How to Create High-Intent Purchasing in Procurement
One of the under-appreciated challenges facing procurement today is low-intent purchasing. It’s not something that immediately sets off alarms because it’s not necessarily obvious. It’s something that tends to build up over time. Low-intent purchasing is a factor that muddies the waters when trying to make the procurement process as efficient and cost-effective as possible.
So, even if companies do everything else right, they leave millions or even billions of dollars on the table. The only way to address the problems it causes is to make the switch to high-intent purchasing in procurement.
Before unpacking the benefits of high-intent purchasing in procurement and how organizations get there, it’s essential to understand the terms.
What is Low-Intent Purchasing in Procurement?
Purchase intent is the overall probability that someone will buy a product or service. Low-intent means buyers are less likely to purchase. Low-intent purchasing in procurement is a problematic state common in many organizations.
Classic signs of low-intent purchasing include
- the number of new suppliers constantly on the rise
- an increase in purchase orders per supplier
- an increase in purchase price variance caused by having too many suppliers
Another sign is the number of suppliers involved with similar transaction clusters increases, resulting in spend fragmentation. Adding another degree of complexity to the procurement equation, many companies leverage their procurement teams’ expertise to manage other transactions. This includes tail spend and strategic transactions that had been under the umbrella of other departments.
Having too many suppliers results in inefficiencies, poor supplier relationships, bloated spend, and a host of other issues. A procurement organization caught in the low-intent purchasing trap can be doing everything right, but the numbers are against them.
What is High-Intent Purchasing in Procurement?
High-intent purchasing means procurement and sourcing teams are likely to buy products and services from suppliers they’ve vetted through extensive RFx processes. Sourcing teams should be working toward the model of high-intent purchasing in procurement. Assessing for high-intent means determining the best supplier for a particular transaction:
- It reduces the time required for the procurement cycle
- It results in higher satisfaction among both business stakeholders and suppliers
- It makes it possible for procurement teams to deliver significant cost savings
Procurement’s Problem in Creating High-Intent Purchasing
On the surface, the solution to low-intent purchasing sounds simple: adopt high-intent purchasing in procurement. However, the devil is in the details. In many cases, knowing which suppliers are the best—and not necessarily the lowest price—for any particular solution is anecdotal, qualitative, and left to personal preference.
Even in the most organized company, the sheer amount of data to assess to determine the best supplier makes it a task that’s doomed to failure. Before a high-level analysis is complete for a given transaction, deadlines loom, and there may even be additional suppliers added to the mix.
How to Create High-Intent Purchasing
How do you create high-intent purchasing when the deck is stacked against you, and the problem is getting bigger by the day?
The answer is in a concept introduced in 2004 by author and journalist James Surowiecki. In his book “The Wisdom of Crowds,” Surowiecki theorized that decisions made by aggregating the data generated by groups were better than those made by individuals.
Following the wisdom of crowds model, the key to creating high-intent purchasing in procurement is to leverage the organization’s data related to past transactions to choose the “best” suppliers that should be asked to bid on a transaction. In other words, you look for clusters.
For example, does one supplier frequently show up as a winner on purchase orders for a particular product or service? If so, they should be weighted more highly in the decision-making process. Does a specific member of the procurement team have a proven track record for picking suppliers that meet delivery and pricing targets? That may be because they know the suppliers well, understand requirements, and know exactly what to ask for.
You have undoubtedly spotted the problem here. The data analysis required to use the wisdom of crowds methodology effectively is prohibitive. It’s difficult enough to do this after the fact but in real-time? In addition, companies are also under pressure to adopt predictive procurement. All of this data combined with tight timelines, inflation, and supply chain disruptions is a recipe for analysis paralysis.
Fortunately, there is a way to effectively create high-intent purchasing in procurement while also supporting the tight timelines of the sourcing process: Predictive Procurement Orchestration.
Using Predictive Procurement Orchestration to Create High-Intent Purchasing
PPO employs two advanced technologies that are changing the game for procurement. AI and machine learning provide the ultra-high performance needed to analyze data related to historical and ongoing procurement transactions in real-time. In addition, this advanced technology can determine the effectiveness of individuals within the procurement team and can weigh their decisions more highly in the data model. It leverages the greatest insights of a procurement team’s smartest people.
When it‘s time to put a purchase order out for bid, Arkestro automatically narrows the field down to the ideal suppliers and the target payment price. The organization has now effectively shifted from low-intent to high-intent purchasing procurement. And they have done so while also enjoying the benefits of predictive procurement.
Interested in learning more about how we can open the door to both predictive procurement and high-intent purchasing in procurement? Book a demo today.