In this article Rajesh Kalidindi, CEO nad Co-founder of LevaData talks about how data-driven procurement tools have been embarced by early adopters is changing the competitive landscape for supply chain professionals, creating a performance gap that sourcing executives would be wise to avoid.
For C-suite leaders, the past year has been marked by greater awareness of AI’s ability to drive value and savings, not only in sales and marketing divisions but also in global supply chain management and manufacturing, to the tune of $1.2 to $2.0 trillion.
Although the numbers are compelling, there’s a widening performance gap that will change the rules of engagement between procurement leaders and laggards across the supply chain.
According to LevaData’s annual reportOpens a new window on strategic sourcing, advances in data-driven procurement have significantly improved supply chain capabilities to the extent that the goalposts have moved. Leveraging technology that moves sourcing from a reactive mode to one of orchestration now mark the enterprise’s journey to digital maturity and best-in-class performance.
To gain these insights, researchers surveyed senior executives who oversee $900 billion in annual direct material spending across five industries: automotive, consumer products, high tech, industrial equipment, and life sciences.
High-Stakes Competition
The current computer-assisted negotiation and decision-making tools provide the ability to analyze a large volume of external data, instead of relying on historical data aggregated from disparate internal systems.
The ability of nearly half the respondents (45%) to make sourcing decisions based on extensible Excel tools and data warehouses is an improvement over fragmented or siloed use of spreadsheets. But it still places such organizations in a reactive mode compared with “best-in-class†companies.
Competitive Advantages
Organizations that incorporate comprehensive sourcing technology (8%) are characterized by their “digitally ready†management and workforce. These teams possess the right mix of talent and management support to complete a digital transformation of their procurement process.
They’re leveraging purpose-built AI sourcing platforms to marry third-party market intelligence with supplier outlooks and internal data. These practices result in a number of competitive advantages for the entire enterprise. They include:
1. Scaling Strategic Control
Cognitive sourcing platforms significantly reduce the cycle time for sourcing professionals to engage with suppliers. Best-in-class organizations can conduct competitive bids and sourcing events on a weekly or continuous basis.
AI’s noted strength in detecting patterns is leveraged for targeted oversight of suppliers, extending management across the entire direct material spend. In contrast, 15% of sub-par organizations hold quarterly sourcing events and 31% conduct annual events, allowing them to engage with a fraction of their suppliers.
2. Agility
Best-in-class firms can reduce the time to prepare, negotiate, and award a contract to four days versus a typical company’s 31-day cycle. This frees the sourcing teams to focus on creating strategic value, sense risk or opportunity, and move faster to lock in new pricing versus their competitors.
Companies lacking this speed and visibility into outside influences spend a majority of their time reacting to events rather than planning for them.
3. Cross-Functional Collaboration
An integrated, intelligent sourcing platform empowers sourcing professionals to share actionable insight on supplier cost, delivery, and timing with their finance, engineering, sales, and marketing colleagues.
In the survey, 62% see the strategic importance of leveraging this insight and visibility on behalf of product development introductions within the enterprise.
A Stark Advantage
There is considerable upside for companies employing data-driven, cognitive tools within the enterprise. With a new year at hand, it behooves procurement leaders to take the practical, targeted steps required to pinpoint their level of cognitive sourcing readiness and maturity.
Remember, a performance gap does not necessarily favor the strong or the mighty. It favors the competitor who can adapt, moving into a newly exposed or unoccupied niche. And that’s good news for today’s sourcing professionals seeking a foothold in tomorrow’s market.