Preparedness for Data-Driven Procurement Lags Among Manufacturers, New Study Finds

The term “digital transformation” — whether applied to procurement or another field — is bandied around frequently, but as far as the average company is concerned, that transformation is still not in the near future.

In a survey of more than 100 senior executives, LevaData found that although nearly all of them agree that data-driven procurement is critical to value creation, cost reduction and efficiency, only half think that their own procurement teams are ready to make use of predictive tools.

The majority (69%) also stated that they believe that the use of artificial intelligence for risk management and negotiations will be key for staying competitive.

The executives who participated in the survey represent manufacturing firms from the automotive, industrial, life sciences, high tech and consumer goods industries, and they are responsible for a collective $450 billion in direct material spend.

Not all manufacturers are behind, of course, although there is a growing gap between leaders and average organizations.

Best-in-class organizations, or those in the top 5%, are using analytics and market intelligence to identify trends and stay on top of risk in a proactive and more effective manner.

But average-performing organizations, which make up the majority, are still working within a reactive mindset. They are much more likely to be using Excel, Tableau, Qlik or in-house developed tools.

Source: LevaData

In contrast to their best-in-class counterparts, average organizations tend to be complacent in having only limited market intelligence, rather than going after an integrated market intelligence system with numerous sources of data.

Best-in-class organizations are also more likely to engage with their suppliers on a constant basis. Average organizations, on the other hand, conduct sourcing events with only 52% of their suppliers at least once a year.

LevaData also found that high-performing organizations are able to use digital technology to bring the time needed to complete an RFQ from 40 days to three. Average organizations typically need about 15 days for preparation and 26 for negotiation, whereas best-in-class organizations speed up that process an impressive 13-fold.

Check out LevaData’s survey results and full report here.