How you can transform procurement into a strategic superpower in 2024
Procurement is entering an exciting new era of embedded intelligence. Technologies such as generative artificial intelligence (AI) and machine learning make possible what was only dreamt of in years past — intelligent automation, predictive procurement and exponential data processing.
As generative AI and other disruptive technologies continue to accelerate in 2024, embracing digital transformation in the procurement space will be imperative for success. Indeed, most procurement leaders are already planning to invest in these technologies. An Amazon survey found 53% of procurement teams expect their budgets to increase in the coming year, with a whopping 98% planning to invest in automation, AI, and analytics and insights tools.
But just how much do procurement organizations stand to gain by investing in automation tools? To find out, we conducted a field trial across three different organizations with our predictive procurement tool to analyze how impactful intelligent procurement can be, and how much savings were possible.
How predictive orchestration has the potential to transform procurement
First, let’s dive into the current landscape of procurement, and what’s changed in the past year.
It’s no secret that 2023 was a tough year for procurement. Inflation, a complex and constrained supply chain, and threats of recession all impacted how procurement processes played out externally. Meanwhile, inexperienced staff combined with limited time and resources added internal pressure to the mix.
Coming into 2024, procurement organizations have a chance to face these challenges head on by working smarter, not harder. The emergence of technologies like Predictive Procurement Orchestration (PPO) have been widely recognized as a chance for procurement to improve its processes and performance. As a recent Gartner study reported, “Procurement organizations can use emerging technology to deliver automation, efficiency and better collaboration with suppliers and stakeholders.”
How do these emerging technologies work? PPO applies the power of data science, machine learning (ML) and automation to transform procurement in the following ways:
- AI and ML combine to predict more favorable outcomes.
- Human behavior and game theory creates competition among suppliers.
- Dynamic supplier feedback encourages engagement among suppliers.
- An embedded intelligent platform can make resources go farther without increasing headcount.
In a world where procurement organizations currently use less than 20% of their available data due to a lack of data processing capabilities, tools like PPO can help procurement teams fill the gaps. PPO can introduce cost savings of 16% within the first 60 days, run three times as many events, and reach more addressable spend with the same resources.
Gains in automation and smart processing represent thousands — if not millions — in savings over time. A field trial of three different organizations applying PPO to their procurement organization demonstrates just how powerful these new tools can be.
How your company can save in the new year with predictive procurement
To test how effective PPO is for organizations, we conducted a 60-day trial across three different organizations in unique industries to see how much savings were possible. The results were compelling: together, the companies experienced over $14.5 million in savings, achieving savings of over 60% in some event categories.
Customer 1: Over $8M in savings
By applying PPO, this company experienced $8,587,048.28 in confirmed savings during their first 60 days. Their minimum expected savings was estimated to be $11,620,958.28. In several key areas, they were able to:
- Save 60.52% on Request For Quotes (RFQs) in the “Tapes” event category.
- Save 35.22% on RFQs in the “Fasteners” event category.
- Save 23.19% on printed circuit boards (PCBs).
Customer 2: Saved 88% in discrete purchases
For this customer, they were able to save $1.3 million over the first 60 days they applied PPO to their procurement organization. Indeed, in one key area they saved 88% in discrete purchases and spot buys.
Customer 3: 4.3 for ease of use on platform
Yet another 60-day trial applying PPO yielded this customer $1.32 million in savings potential, with realized savings of $476,000. This client ran 36 projects across 8 plants with 11 users running at least one event with the technology. Afterward, the team also rated the tool’s “ease of use” as 4.3 out of 5 for users who ran multiple events.
Overall, our findings indicated how powerful tools such as PPO and predictive procurement can be. Each of the four customers saw a huge benefit from:
- Cost savings from improved data processing
- Streamlined supplier negotiations
- Intelligent automation for higher efficiency
Applying a tool like PPO to your procurement organization in 2024 can help your organization unlock latent potential from your data and your team.
Predictive procurement should be on your 2024 priority list
The best time to invest in digital tools applying AI and ML was 2023, but the second best time is now. Beyond the benefits we saw above, procurement leaders are increasingly interested in and looking for emerging technologies like these to help address the lingering challenges of the past year.
A recent Amazon survey found procurement leaders were interested in the potential of AI and ML for the following opportunities:
- Data: Faster or deeper data analysis (44%)
- Resources: Time savings (43%)
- Efficiency: Different systems to connect more seamlessly (43%)
If your procurement team is stuck in reactive mode, consider how powerful tools like PPO can be when it comes to anticipating demand, optimizing supplier relationships, and mitigating risk. It can make your team’s influence go further, save money, and ultimately transform procurement into a strategic partner at your organization.