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Resources  /  Blog  /  What Are Predictive Procurement’s Most Important “P”s?
Sourcing Education

What Are Predictive Procurement’s Most Important “P”s?

November 16, 2021

Predictive procurement is heavy on the letter “P.” However, when you start digging down into what this approach to procurement means, what’s needed to succeed, and the benefits of adopting it, you’ll find a whole lot more “P”s. Not convinced? We’ve put together a list of the five most important “P”s in predictive procurement.


Predictive Procurement’s Most Important “P”s #1: People

The first item on this list is often overlooked. Every organization’s procurement function is run by people, from the CPO at the top of the hierarchy to the newest addition to the sourcing team. Many companies take the people component of procurement for granted, but doing so is a mistake.  

Deloitte’s Global CPO Survey 10-Year Lookback: 2011-2021 makes it clear that people are a critical part of the equation, noting:

“High-performing organizations invest in their talent strategy early, viewing training and development of employees as a necessary foundation for success.” 

In addition, the Deloitte survey found that adopting advanced strategies like predictive procurement makes it easier for companies to attract the best people, observing that:

“… top talent is looking to secure roles in top organizations that are pushing the boundaries and driving leading practices.”


Predictive Procurement’s Most Important “P”s #2: Process

Process is probably the “P” that most people would immediately guess at being on this list. They’d be right. Process is central to predictive procurement and in multiple ways. 

First, an organization has no shot whatsoever at making predictive procurement work if they stick with antiquated processes such as tracking everything in spreadsheets.

As an added bonus, adopting the process to support predictive procurement allows for moving staff from repetitive, manual tasks to more exciting and challenging, value-added tasks. Remember the first “P” about attracting the best people? Process is a big part of that. 

According to Deloitte’s Global 2021 Chief Procurement Officer Survey, investing in digital solutions is seen as a key to success. CPOs who are considered to be high-performing spend much less of their time on transactional and operational activities. What sort of technology are these high-performers investing in? According to the Deloitte survey:

“High performers are 4-5 times more likely to have fully deployed advanced analytics/visualization, 10x more likely to have fully deployed RPA solutions, have fully deployed predictive analytics capabilities (12% vs. 0% for others), and are 18x more likely to have fully deployed AI/cognitive capabilities.”

AI in particular—the transformative technology that’s central to Arkestro—is key to modernizing process to enable predictive procurement. And AI is also a big part of the next three “P”s on the list.


Predictive Procurement’s Most Important “P”s #3: Predict

Historically, much of what a procurement organization did has required making cognitive judgments. A sourcing professional looks over multiple bids, and before getting into a deep, time-consuming analysis, they “eyeball” the bids and remove any obvious outliers.

That same kind of eyeballing is done throughout the procurement process. However, ultimately it simply doesn’t scale. It’s completely dependent on the skills of the procurement team members, and the more predicting you try to do, the more skilled staff will be required.

That’s where AI comes into the picture again. AI can scan massive databases worth of data in an instant. A range of potential values is assigned. The AI can then grade outcomes for virtually any variable or process using that value range, indicating whether it looks as though it is in the expected range or an outlier. If there is an outlier, it’s flagged for a human to look at it more closely. Anomaly detection and forwards-looking KPI reports are essential to enabling prediction


Predictive Procurement’s Most Important “P”s #4: Prioritize

Without prioritization, adopting predictive procurement is difficult. The problem is that the procurement organization and even the CPO could spend all day buried in what we often refer to as “transactional busy work.” These tasks are usually dull, repetitive, and they’re the type of work where humans can easily make errors (especially if they’re bored and not fully paying attention). Think manual data entry, for example.

One of the keys to the successful adoption of predictive procurement is prioritizing the tasks that are considered high-leverage. Put your staff on those high-leverage tasks, and the procurement team is operating at a much more strategic level, becoming much more involved in the business process. One problem. Who does the transactional busy work?

Once again, let’s go back to the second “P,” where we talked about the importance of AI to process. Advanced, AI-powered procurement software can automate those repetitive tasks. Who’s doing the transactional busy work? AI—and it’s doing it at lightning speed, with no errors.  


Predictive Procurement’s Most Important “P”s #5: Produce 

Prediction and prioritization work together to achieve the fifth “P,” production. The goal is for the procurement team to drive more outcomes to be optimal over time. It does so by using prediction to catch and correct any outliers, and by prioritizing so that the highly-skilled procurement team members are spending their time on high-leverage activities instead of transactional busy work. Procurement can then produce results. 


Predictive Procurement’s Most Important “P”s #6: Preview

Now that you’ve seen five of procurement’s most important “P”s, it’s time for a sixth and final one. Preview. As in, book a demo for a hands-on preview of Arkestro and everything this AI-powered predictive procurement software offers to drive faster savings.