Procurement Managers stand to gain a lot in the age of AI, big data, and modern analytics. Modern day computing power and artificial intelligence gives procurement teams unprecedented insight into the supply chain. It provides them with the tools and information necessary to make informed, forward-thinking decisions that have a sustainable impact on the bottom line.
Currently, the resources managers bring to a negotiation with a supplier are manually generated spreadsheets, outdated projections, and personal relationships bolstered by the experience cultivated over the years. The slow, difficult task of gathering and processing the data required to generate supporting materials means negotiations with suppliers are infrequent, cycle times are long, and time is scarce.
Managers are reactive and forced to play catch up. As a result, they miss out on opportunities, are slow to identify risks, and lack leverage when negotiating with better informed suppliers.
What if this weren’t the case? What if procurement managers could come to the table at a day’s notice, with data and critical analysis that was up-to-the-minute? What if they arrive armed with fresh insight into emerging market trends, allowing them to use their experience to find hidden insights and then engage suppliers on their own terms?
Here are some ways Cognitive Sourcing™ is going to change the field of procurement over the next 5 to 10 years.
All the Data on Demand, With a Side of Insight
Interactions with systems that efficiently manage, measure and manipulate huge volumes of data are now daily and common place, both at work and in our private lives. The same change is coming to procurement. Best-in-class sourcing and procurement organizations track over 1.5 million data points that affect their supply chains annually.
This deluge of data would be overwhelming for any individual. But it can be synthesized by AI and presented as actionable insights on demand. Managers no longer have to face working across department silos, gathering disparate datasets. That internal data and its contained insights will be now be persistently at hand.
More than just crunching the numbers and presenting the data as information, AI can make sense of the inputs in ways that most humans can not. Augmented intelligence tools can seek patterns across community data, market feeds, procurement cycle time, and economic performance by sector. Benchmarks at the commodity, supplier and corporate level can be generated from market assessments and managers alerted at the relevant time.
Decision makers are often held back by insufficient data and may not even be aware of this. There are savings to be uncovered in the quality, delivery, compliance, and cycle time details of the managed spend. By monitoring market conditions or suppliers outside the normal review, Cognitive Sourcing can identify opportunities that would otherwise be missed.
Suppose you’ve accepted a 4 percent price reduction from a supplier over three years. You were satisfied with the result and achieved what you thought a fair price. But an AI analysis might reveal a widely accepted, 6 percent savings for this particular commodity. Uncovering this opportunity wouldn’t be possible without access to a broad set of external market data.
Negotiate with Confidence
The capacity of these new Cognitive Sourcing tools to change the game becomes more evident when you consider how they can be put into practice in light of the demands on procurement managers described above. The information required for an informed negotiation can be gathered within a day, drastically reducing the sourcing cycle time. This increase in productivity translates allows for engagement with a greater number of suppliers. Managers can be be strategic and proactive in their demands as they engage suppliers with requests supported by analytics.
Quarterback Your Team and Standout
The purchasing department has a substantial impact on an organization’s financial success and empowering them to be proactive and responsive can generate a sustainable competitive advantage and raise the bar for the entire organization. Supply chain managers will be able to provide context and justification for decisions when sitting down with internal stakeholders.
In the past, a CFO would specify cost reductions based on a percentage over prior year results. Procurement managers would try and manage a supplier side strategy on this basis for the next year. But these goals are based on trailing assumptions that are often outdated when made.
A cognitive computing approach could replace this cycle. It can help finance set data-based and achievable goals. The supply chain team can hit new, realistic targets. The procurement manager, and the company, can achieve sustainable, measurable savings.
It’s a win-win across the enterprise.