When it comes to automating processes, procurement organizations are no slouches. Long ago, chief procurement officers automated administration, payroll processing, material-resource needs calculation, invoice generation, and material flow tracking. The function has, for the most part, eliminated redundant work to dedicate more time toward more strategic activity and transitioned the collaboration to business networks.
The supply chain is an integral part of business operations, and it drives tremendous competitive advantage. Its speed and agility come from quickly picking up subtle changes in demand and supply and adapting to those shifts to keep business humming along without disruption. By tightening the procurement and supply chain synchronization, businesses can quickly realize this reality. However, even though they are focusing on improving the effectiveness and social consciousness of their procurement operation, very few procurement organizations have adequately integrated their supply chain into the fold. In fact, Deloitte's "Global Chief Procurement Officers Survey 2018," reported that only 23% of procurement leaders plan to use supplier collaboration as a strategy for delivering higher value – a slight decrease from 39% in 2016.
On March 6, the world was presented with an interesting new alliance to consider between Salesforce's Einstein and IBM's Watson. The'global strategic partnership' will bring together Salesforce's customer relationship data and Watson's data on weather, healthcare, local shopping patterns, and financial services. Their joint solution(s) are expected to be available in the second half of 2017. 'How wonderful' many readers of this news may have thought to themselves. 'This is truly the beginning of a bright new journey for Artificial Intelligence (AI)…' Once casual interest wears off, procurement and supply chain professionals must regard this news a second time with professional eyes, as has been the case with so many other technological advancements.
The business case for almost every merger and acquisition includes an assumption of significant cost savings. Unfortunately, achieving these cost savings is often harder than anticipated, which is one reason why 70-90% of mergers and acquisitions fail. This problem is most obvious in highly acquisitive companies, but is something all companies with multiple business units struggle to solve. The business units that suffer the most as a result of this problem are the smaller, higher growth ones that have the least purchasing power. By not leveraging the spend of the entire company to drive down costs, these units are left with less money to invest in growth.
Historically, despite its potential to gain a more strategic role in the organization, procurement does not manage even 50% of enterprise spending (according to KPMG). Procurement teams tend to focus on the largest and inherently visible costs, where their influence will have the most impact. To analyze "longer-tail" costs is a tradeoff of time and resources in which teams must estimate the return on their investment in wading into murkier non-managed spending (especially in light of the opportunity costs involved). The question, of course, is why are procurement teams forced to estimate this tradeoff? What, exactly, are the opportunity costs of analyzing longer-tail costs?