From Reactive to Proactive: How Predictive Procurement Reshapes the Industry
The procurement workload is expected to increase by 10.6% in 2023, even as organizations continue to grapple with talent shortages, budget cuts, supply chain issues, and global inflation. The result? An industry productivity gap of 7.4% and an efficiency gap of 7.8%, which is forcing procurement teams to shift priorities and do more with less.
In the midst of this volatility and uncertainty, digital transformation is key to success. Tools like predictive procurement empower procurement leaders to face current and future disruptions head-on, transforming a reactionary role into one that’s proactive and data-driven.
How does Predictive Procurement Orchestration Work?
Predictive procurement is a modern approach to supply chain management that leverages data analytics, machine learning, and game theory to forecast and optimize purchasing activities. At its core, predictive procurement enhances decision-making in the procurement process by utilizing historical data, market trends, supplier performance metrics, and various other factors to anticipate future demand, price fluctuations, and potential supply chain disruptions.
This approach goes beyond traditional procurement methods that rely on manual, reactive approaches. Instead, it enables organizations to proactively identify cost-saving opportunities, manage risks, and streamline their procurement processes.
By accurately predicting when and what to buy, companies can maintain leaner inventories, reduce excess costs, negotiate better terms with suppliers, and quickly find opportunities that deliver business value.
Top Benefits of Predictive Procurement
Predictive procurement comes with a host of benefits, helping companies make their best buying decisions, faster, across all categories of spend. Here are just a few of the ways the technology can help optimize procurement and scale influence.
Cost Reduction
Predictive procurement can help companies save by reducing spend and optimizing purchase decisions. A McKinsey study found that organizations that adopt digital procurement strategies expect to increase annual savings by 40%, and reduce costs of products and services by up to 40%.
Increased Efficiency
Currently, as little as 10-20% of procurement data is leveraged to drive efficiency and smarter decision-making. Predictive procurement changes this by giving teams access to data that can streamline operations and automate routine tasks, such as order generation and supplier selection. It also improves time-to-market and improves collaborative and advanced sourcing strategies, which frees up procurement professionals to focus on strategic activities.
Improved Supplier Relationships
By analyzing supplier performance data, predictive procurement allows organizations to identify and collaborate more closely with top-performing suppliers. This collaboration fosters stronger relationships that benefit the organization’s bottom line. For example, when Dover Chemicals adopted predictive procurement to improve supplier relationships, it was able to grow its savings by 10% year over year.
Better Decision-Making
The vast majority of CPOs say they lack the technology to perform thorough, real-time data processing. But with predictive procurement, organizations can use data-driven insights to make informed decisions regarding sourcing, inventory levels, procurement strategies, and more. It ensures companies always have the most current and precise information, which drives better buying decisions, faster, at scale.
How to Implement Predictive Procurement Orchestration
Implementation of predictive procurement requires a strategic and systematic approach. Let’s explore the steps to successful adoption:
- Assessment: First, organizations must decide if they have a strategic imperative to save money and drive improvements across their processes for collecting and gathering quote information from suppliers.
- Data gathering: Buying teams must examine the sources of data they use to make buying decisions in terms of supplier price.
- Technology selection: Next, procurement teams should choose technology that meets the needs of the organization. The ideal platform should use advanced techniques such as machine learning and statistical models to extract valuable insights and put them into action immediately. The platform should integrate the predictive procurement system with supply chain management software for real-time decision-making.
- Training: Once the software is selected, procurement teams should invest in training to build the necessary skills for interpreting and acting on predictive insights.
- Continuous improvement: Teams should continuously monitor and refine predictive models, adapting to changing market conditions.
- Risk management: Procurement insights should be used to create contingency plans that manage supply chain risks.
- Performance measurement: Leaders should define KPIs and metrics to track success, such as cost savings or supplier performance.
Procurement teams should also ensure alignment across all departments and stakeholders. As the implementation plan proves successful, teams can expand the strategy across the organization or supply chain.
Transform Your Procurement Processes Today
Predictive Procurement Orchestration is a transformative strategy that empowers businesses to make informed, data-driven decisions that optimize procurement and fuel growth. When coupled with advanced platforms like Arkestro, organizations can unlock the full potential of their supply chain operations.
Arkestro’s innovative technology leverages data analytics and artificial intelligence to provide real-time insights that allow businesses to reduce costs, mitigate risks, and foster stronger supplier relationships. Contact Arkestro today to learn how we can help scale your influence without increasing headcount.