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Procurement 2018 in a Word: Intelligent
By Dr. Marcell Vollmer, Chief Digital Officer, SAP Ariba
According to a recent survey of over 600 companies, 52 percent of the average procurement organization’s time is spent on transactional activities such as managing purchasing orders (POs), sourcing events and contracts, reconciling invoices and tracking payments. Most organizations have automated at least some of these core transactional activities. But many are now tapping into new technologies to take things to the next level.
Intelligent technologies such as machine learning, artificial intelligence and cognitive capabilities have the potential to make procurement smarter and easier than ever. In embracing them, procurement organizations can perform transactional activities at much greater speed, lower cost, and higher accuracy. More importantly, they can make smarter, more informed decisions and operate in more efficient, collaborative and data-driven ways that deliver value to the business beyond just cost savings.
Leveraging intelligent technologies - think SAP Leonardo and IBM Watson - companies can combine insights from procurement data and unstructured information to predict and respond more effectively to customer and market demands.
Leveraging intelligent technologies - think SAP Leonardo and IBM Watson
They can also open new approaches to connecting people and information – all of which will fundamentally change how buying and selling get done.
A digital procurement assistant combined with machine learning, for instance, can completely transform sourcing events by helping with tasks such as defining the correct Request for Proposal type, identifying appropriate suppliers to participate based on commodity category, region or industry and delivering intelligence on market signals and pricing pressures to optimize results.
Contracting can also become smarter and more comprehensive with applications that automatically identify relevant terms and conditions matched to legal library and taxonomy, uncover similar contract terms for a specific commodity by industry or region based on benchmarking data and suggest optimal prices to target based on expected volume and contractual discounts.
The road to intelligent procurement has been paved and companies that get on can drive real value. But doing so will require change. Procurement will fundamentally need to rethink what it does and how it does it. Procurement professionals will need to more closely align with business teams, and their work will draw heavily on analytical insights. All of this will require newer skills in data science and analytics, risk management, and collaboration.
The journey to digital procurement is different for every company. But it all starts with process automation. In digitizing things like sourcing, ordering and invoicing, companies can drive between 10 percent and 15 percent savings on average. When intelligent technologies that enable companies to dissect their data and make more informed decisions are brought into play, another five percent to 15 percent in savings become possible. Add in the efficiency and effectiveness that digitization brings and these numbers become even higher.
Intelligent procurement isn’t just a buzz term. In embracing the concept and the technologies behind it, procurement can fuel a more efficient, intelligent way of operating that truly changes the game. Rather than eyes rolling when they walk in the room, they’ll be winking.