Are you paying more than your competitors or peers for the same component? If so, which negotiation strategies—or alternative sourcing decisions—might reduce the gap? Does a proliferation of component stock-keeping units provide an opportunity for component aggregation and consequent price reduction? And does your supplier base have inherently greater risk exposure than those of your competitors or peers?
For procurement organizations, such questions are both troubling and difficult to answer.
But there is a way—once procurement and sourcing move away from enterprise-specific systems and onto multi-enterprise shared marketplaces that connect buyers and sellers and against which smart data analytics and AI can be thrown.
Take, for example, pricing. With multiple buyers purchasing the same component from the same supplier, seeing which buyers are achieving the lowest prices is straightforward. With all that common data, it’s very easy to see how buyers’ annual demand and the procurement lot size have a bearing on price, providing insight into negotiating strategies. Nor is it solely about price negotiation: once you move away from measuring demand in terms of annual consumption, it’s possible to explore the combined impact on both working capital and purchase costs by intelligently matching dynamic consumption to dynamic procurement.
So too with component aggregation, of course. If the buyer’s bills-of-material resides with both the marketplace and an AI-driven aggregation engine, buying organizations can easily identify aggregation opportunities and their impact on both purchase costs and supplier selection.
The same goes for risk. It’s not just about obtaining greater visibility into risks; it’s about being able to make intelligent and better-informed choices between those risks. Price discovery through data aggregation is a good example of a capability that wasn’t available 10 years ago.
Pooling data at scale makes obvious good sense. As technology becomes more ubiquitous and cheaper, it’s possible for more and more companies to access the value it offers meaningfully. Of course, there are privacy and data security issues to address, but a trusted provider should be able to accomplish that.