SUNNYVALE, Calif. — Privately held LevaData today announced the debut of the Cognitive Sourcing Maturity Model Assessment, a process and performance auditing tool geared to enterprise teams exploring digital transformation and seeking the exponential impact of AI-enabled direct materials sourcing. LevaData’s maturity assessment analyzes organizational structures, sourcing strategies, RFQ processes and negotiations in light of sourcing technology’s integrated role in manufacturing, engineering and finance. Maturity assessments take a holistic, 360-degree look at the enterprise, benchmarking strengths and needs against a series of key capabilities to qualify for one of five levels of performance.
Conventional maturity models for direct materials sourcing evaluate procurement in terms of outdated capabilities and enabling systems. Today’s maturity models, however, must address the tremendous advances in technology that have transformed the manufacturing world in the last ten years. Assessments that focus on concepts such as “upstream” versus “downstream” rely on traditional metrics like spend under management and do not address impaired agility and opportunity risks hidden by siloed data, fragmented ERP systems, and different product management systems.
“LevaData’s Cognitive Sourcing Maturity Model is unique because it captures the impact of contextual market intelligence on sourcing professionals’ decision-making and their ability to leverage open-source analytics, machine learning, and AI-enabled insights with cross-functional teams,” explained Rajesh Kalidindi, Founder and CEO of LevaData.
In addition to technology disruption in the supply chain, the role of sourcing itself is undergoing profound change, Kalidindi added. Procurement professionals have the potential to make a big impact on the enterprise, and predictive intelligence can greatly expand a company’s strategic horizon. Sourcing professionals empowered with actionable visibility into supplier risks, market volatility and otherwise hidden opportunities can forecast months in advance and orchestrate a strategic response. When nurtured and fully utilized, cognitive sourcing insights provide the enterprise with sustainable competitive advantage.
Levels of Assessment
Findings from LevaData’s 2017 Cognitive Sourcing Study documented and quantified the advantages gained by sourcing technology adopters and played a key role in developing this assessment tool:
- Only a small percentage (13 percent) of companies continuously engage their suppliers; the average organization engages with only 52 percent of their suppliers once a year.
- Outmoded enterprise analytics and sourcing tools lead to reactive, inward-looking decisions, rather than proactive insights that identify market risks and opportunities before they become a problem.
- Compared to that average or typical organization, the most advanced procurement teams use technology to speed up their prep and negotiation time by a factor of ten.
- Only 5 percent of organizations utilize a purpose-built platform for direct materials sourcing operations.
LevaData’s framework for this assessment delineates five stages of maturity. Each captures a range of sourcing practices and methods:
Level 1: Ad Hoc
Organizations at this level of maturity generally have siloed procurement teams with limited visibility to the overall spend. Adoption of technology is also limited, so individual spreadsheets dominate the procurement and negotiating process.
Level 2: Reactive
This level largely focuses on meeting immediate supply needs and short-term cost reductions. The enterprise has supplemented spreadsheets with data warehouses and third-party business intelligence tools. Sources of insight usually come from suppliers and a limited view of market spending.
Level 3: Anticipating
This tier identifies organizations with systems that help aggregate and process the relevant data and recommend action, allowing teams to avoid risks and locate some opportunities. In addition to risk management, a sustainable approach to cost reduction is often an important goal.
Level 4: Learning & Orchestrating
These organizations typically have a cross-functional sourcing team and shared platform for learning and informed decision-making. Sourcing events occur on a quarterly or even weekly basis, with 70 percent or more of the direct spend actively managed.
Level 5: Continuous
At the highest level of maturity, organizations constantly review commodity areas and interact with suppliers. Intelligent, assisted or autonomous RFQ capabilities provide cycle times that are weeks ahead of competitors. These organizations are the most agile, taking advantage of opportunities and reacting to market changes in close to real time.
“We know from our recent survey of manufacturing industries that the majority are critically unprepared for the way data-driven, AI-enabled procurement is transforming the supply chain,” continued Kalidindi. “This maturity assessment enables companies to quickly and easily close the performance gap. It offers an objective, third-party perspective of an enterprise’s strategic readiness and visibility into actionable business intelligence. C-level executives and board members who may not be familiar with these issues gain a clear picture of resources and processes needed to improve outcomes in increasingly volatile global markets.”