The Future of Sourcing – Business Alignment and Cognitive Procurement

In the four short papers published already in our Five Principles of Sourcingseries, sponsored by advanced sourcing gurus Trade Extensions, we have looked at the overall concept, and then described all five of the principles - Coherence, Alignment, Rigour, Openness and Commerciality.

In our fifth and final paper, just published, we look at how sourcing might develop over the next few years.  We believe the principles we have outlined in the series will prove pretty robust into the future, but there will undoubtedly be changes in what is perceived as sourcing good practice, driven by technology and other factors.

Here is an excerpt from the paper, and you can download the whole thing now from the Trade Extensions website.

 

The Future of Sourcing

Here then are our ideas in terms of how the whole field of sourcing (and related activities) might develop over the coming years. But none of these are wild futuristic predictions; indeed, they all build on developments that can be seen in leading organisations today.

Sourcing will be better aligned with the business

The sourcing process has been at the heart of procurement activity for many years. Yet it is often seen as a bit of a “black box” by the rest of the business, who do not understand it well. In other organisations, it can even be perceived as a fairly routine or even administrative function. But handled properly, the sourcing process can and should be both a key driver of competitive advantage for the organisation, and is a process that can demonstrate the value skilled practitioners can bring.

As technology develops, and advanced sourcing and optimisation platforms become more widely used, many factors can be considered during the supplier selection and contracting process. A budget holder can explore how different suppliers can offer alternative options, examine trade-offs and constraints, and ensure that the final sourcing decision is well aligned with the ultimate goals of the business (and their own objectives).

Making trade-offs between price and other benefits more visible; allowing suppliers to put forward their own options in terms of alternative proposals; allowing a greater number of suppliers to be considered s part of the process; all these outcomes, driven by technology, will drive better business alignment. That is also good news for the reputation of procurement in the business.

Faster, better, cheaper sourcing technology will incorporate “cognitive procurement” and be more devolved

We have already seen huge advances in the past few years in terms of what is possible with advanced sourcing and optimisation type platforms. Sourcing exercises that were literally impossible – or required massive mainframes to work for hours or days - can now be executed in minutes. This gives the ability to consider hugely complex sourcing problems, look at many options, and consider constraints and “what if” options within the sourcing process.

One of the next steps will be platforms that use what we might call “cognitive procurement” – basically even more complex algorithms that, for instance, will enable the platform to define further options for the exercise in terms of conditions or constraints that it believes might drive a successful outcome. So after an initial optimisation exercise is run, the platform might give the buyer various suggested alternatives to explore, based on past experience and other sourcing exercises. Or the buyer might be presented directly with a whole range of options where the outcomes have already been calculated … (to be continued…)

 

To read more about “cognitive procurement”, category management developments and our other thoughts for the future of sourcing, download the paper from the Trade Extensions website here.

 

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