As the role of purchasing continues to expand and as time becomes more scarce, it’s good to know that help is on the way. Though artificial intelligence isn’t “help” in the traditional sense, its capabilities for strengthening procurement aren’t either. The benefits of AI are much more significant. And if your firm delays in embracing AI, it will be giving the competition who makes it a priority a leg-up. Any company looking to perform true strategic sourcing will need AI’s assistance in tackling the challenging and nuanced task.
When a company’s engineering department is being stretched to its limits, this can have a debilitating effect on the organization. For one, this constrains the number of projects that can be in full-process at any given time. This in turn stifles production and innovation, which can weaken a company’s bottom line and decrease its competitive advantage.
At the recent Spring 2017 Prime Advantage Conference, Lisa Reisman of MetalMiner gave a Metals Outlook presentation on how procurement should approach the metals market and all of its fluidity. Reisman contends that most forecasters are notoriously inaccurate and that metal production and consumption numbers are largely useless to metal buying organizations. These numbers aren’t very actionable and fail to correlate to the timing of purchases. The chances of hitting a bullseye when prophesying based off of these figures is extremely small.
Procurement professionals are always striving to not only make better decisions, but to make them more rapidly. The level of intelligence purchasing departments can attain on precisely where supply chain risks lie, as well as on the most cutting edge solutions to dealing with them, will dictate how successful they are in reaching these goals. According to Spend Matters, as supply chains become increasingly global, the possible threats become more and more of a moving target.
How can purchasing departments stop adding to the densities of procurement and better leverage technology and skills to make the whole process less difficult? That is the million dollar question that Procurement Leaders explores in its 10-part series, “Making Procurement Simple.” Never before have purchasing professionals been called on to do so much with this level of ambiguity on which routes to take to get it all accomplished. This often leads to solutions that create more questions than they answer and add more tasks than they subtract.
One of the biggest challenges purchasing professionals are met with every single day is locating enough resources to meet the demands of the job. It seems like procurement is being asked to do more and more each passing year, causing it to further stretch the resources it currently has at its disposal. Buyers are then forced to come up with creative and innovative methods to corral this predicament. Some of the savviest procurement professionals will tell you, the easiest way to get some much needed help is to join a group purchasing organization.
Strategic sourcing can make or break your business and finding the right suppliers will require research, meeting with the vendors, and even a certain amount of trial and error. In order to foster the best strategic sources more quickly, there are some general steps that will outline the path to follow:
I used to have a roommate who thought he was a really savvy shopper. He'd come home with a 50-count bag of frozen chicken breasts because "it was such a steal." But I always thought the purchase was quite short-sided because he only focused on the volume he was getting for his buck, completely ignoring total cost of ownership. Time and time again I'd watch him throw out much of the uneaten chicken, because um, who in their right mind has the stomach for 50 frozen chicken breasts? How's your price per unit now buddy? Not to mention it wasn't fresh meat so he was consuming an inferior product. And he was ignoring the amount of energy being gobbled up by that behemoth bag in the freezer, as well as how that space could have been used for something else.
Refining strategy is a never-ending process. Once you get a project, a relationship, a product line to lift-off, there will always be room for improvement and opportunity to tinker with its underlying strategy. When it comes to sourcing, sure we may be getting the job done, but are there areas that can be enhanced or further developed? We don’t just want suppliers who meet requirements or who are merely “good enough.” We strive for true partnerships, mutual benefit and shared skin in the game. We want vendors who can help take us to performance and end products that smash our goals and expectations. So, how do we get there?