By Dennis Bouley
For most procurement professionals, the level of job complexity is on the rise. An average procurement manager these days is likely to oversee $50 million dollars in spend and is managing over 100 suppliers and a thousand parts. Given these circumstances, there is not enough time for procurement managers to talk to all of their suppliers and parts managers. Product life cycles are also getting shorter. That means the procurement process has to absorb more programs over a shorter period of time. In addition, an explosion of new information, driven in large part by an evolving environment of enhanced connectivity means that many more drivers are influencing costs, and that these cost changes occur more rapidly.
The wider implication of all of these changes is that the competitive positioning of most enterprises is being altered. In order to remain competitive in this more connected world, procurement must contribute through the development of a new ability to better sense the marketplace and to make decisions that are both faster and more accurate.
This is where digitization begins to make a difference. The very same trend that is driving marketplace change can also be leveraged to introduce new tools that allow the procurement manager to not only survive the more complex procurement world, but to capitalize on new market opportunities as soon as they emerge.
How tools enhance new era competitiveness
According to Rajesh Kalidindi, Founder and CEO of Levadata (www.levadata.com), a procurement analytics solution provider, the need to react faster will be a critical success factor for driving corporate profitability. “Over the last 10-15 years procurement professionals, under constant cost cutting pressure, have been asked to do more with less in an increasingly complex and competitive market. They need help. Those that imbed cognitive sourcing, and the business efficiency gains that accrue, are going to achieve greater maturity and competitive advantage against others in the market,” he said.
“Cognitive sourcing” is a concept drawn from cognitive computing, which is a computing technique that tries to mimic the way that the human brain works and learns. It’s an infusion of intelligence that combines learning, big data and human expertise.
Cognitive sourcing applies multiple artificial intelligence (AI) techniques to empower strategic sourcing managers, through intelligence imbedded into their systems, to drastically reduce (by a magnitude of 10x) the amount of analysis work required to arrive at an accurate and profitable decision when managing negotiations. These technologies literally sort through a mountain of data and zero in on only the information that is required to act quickly.
“Users who deploy cognitive sourcing through cloud-based solutions are able to sense what is going on in the market and are able to react faster. They receive recommendations from their systems based on up-to-the-minute data and drive more negotiations across suppliers thereby harnessing value for their corporation,” said Kalidindi.
This advanced “sensing” involves an analysis of up to 1.5 million data attributes in the market. These attributes include suppliers, parts, raw materials, foreign exchange costs and other critical variables. The system works in a constant state of risk and opportunity identification. The system constantly ranks what’s most relevant or actionable and, over time, the system determines which opportunities should be acted upon based on machine learning.
“The system removes the low value-add portions of the data management analysis and then combines contextual knowledge that has been accumulated over time with “tribal” knowledge from seasoned procurement experts, and with explicit knowledge that is fact-based and data-driven. In the end, what you end up with is better decision-making and a comprehensive negotiation strategy and playbook,” he said.
LevaData, a Cognitive Sourcing Platform provider, offers global enterprises the ability to improve gross margins by reducing supply chain costs, with a focus on delivering measurable and accountable supply chain solutions and strategies that transform companies and markets. Customers include leaders in the top global supply chain organizations, as well as medium-sized OEMs seeking to achieve best-in-class direct materials sourcing practices. LevaData is privately held and headquartered in Sunnyvale, California. For more information, visit www.levadata.com
Dennis Bouley is Editorial Director of MyPurchasingCenter.com and special advisor to MediaSolve Group, a strategic B2B marketing services firm focused on helping companies and institutions leverage the web and social media to achieve business goals. He spent 18 years at Schneider Electric as Managing Editor of Global Publications, and was responsible for cross-division management of the corporation’s white paper and customer success story processes. Prior to that, he spent 10 years working for IBM managing both small and large accounts. He holds a Bachelor of Arts in Journalism from the University of Rhode Island and holds a Certificat Annuel from the Sorbonne in Paris, France.
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