By Omer Abdullah, Co-Founder at The Smart Cube
The high-level aims of procurement – from managing costs, negotiating profitable contracts, to building secure supplier portfolios – haven’t changed. Over recent years, however, the function has taken on a wider role. Procurement has evolved from the traditional ‘cost saving function’ to a strategic risk mitigator, sustainability champion, and value creator.
With procurement teams having to focus on a widening range of responsibilities, this accentuates the growing need for robust data and intelligence, to help business leaders make more effective decisions. At the same time, the acceleration of digitally-driven transformation has given procurement teams access to ever-increasing volumes and varieties of data types.
Today, procurement teams’ success is determined by their ability to turn that data into intelligence and value-creating opportunities.
Establishing a strong data foundation
The variety of data available to procurement teams today undoubtedly provides them with the ability to improve business performance, adapt to disruption, and deliver value.
Nevertheless, this variety and volume has also created a substantial operational challenge for the procurement function. Procurement teams and experts cannot rely on data alone – they must use it to create reliable, actionable insights. In order to gain these insights, businesses must establish a strong data foundation and prioritise creating a clear and coherent view across a vast range of data types.
Practical and valuable procurement intelligence should combine a number of different elements. This spans category and market intelligence which provides a holistic overview of what’s taking place externally, in addition to traditional internal procurement data from contracts, invoices and purchase orders, and category-specific metrics.
Bringing together complex internal and external data sources that create reliable, contextualised procurement insights is far from an easy process. What’s more, with macroeconomic conditions and the risks they present constantly evolving, this intelligence must be readily available to procurement teams wherever they are and whenever they require it.
Embedding new technologies
This is where emerging technologies become extremely beneficial. One such technology which has gained considerable momentum is, of course, artificial intelligence (AI). While people cannot manually sift through the vast swathes of data to make decisions, AI can be used to process and translate the raw, diverse data sources into more digestible insights. This allows procurement professionals to focus on contextualising these insights to make informed decisions – an activity which cannot be automated.
Nevertheless, to ensure AI and other new digital technologies have the desired impact for procurement teams, professionals must ensure they introduce and use solutions in a way that enables and empowers their employees.
This includes investing in the upskilling of teams, as well as encouraging a shift in mindset towards accepting data and intelligence as the foundation for decision-making. With human intelligence (HI) and contextual awareness still playing a pivotal role in the procurement process, it is imperative to deploy AI in ways that make it as efficient and effective as possible, while using HI to formulate value-creating outcomes.
An example of this can be seen when looking at supplier risk management. Nowadays, businesses face a vast variety of risks at different stages of the supply chain. As such, it’s no longer possible to monitor all the necessary data on a real-time basis without the aid of technology such as AI and machine learning.
Procurement professionals can utilise these technologies to analyse immense volumes of data and identify early warning signs regarding potential supply chain risks. Thereafter, procurement teams can use HI to contextualise the available data and determine how it impacts the actions organisations should take.
Balancing AI and HI
As the risk landscape complexifies, using AI and HI in tandem will become even more important. This human-centric and user-friendly application of AI is set to define the procurement function of the future.
The aim for all procurement leaders in today’s world should be to ensure intelligence is embedded at the heart of their function. Fortunately, that’s easier than it sounds. As long as intelligence is generated in ways that solve challenges for procurement teams and can be delivered in ways that align with their workflows, professionals will be open to it.
Any intelligence or data-driven change in procurement must represent a rational step forward for a business’ procurement professionals. It should be built around them, to enhance their capabilities in an intuitive manner. In this way, organisations can enable teams to get the most out of both AI and HI.
