Our previous post discussed the challenges procurement must overcome to improve its productivity. Fortunately, overcoming these challenges and showing dramatic improvements in performance is within reach for most organizations. One specific opportunity is improving spend under management, an effort worth a potential 1-2% of additional savings annually. The average organization has only 55-60% of its spend under management, while best-in-class performers manage close to 85%. If procurement can achieve 5-10% savings on spend under management, an increase from 55% to 75% can generate an additional 1-2% of savings -- and put procurement on a path to exceed its typical annual savings of 7%.
REDWOOD, CA – Over half of all organisations are set for major investments in supply chain and procurement AI, but could be hindered by poor quality data, an independent study has revealed. Global spend management cloud provider, Ivalua, have announced the findings of a worldwide study of over 400 supply chain, procurement, and finance business leaders, which found that over 55% of organisations are planning to invest in AI during the next two years. Conversely, two-thirds of respondents (59%) said that poor data quality will make it impossible for AI to make accurate and informed decisions – ultimately undermining any ROI. "There is clearly a huge appetite for AI and this will only increase as more relevant applications and success stories come to light," said David Khuat-Day, Corporate CEO of Ivalua. "But when investing in AI, it's important that organisations address challenges that will otherwise limit value.
The biggest trend in technology right now is the race to make machine learning more sophisticated and as the experts say, "less stupid." Machine learning is the ability of computers to learn something without being explicitly programmed. Based on human neural learning, machine learning takes millions of examples and uses layers to build on itself to eventually interpret something without a human first identifying it. Machine learning is infiltrating every aspect of life. From machine translation, email spam filters, ATM check depositing, category filters for photos, emails and apps to facial recognition, machine learning is everywhere taking our basic human actions and instantly making sense of them through technology.
Basic machine learning technology is already used by some procurement applications in areas such as spend analytics and contract analytics. This is mostly limited to automating the processes of collecting, cleaning, classifying and analyzing expenditure data in an organization -- to identify savings or paths to greater efficiency.
Kelly is the Managing Editor of Buyers Meeting Point. She has a unique perspective on procurement from her experience on both sides of the negotiation desk. She has led projects involving members of procurement, supplier and purchasing teams. She has practical skills in strategic sourcing program design and management, opportunity assessment, knowledge management, and custom taxonomy design and implementation. She also has direct sourcing experience in a number of product and service categories including: inventory fuel, location-based services, corrugated, and corporate purchasing cards.