It’s time to discard the conventional wisdom that says the economic benefits of artificial intelligence (AI) and cognitive analytics—long promised for all industries—are only available for the select few. Now, sourcing teams, as well as procurement and purchasing managers, can easily tap into the power made possible by the marriage of advanced analytics and machine learning.
The competitive advantage of using these tools springs from several factors. First, procurement managers become empowered to take fast, proactive measures despite the ever-changing dynamics of inbound supply. AI-based insights provide timely business intelligence to these same harried managers on emerging risks and opportunities. With advanced analytics at their disposal, supply chain managers can transform their sourcing negotiations from annual or discrete events into an ongoing process.
These newfound abilities drive up incremental gross profit margins. They also provide optics into potential revenue savings normally left on the table during procurement negotiations. Here’s how it works:
Leverage the explosion in information complexity. A world-class sourcing and procurement organization monitors annually at least 1.5 million data points affecting the supply chain. This volume far exceeds any individual’s ability to synthesize the data. Procurement negotiations are usually limited to once per year, due to the amount of preparation time and employee hours required to sort through spend history, sales forecasts, and fragmented market intelligence services. However, access to a continuous information stream empowers managers to request specific categories of push notifications, enabling the system to sort through and sense hard-to-spot market opportunities and risks.
Say goodbye to massive spreadsheet crunching. Optics into personalized streams of insights and recommendations can uncover patterns and anomalies across petabytes of data sources. No longer must a manager work across department silos, collect spreadsheet sales and accounting data, crunch the numbers for weeks, and finally take that information into contract negotiations. Customized prescriptive analytics enables sourcing managers to massively improve their productivity and agility to respond to opportunities in the market.
Perform faster turnaround, strategic negotiations. Data-driven negotiations not only enable a far greater number of strategic discussions, but even the type of negotiation is transformed. Now, managers use analytics to back up their requests rather than issuing generic requests for lower costs or renegotiations based on past relationships, leading to more successful outcomes.
Achieve broader oversight for more strategic spend management. Faster turnaround with responsive, data-driven intelligence raises the bar for the entire organization. Procurement managers have the firepower to review strategic spending across the enterprise. In addition, the ability to dive deeply into more budget categories elevates the strategic spend under management’s review.
With these advantages, why would companies refrain from adopting a proactive solution that provides data-driven insights? Two common concerns focus on data accuracy and the effort to onboard and install these systems. However, companies that begin with a subset of information and add additional business units incrementally are more successful than those which take a “big bang” approach. By leveraging cloud-based systems, installation of AI-based sourcing and analytics tools can take just weeks, not months.
AI is changing supply chain management. These new tools can pinpoint and manage strategic sourcing, enabling manufacturers to compete more effectively. The ability to gain insights from market risks and opportunities and greater responsiveness are repositioning global sourcing as a kind of futures market, with savings that go directly to a company’s bottom line. Leveraging the convergence of AI, digitized data and cognitive computing truly revolutionizes procurement—with fast installation, faster insights, and proactive feedback creating a continuous feedback loop for greatly extend the reach and oversight of managers.