Large-scale enterprises are quickly realizing the importance of strategic supplier sourcing – and that means more than finding the cheapest prices on goods they need. It's an opportunity, experts say, for digitization and automation to step in, particularly as advanced analytics and artificial intelligence offer the ability to make more informed decisions about who to work with, and when.
The eProcurement and strategic sourcing departments have not always received the attention they deserve from the executives investing in technology for the enterprise, however.
Last year, research from Scout RFP and Harvard Business Review found that improving non-customer-facing operations, like procurement, ranked 10th among 13 top business focuses related to overall digital transformations.
But there is evidence that procurement is on the cusp of a change.
That's particularly true as procurement and strategic sourcing processes become increasingly strategic parts of enterprise growth, according to LevaData CEO Rajesh Kalidindi and SVP Marketing and Customer Success Richard Barnett.
"Historically, strategic sourcing teams manage a massive amount of spend for the corporation," Kalidindi said in a recent interview with PYMNTS. "You have a lot of complexity with respect to the number of suppliers and parts a team manages. The markets are changing, and are fairly volatile."
Rising pressure on strategic sourcing teams to deliver improved margins and strategic growth, coupled with the increasing complexity of supply chain relationships, means the old ways of supplier management no longer cut it, he added.
"With the basic analysis they do, these teams just are not able to keep on top of it," said Kalidindi. "The companies that want to be competitive have no choice but to invest in technology and augmented capabilities, with respect to being able to process this massive amount of information, analyze it, find specific impacts and opportunities, and recommend a course of action – and assist the users in driving that action forward."
Analytics technology has caught up to these demands, and companies like LevaData are stepping in to meet them with tools like artificial intelligence. But Kalidindi noted that the company wants to take an approach that augments existing talent in the enterprise, and not one that replaces it.
"Any technology is going to have change management required," he said. "Procurement and strategic sourcing teams are generally some of the most skeptical bunch in terms of adopting new things – I can say that because I was one of them for many years. They're so busy with the here-and-now, with the immense amount of suppliers they have to manage, with market dynamics, it takes quite a lot of convincing to use new technology."
Artificial intelligence tends to pique concerns of job replacement, he continued, while other issues arise about usability and comprehension of cutting-edge solutions making their way in the workplace.
"We think augmented intelligence is going to triumph," said Kalidindi. "It's not human intelligence by itself, and it's not artificial intelligence by itself. It's a combination of both that really moves the needle for the corporation."
Professionals in the strategic sourcing function are beginning to feel more comfortable with these kinds of solutions, but they aren't the only ones challenged with change management. As Kalidindi and Barnett explained, procurement is a process that touches many aspects of the corporation – from IT to finance and treasury, from the C-Suite down to less strategic operations working with suppliers and goods procured from them.
"It's very interconnected," Kalidindi summarized.
According to Barnett, that interconnectivity means strategic sourcing has an opportunity to be a leader.
"There is an opportunity to elevate the role of strategic sourcing and procurement as quarterback, as an orchestrator," he noted. As technologies continue to grow more sophisticated, they can guide decision making and steer corporate growth for months, even years, into the future, added Barnett.
The potential is there, and technology is catching up. But if procurement and strategic sourcing teams are going to take a lead role in the enterprise, they must take the lead on technology adoption, too.
"There is a broader wave beginning to happen in the area of artificial intelligence, and that technology of advanced analytics is maturing to the point where it is being purpose-built for a certain function," said Barnett. "That is very helpful to getting greater adoption from these communities.
"Strategic sourcing professionals have an interesting psychological aspect to their behavior," he continued. "They're super curious, they're hungry for insight, but they're overburdened. They have too many suppliers, parts, commodities and information than they would possibly try to consume individually."
These pressures actually add to the challenge of embracing new technologies, he said.
"It's very easy for them to be skeptical of AI or analytics services that aren't put in the context of decisions they're trying to manage," said Barnett. "But this newer generation of digital natives is analytically driven. They adopt these solutions and capabilities super-fast. And the folks in these roles for a long time become skeptic-turned-advocate. It takes time, and a push and nudge. But when they see the insights in context and how fast they can act on them, they're converted."