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%.
Accenture is a company passionate about digital procurement. In a recent report, the global management consultancy made no bones about the disappointment it feels at what it perceives as an almost industry-wide failure to embrace the technologies available for digitising procurement. It states that "procurement organisation has been largely left behind in the digital revolution. The report looks at how bots can be used to automate and streamline manual or routine procurement tasks, how making use of available expertise such as speaking to buying agents and advisors will help people make the best purchasing decisions and deliver optimal value to the business. Accenture specialises in helping procurement companies to digitise their business operations, and the report shows confidence that the familiar frustrations surrounding procurement today will give way to a simple and intuitive buying experience for users to enthusiastically embrace.
In a world awash with a seemingly never-ending list of technology buzzwords such as automation, machine learning and Artificial Intelligence (AI) to name a few, AI is one such technology that is moving away from simple hype and stepping closer to reality in procurement. This featured in the August issue of CPOstrategy – read now! Procurement, by its very nature, is tasked with handling huge quantities of spend and with spend comes spend data. Often described by leading CPOs as a repetitive task, understanding and sorting that spend data is now being achieved through the implementation of AI. Through the use of AI, procurement teams can remove human error, increase efficiency and realise greater value from spend data.
Spend analytics solutions often get passed over when it comes to claims of ROI. But spend analysis can provide just as much value as better-explored options like e-procurement or sourcing systems, sometimes providing ROI immediately after being turned on. Yet quick wins and short-term value are only the starting point. Beyond areas like error identification, improving leverage with existing vendors and contributing to CSR risk management, spend analytics can be a foot in the door for procurement to deliver long-term, sustainable value to the business. In fact, many of these areas can include contributions procurement hadn't even imagined before, helping push the function from simple analysis of what has been spent to true strategic supply and business planning.
SpendEdge, a leading provider of procurement market intelligence solutions, has announced the completion of their latest article on the impact of AI in procurement functions. This press release features multimedia. Artificial intelligence possesses the potential to support key businesses processes and procurement is no exception. It can improve the forecasting accuracy of end-customer demand for finished goods and material requirements by improving the efficiency of procurement organizations. Also, the use of AI in procurement can help optimize resources, develop pricing initiatives, and transform every single business function.