Autonomous Sourcing Leads to Better Procurement Outcomes
The only ubiquitous thing about sourcing and procurement in 2023 is that there is no one-size-fits-all model for success. While certain industries continue to work around rising prices and supply disruptions, others are trying to take advantage of downward price pressures.
Couple these with a broader climate of economic volatility and talent scarcity, and CPOs and heads of Manufacturing and Supply Chains have their work cut out for them. No matter your industry, following conventional wisdom in regard to sourcing and procurement is no longer enough to prove value to the organization at-large.
However, with great challenges also come great opportunities. Artificial intelligence (AI) and automation are delivering more efficiency and resiliency in sourcing processes, making 2023 a potentially career-defining moment for CPOs who stay ahead of the curve.
In this blog, we’ll break down specifically what autonomous sourcing technologies do, why autonomous sourcing matters, and examine how solutions like Arkestro are improving business outcomes.
Defining Autonomous Sourcing
Autonomous sourcing applies the power of technologies such as AI or machine learning to streamline or automate sourcing processes. This includes providing decision support around spend, suppliers, and analytics. Some capabilities of autonomous sourcing include:
- Automated event creation
- Lot/line structuring
- Dynamic event timing
- Automated supplier feedback
- Response scoring
- Analysis and award
The 2023 Gartner® Hype Cycle™ for Procurement and Sourcing Solutions rates autonomous sourcing as highly beneficial, meaning that it “enables new ways of performing horizontal or vertical processes that will result in significantly increased revenue or cost savings for an enterprise.” Gartner also predicts that autonomous sourcing will enter mainstream adoption in the next 5-10 years.
The Importance of Autonomous Sourcing
Autonomous sourcing is increasingly important to mitigate the challenges that arise during extended periods of inflation and economic uncertainty. A 2023 Deloitte survey found that only 25% of organizations say they can identify and predict supply disruptions in a timely manner, while risks around cost and spend due to inflation remain an issue for 89% of CPOs.
The fact of the matter is, businesses who employ solutions like autonomous sourcing are experiencing better outcomes in today’s climate than those who don’t. The same survey found that leaders in the procurement space are employing technologies like analytics and robotic process automation (RPA), Artificial Intelligence (AI), and machine learning (ML) at three times the rate of their lower-performing counterparts.
When you consider the benefits of autonomous sourcing, it’s easy to see why. Autonomous sourcing frees up buying teams to focus on value-add activities like building relationships with suppliers. Autonomous sourcing also learns from prior interactions and data sets, providing invaluable recommendations such as when to buy, what to buy, and who to buy from.
Over time, autonomous sourcing learns from itself, leading to a fully automated future for some commodities where much of today’s sourcing tedium can be outsourced to tools who can be trusted to know what’s best. Adopting the best autonomous sourcing technology today is vital because it means your sourcing team can streamline processes while simultaneously preparing for the next stage of digital transformation in procurement.
The Business Impact of Autonomous Sourcing
The workload of procurement teams is expected to increase by 10.6% in 2023. Meanwhile, headcount budgets are only projected to grow 3.2%, and operation budgets are only projected to increase by 2.8%. This glaring gap between capacity and output will inevitably lead to burnout, inefficiencies, and productivity problems unless it is bridged by technology solutions like autonomous sourcing.
Indeed, procurement organizations plan to increase technology spending by a median of 5.7%, and 45% of procurement leaders believe that digital transformation is the best strategy for navigating today’s economic landscape. In fact, enhancing digital transformation is the top priority for 80% of CPOs.
Autonomous sourcing is a necessary component of future-focused leaders because it increases speed and agility, freeing staff from non-value-added tasks. Generative AI through autonomous sourcing will focus on risk management, process automation and decision making. This can provide the following benefits to procurement organizations:
- Optimize the supply base
- Recommend supplier awards at a project-specific level
- Analyze internal and external constraints including market conditions
- Generate actionable insights based on historical data and supplier performance
- Improve negotiation strategies to increase competitive advantage
With the power of autonomous sourcing, CPOs can transform the way sourcing has been done to make processes more efficient and effective — two imperatives in a future where output demands overpower capacity.
Arkestro: A Leader in Automous Sourcing
We are recognized as one of the Gartner Hype Cycle Sample Vendors for autonomous sourcing, Arkestro’s Predictive Procurement Orchestration tool analyzes bid results from both internal and external data, leading to more informed spend decisions.
Through Predictive Execution, we utilize past buying patterns to break down your spend and PO volume over time. Plus, our built in recommendations based on your category, organization, and location data ensure everything is tailored to your specific needs.
Arkestro’s autonomous sourcing capabilities include features like:
- Proactive and personalized email recommendations with anomalies in buying patterns, market trends, or risks
- Visualized procurement insights that make it easy to understand complex patterns in everything from PO volume, spend, and more
- Insights to learn supplier behavior across sourcing, purchasing, compliance and performance datasets
Arkestro Reduces Costs, Improves Supplier Relationships
When Holman needed to improve forecasting and strengthen relationships with key suppliers, it turned to Arkestro’s autonomous sourcing capabilities to automate and accelerate the bidding process. In one day, Holman experienced 7% savings, eventually saving $202,000 in the first bid cycle alone.
Identify Opportunities and Risks
Our autonomous sourcing solution looks not only at your data but what is happening outside of your organization that can have an impact, like Supplier Risk or Market data. That means we can detect risks in real-time by looking at how external factors such as supplier, commodity, and market data impact your buying decisions.
Improve Your Output
Without adding headcount, Arkestro can make your sourcing team do more with less. Autonomous sourcing powered by machine learning, game theory, and data science learns from your spend history and buying patterns, acting like your best team member across all of your spend.
Prepare for the Future
You’ll never miss a beat with proactive and tailored alerts designed to identify risks or opportunities — plus provide clear recommendations on next steps that you can take (or that Arkestro can handle autonomously).
Autonomous sourcing can streamline sourcing events, apply AI to solve tough problems, and bridge the gap between talent, burnout, and limited budgets in 2023. Reach out today to learn more about Arkestro’s autonomous sourcing capabilities.