Alarmingly procurement is still viewed as a financial activity or an administrative process, rather than as an operational strategic activity that ultimately affects the business’s bottom line. This archaic thinking limits the potential of procurement departments, but fortunately, there are new, smarter, procurement trends that are facilitating a change in this backwards perception.
Point News Room – Smart Procurement and Sourcing Innovation
Insight
Sourcing Innovation
Cognitive Procurement
Innovation Driven
The Building Blocks
Cognitive Procurement
The technological evolution has seen conventional procurement take its first major steps towards cognitive procurement. These exciting technologies aim to improve decision making in complex and dynamic environments, deliver intelligent solutions based on the procurement data on hand and provide predictive insights from unstructured information.
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Of procurement leaders believe that cognitive technologies will transform operations in the supply chain sector within the next 5 years, according to the Harkett Group.
You can look forward to self-learning systems that use data mining, pattern recognition and natural language processing systems that mimic the human brain.
Innovation Driven
To combat the traditional silo-thinking procurement approach, progressive procurement departments have started transforming into Innovation Driven Procurement (IDP) groups.
These IDP groups support the business strategy in pursuing innovation targets such as delivering more process innovations in less time, improving product/service price-quality ratio and increasing the end-user’s experience/satisfaction. These groups develop the stages of procurement by scouting technologies, setting up supplier involvement strategies and managing continuous involvement.
Key dimensions of IDP groups include:
They find scarce sources of innovative capabilities
They are involved in innovation projects from start to finish
They manage supplier involvement collaboratively
Building Blocks
With new technologies coming to the fore and innovative thinking currently driving procurement and the business’s strategy, the key pillars to traditional procurement must be faultlessly executed to support this progress.
Timely Deliveries
Short yet realistic agreed to timelines for delivery is the cornerstone to any good procurement process, which in hand is supported by a strong, well-thought-out project plan executed by the project owner. It’s also imperative to have measures in place to expedite deliveries in special cases to help reduce or avoid downtime.
Broad Range of Suppliers
Efficiency is achieved by having a broad supplier base of specialised local and regional suppliers that can also offer global sourcing and deep commodity knowledge in both domestic and worldwide markets. Quality can only be achieved through continuous auditing and grading of suppliers’ competencies whilst reviewing new potential suppliers to expand the base.
Quality Assurance & Solutions Management
Sourcing materials & products of the highest quality is obviously an imperative, but not always a given. Dedicated quality assurance and management teams create less re-work and waste, and fewer returns and claims, enhancing a business’s profitability. To be successful, this team provides integral, flexible and scalable solutions thus achieving efficiency and cost savings.
Quick Lead Times
Quick lead times are a prerequisite to service organisations operating in fluctuating markets. Maintaining a nimble procurement process enables taking advantage of growth spurts, which may be seasonal, while reducing overhead associated costs
Cost Reduction
Outsourcing procurement has cost benefits to a procurement department such as reduction of overhead costs, competitive pricing and shorter lead times from a broader supplier base. When using an outsourced procurement partner, transparency of pricing and fees are key to a successful partnership and the smart use of budget with accurate savings.
Going Global
Global procurement reports have predicted that technological advancements will reshape every aspect of procurement for improved efficiency in operations and timely contract management.
Organisations and institutions who enthusiastically adopt a progressive approach will find themselves in an advantageous position to handle these major trends that will in turn scope and structure global sourcing.
Global Trade Magazine projected that one third of all manufacturing supply chains will be using analytics driven cognitive capabilities, therefore, increasing cost efficiency by 10% and service performance by 5% come 2020.