Acquisition professionals are facing expanding regulatory requirements, pricing pressures and an ever-evolving environment, compelling procurement leaders to reevaluate their own strategies. For example, many procurement professionals for the past two years have diligently reduced their labor and outsourcing costs, but at what price? Given this landscape, technology acquisition professionals are asking themselves, “What is the future of procurement?”
According to a World Economic Forum report, by 2025, a third of the more critical skillsets that procurement will require are only now emerging. This will require another rethink for how best to optimize your business arrangements. Firms such as Deloitte, the Hackett Group and KPMG conclude your future strategies should include certain key technologies. More specifically, artificial intelligence (AI), machine learning (ML), natural language processing (NLP) algorithms, the Internet of things (IoT) and bots will proliferate various AI and robotic process automation (RPA) applications.
Why is this your future?
Many organizations maintain a ratio of purchase to revenue to calculate the annual value of all goods, materials and services purchased to total company revenue. On average, depending upon the industry, the ratio is usually between 20% and 45%. This translates to the organization’s bottom line, which means any savings of between 1% and 5% in procurement have the potential to greatly improve their organization’s bottom line.
Moving forward, you will need increased visibility into your revenue ratios, cash cycles, supply chain and workflow transparency. How can this be accomplished or, in some cases, improved? Those aforementioned technologies can simulate human intelligence via algorithms, devices, systems and machines. Consider ways that you and your partner companies can make use of them. For example, use these technologies to negotiate contracts based on past vendor performance or current behaviors. As another example, these technologies could automatically decide when and if material inspections are necessary or, when certain conditions are met by suppliers’ contracts, are automatically executed.
Consider deploying these AI-type solutions and technologies where they can immediately reduce time spent on transactional activities and human interventions to optimize your efficiency. In other words, deploy them for more powerful visualizations, more interactive data consumption and more custom data explorations. There is no shortage of selective applications, such as
- Autonomous negotiations, including for smart contracts executed by programming and combining AI and Blockchain technologies.
- Augmenting or replacing specialist staff with AI, ML and NLP to analyze data, discover patterns and trends, and improve decision-making.
- Reducing time spent by using bots for inquiries.
- Managing the vendor ecosystem and third-party risk mitigation.
The Hackett Group
World Economic Forum