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How Procurement Orchestration Drives Up to 5X More Savings

September 7, 2021

One of the most critical factors in cost savings and supply chain agility is procurement orchestration. Companies that adopt predictive procurement orchestration can realize two to five times the amount of savings.

So, what is procurement orchestration?

Procurement orchestration is a game-changer that makes KPI reports actionable. Ultimately, procurement orchestration is the key to procurement teams realizing their potential to become strategic partners in their organizations.

The pressure is always on procurement teams to deliver savings to their organizations. That requirement never goes away. More recently, events like the pandemic have exposed the global supply chain’s complexity (and risks) like never before. A Deloitte Insights report shows that, as a result, sourcing professionals have a greater potential than ever to become true strategic partners.

Many procurement teams adopt KPI reporting to meet these goals. Unfortunately, the reality is that KPI reports are time-consuming and backward-looking. It is difficult to implement change that is meaningful and ensures procurement is a strategic partner based on KPI reports that are not standardized and only look backwards.

That is why procurement needs procurement orchestration. Here’s what you need to know about this revolutionary procurement concept.


What Is Procurement Orchestration? A Deep Dive

It’s a relatively new term, so let’s start by defining procurement orchestration.

Sourcing is a complex process that involves the supply chain as well as multiple internal stakeholders and individuals. Everyone has a part to play in the procurement process. The procurement team has a significant role here, but there are business stakeholders as well. The accounting department is involved.

A classic arrangement is a procure-to-pay setup, with stages that include selecting suppliers, compliance, and invoice payment. However, with multiple stakeholders, information is often siloed. That makes coordination difficult.

Procurement orchestration actively coordinates all of the key activities across the supply chain.

To succeed, procurement orchestration requires real-time data. That is a critical requirement and one where traditional procurement solutions are sorely lacking.


Procurement Orchestration and Understanding Price

Many companies have a significant spend on MRO, logistics, packaging, indirect services, and contract labor. The procurement team can often negotiate terms with new or existing suppliers that represent substantial savings in these areas. However, they don’t always see the process through to its conclusion. They get pulled off to new priority tasks, or business stakeholders take over the purchase order.

What price was paid for the product or service? The newly negotiated price that offers cost savings, or the price that had been paid previously? Typically, that information is only available as a historical report, after the fact. The data on these reports is likely to be aggregate, not at the line item level, making it even more challenging to analyze.

Too often, the savings that had been negotiated are not realized when it comes to payment. All the efforts of the procurement team were for nothing, and the company fails to achieve its cost-reduction goals.


The Power of Instant Forecasts

Procurement orchestration requires real-time data. Having access to this information unlocks the power of instant forecasts.

Instant forecasting leverages real-time quote data before it becomes a spend. Exceptions are caught before they become purchase orders. The procurement team can see details right down to the line item dollar and cent forecast of spending with a supplier. That can be compared programmatically (assuming they have the required software) against existing transactions at the time of initiation. The procurement team or the business stakeholder is then notified of an alternative, and they have the choice of whether to go ahead with the purchase order or to switch to another supplier.

The exception isn’t caught after the fact through an audit. It’s caught at the quoting stage before a purchase order is issued. That offers huge cost savings potential.

To learn more about the importance of instant forecasts, be sure to watch this free webinar where panelists share their insights into the future of procurement forecasting.


Exception Engagement and Driving Value

Catching sourcing exceptions in real-time and at the line-item level also offers the advantage of engagement. Being able to pull in detailed data in real-time as the processes are running means a dashboard can be created that shows when spending moves toward or away from targets. That engages procurement teams and business stakeholders to act. No more blindly issuing purchase orders; they have the information needed to act to ensure savings targets are met.


Using Procurement Orchestration to Improve Purchase Orders

The power of instant forecasting is the power to translate intelligent data into intelligent behavior change. That is on full display when it comes to purchase orders.

During the quoting stage, any exceptions are flagged. That lets the procurement team decide whether to proceed. In some cases, they may even make the call to go with a more expensive quote because the firm bidding is a strategic supplier. That is another example of an opportunity for procurement to create value. With a fully open procurement system, approved suppliers can even be part of the procurement orchestration process. When these suppliers receive a notification of a big that tops theirs, they have the opportunity to match it rather than risk losing out on the business.

The bottom line is purchase orders that reflect significant cost savings and drive strategic value as well. By employing procurement orchestration, they reflect the result of intelligent behavior change.


Take Action to See First-Hand How Procurement Orchestration Can Drive Up to 5X the Savings

Harvard Business Review recently published an article on procurement becoming a strategic partner in the digital age. The authors noted:

“The starting point for a healthy procurement ecosystem lies in creating a world-class data, information, and intelligence strategy that provides visibility into spending decisions, consumption patterns, performance and quality data, supply chain risks, market insights, and intelligence.”

Sourcing professionals understand how instant forecasting ability and procurement orchestration hold the key to spending visibility, big cost savings, and the ability to be a strategic partner.

Procurement orchestration is what sets Arkestro apart from other platforms. To learn more about effective procurement orchestration, predictive procurement, and KPI dashboards, visit Arkestro for a demo of the advanced Orchestrate solution from this AI-powered Predictive Procurement Orchestration Platform.