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At the end of September, Arkestro hosted a webinar covering the topic of predictive procurement. The focus was on how procurement technology and procurement strategy align with the digital transformation goals of many procurement teams; reducing manual work to free up time for delivering on strategic objectives around value creation and cost reduction.
Predictive procurement is no longer the future of procurement. For successful companies, it’s the “now.” By employing predictive procurement, companies can take advantage of the strategy’s unique benefits and advantages. Using this data-driven approach for sourcing, contracting, supplier management, and KPI reports is a proven advantage that will result in your business exceeding its goals and delivering faster savings.
Those that work in supply chain have all heard of predictive procurement. It’s often spoken of as the future of sourcing, with AI-powered predictive analytics delivering revolutionary change. Procurement becomes a strategic force in an organization—a far cry from its traditional reactionary role. In the 2021 report “The Race to Predictive,” KPMG analysts call predictive analytics:
When it comes to procurement, have you thought about the big picture? Too often, it’s focused on segmented demand and fails to account for overall demand. That’s why progressive organizations are making the shift to category management.
Advances in artificial intelligence (AI), machine learning, and big data have led to breakthrough capabilities for procurement software. As the authors of Harvard Business Review’s “AI Can Help Companies Tap New Sources of Data for Analytics” point out:
One of the most critical factors in cost savings and supply chain agility is procurement orchestration. Companies that adopt procurement orchestration can realize two to five times the amount of savings.
Procurement goals have evolved even further throughout 2021, and procurement teams have big goals for the future. Although still working through aspects of digital transformation and implementing platforms and tools, procurement is primed to bring greater strategic value to all organizations by achieving three goals.
Procurement operations teams face big challenges, even if they have access to data from procurement KPIs. First, getting their stakeholders to use contracts that are pre-approved by procurement and include specific and necessary terminology. Second, convincing stakeholders to adhere to common sense standards around issues like competitive pricing and best value award decision-making. Third, getting stakeholders to use processes that are compliant.
While we might think of procurement as a single discipline, it’s more complicated than that. There is direct procurement, which is what most people think of when they hear the term “procurement.” This is the sourcing of the raw materials needed for production. However, there is also indirect procurement, or the sourcing of products, services, and supplies that keep the business running. This is everything from repairing equipment to buying the toner and paper for the printers. It’s no less important, but indirect procurement is often harder to measure and source for.
Procurement teams don’t just ensure that the raw materials, components, and parts arrive on time, on budget, and on spec. In many organizations, the procurement team is also responsible for MRO sourcing. That’s maintenance, repair, and operations.