supply chain ecosystem.

Unconscious bias remains a real problem for companies as they choose the networks and suppliers that make up their extended supply chains. Procurement analytics can solve this problem by deploying continuous AI-based monitoring to detect instances of unconscious bias, while providing better insight into suppliers and their performance. This puts organizations in a much stronger position to maintain optimal supply chain conditions, to ensure competitive advantage and to generate maximum revenue. The result is increased business continuity and a stronger supply chain.

Shreya Donger is the Director of Product Marketing with grill.

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