Logistics Leader Maersk Takes the Long View for Digital Procurement

A fresh approach allows Maersk to build a more powerful, more robust solution for the long term. 

A.P. Moller-Maersk, an international leader in integrated transport and logistics, is building the future of digital procurement with assistance from C2FO. 

Adam Brown, Maersk’s procurement platform technology leader, and his team are developing bleeding-edge solutions to streamline procurement processes from the ground up, and much of that is possible because of how they investigate user needs. 

Instead of jumping to a solution, Maersk’s developers talk to end users to carefully define what they need digital procurement to accomplish.

“I wanted to create that commonality of language and description so we have a common approach, rather than going straight into solution mode,” said Brown, who previously worked for telecom giant BT. 

“Let’s talk about the outcomes you want, or the problems to solve, and then let’s talk about what digital capabilities would deliver on those. And then once we’ve figured out the capability needed to do this, we can then talk about solutions. It’s a case of shifting minds, vocabularies and thought processes.” 

While others might jump to a quick tactical solution, Maersk’s procurement technology is better positioned to support large, long-term strategy and goals over the course of years. 

Maersk’s approach to digital procurement was recently featured in an issue of CPOstrategy. 

Innovating supplier finance

In addition to empowering procurement leaders and their supplier partners, the Maersk team also wants to perfect the “big chunk of stuff in the middle” — the execution part of the process to raise orders that can be highly manual and prone to inevitable human errors. Maersk’s developers are creating sets of “triggers” that will automatically start the process of additional tasks when a shipment reaches a certain point. For example, when a vessel arrives at port, Maersk’s platform will already have directed the team to schedule a tugboat, guards and other necessities

Brown is particularly proud of Maersk’s commitment to ESG (environmental, social and governance) goals. It is building a feature into its platform that allows customers to see the environmental impact of how they ship. For example, a customer could see that shipping via an ocean vessel would take longer but come with a lower impact than flying an order to its destination.

While Maersk often builds its own technology solutions, it will incorporate existing platforms into its workflow when their capabilities meet Maersk’s needs. That’s why the company deployed C2FO’s easy-to-use, on-demand working capital platform to offer extra funding options to its network of suppliers. 

With C2FO’s Early Pay offering, suppliers can receive early payment on their invoices in exchange for giving Maersk a customized discount. For the average supplier on the C2FO platform, payment arrives about 30 days faster when using the platform, which improves the supplier’s cash flow. 

“With C2FO, we can use our accelerated cash flow instead of having to request a loan from the bank or a subsidy … and minimize the short-term costs,” said Sebastián Urenda González, company manager of Newport Logistic, a Maersk supplier.

By improving its cash flow, Newport Logistic increases its capacity to reinvest in its business. 

“I’m interested in using early payment because it improves our company’s cash flow so we can invest in more machinery,” Urenda González said. “It’s a program that helps companies a lot. It helps the company grow, to run smoothly. I’d really recommend it as a good ally to help a company grow.” 

Plus, the discount for buyers like Maersk is usually greater than what could be generated by placing funds in a short-term investment vehicle. 

The bottom line

With C2FO Early Pay, Maersk funds the early payments from its own balance sheet, but C2FO also provides a Dynamic Supplier Finance solution where early payment can be funded by the buyer, its bank or C2FO’s network of trusted funders. 

“I think it is great for many, many reasons, least of which is because big organizations need to have some kind of financing capability for their smaller suppliers,” Brown said. 

“And I think that C2FO empowers the suppliers massively. The suppliers can say, ‘OK, I would like to be paid early this month and I’m happy to give you this discount on my bill’; critically for me, the power is with them.”  

Brown also appreciates C2FO’s ability to incentivize pro-social, ESG-friendly changes among suppliers.

As Brown said: “I have also seen large organizations saying to suppliers, ‘We will give you these facilities to make your life better in whichever way you want, but please make sure you’ve got the correct social commitments that we want you to have as a supplier.’ This will encourage people to do the right thing with a degree of positive leverage.” 

Read the full CPOstrategy article here.