More has been written about global supply chains in 2020 through 2021 than in the decade and a half preceding the COVID-19 crisis. Much coverage has been devoted to the devastating effects it has had on procurement functions. Today, procurement leaders are essentially facing an entirely new set of challenges, many of which will have significant impacts on future generations of Chief Procurement Officers and their teams.
But even before the pandemic, CPOs were experiencing a “perfect storm” for procurement, explained Keelvar Founder and CEO Alan Holland during a June 2021 webinar held in partnership with Ardent Partners.
“For some time, CPOs were saying that resource constraints for procurement were tightening. They're trying to do more with less, so there is an onus on technology to do more for procurement,” he said. “As a technology vendor, how can we help procurement tackle this perfect storm?”
The question was raised during a discussion on the findings of Ardent Partners’ 16th annual report, State of Procurement 2021, which revealed the top two prioritizations among more than 350 CPOs and businesses leaders: streamlining processes and driving a digital transformation using automation technology:
For sourcing teams in particular, supplier award decisions are becoming even more complex as environmental goals and corporate social responsibility objectives are more frequently included in analysis.
But while the past year has revealed global procurement functions to be universal – most CPOs manage similar processes and have similar goals, objectives and challenges – paradoxically, leveraging the right software tools and strategies to ultimately drive value to the rest of their organizations has not been universal in adoption.
Despite survey participants showing strong interest in adopting more technology to improve business operations, just one-fifth report using optimization-based sourcing currently, with another one-third planning to do so over the next 24 months:
As software that helps teams weigh up the pros and cons associated with optimizing for different objectives, optimization should be the natural technology of choice, explained Mr. Holland.
Fellow co-presenter and Ardent’s VP of research, Christopher Dwyer, added that businesses that survived 2020 and are starting to thrive now are ones that actively and openly embraced such technology: “More CPOs have been incorporating tech into their environment and investing in solutions to support the expansion of duties and take the standard of sourcing to a higher level.”
Given the significant return on investment that has been evident in many case studies of sourcing optimization – Keelvar customers have seen as much as 100% ROI in the first event – such levels of adoption are uninspiring at best, added Mr. Dwyer.
“To crack the nut on adoption levels, it's up to technology vendors to help procurement,” Mr. Holland pointed out. “I think it's incumbent upon the vendors to make adoption easier, less costly, and to automate more processes.”
Throughout the webinar, the presenters explored a range of ways advanced optimization and automation tools can transform how procurement teams strategically source materials and products. Here is just a small selection of the benefits highlighted:
Optimization-based sourcing takes supplier bid analytics to “the next level”
Optimization tools essentially solve the big data problem for large, strategic sourcing projects. For example, sourcing optimization tools can aggregate and consolidate large amounts of big data and conduct complex, robust analytics that -- due to the sheer volume of data -- cannot be done manually or with regular desktop tools like Excel spreadsheets.
“There are so many datasets where optimization-based sourcing is critical,” said Mr. Holland. “It takes into account factors like shipping data, logistics, supply chain and all of those other elements of data that procurement organizations wouldn't ordinarily have access to.”
Optimization technology gives suppliers the flexibility to play to their strengths
With no two suppliers out there with the exact same strengths or weaknesses, optimization is all about finding the best way to combine them together and finding faster and better outcomes for your procurement needs.
For example, if your organization wishes to secure carriers who are going to get your goods to market faster, you could optimize for speed. Or environmental goals may be an additional dimension to optimize for, rather than cost savings.
“The premise of sourcing optimization is don't try to aggregate everything yourself; invite suppliers to bundle up what they're good at and offer conditional discounts subject to winning the right combination,” Mr. Holland added. “That's the key to it.”
Market demands resonate with what Sourcing Automation can deliver
On-going supply chain disruptions for ocean freight, air, and trucking have resulted in an increase in carriers not honoring contracts – meaning procurement teams have to go back to market over and over and over again.
Sourcing Automation can help by streamlining such processes and making them much faster, and Sourcing Automation Bots can launch spot buying events without the sourcing team being distracted by requests.
“Ideally, you'd like to automate these processes and decrease the workload on your team so they can be more agile,” said Mr. Holland. “In essence, automation has been seen as a hammer to hit several nails on the head at once.”