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Sourcing Education

Why You Should Be Adopting Predictive Procurement, Now

October 12, 2021

Those that work in supply chain have all heard of predictive procurement. It’s often spoken of as the future of sourcing, with AI-powered predictive analytics delivering revolutionary change. Procurement becomes a strategic force in an organization—a far cry from its traditional reactionary role. In the 2021 report “The Race to Predictive,” KPMG analysts call predictive analytics:

“… an increasingly mission-critical enabler that will help procurement organizations more intelligently analyze spend, monitor supplier performance, and identify savings opportunities.”

They see the benefits of a shift to predictive sourcing driving a combination of direct and ripple-effect benefits to a wide range of functions and goals, including:

      • Budget planning
      • Negotiation and pricing leverage
      • Operational and financial transparency
      • Identification of value opportunities
      • Proactive compliance
      • Resourcing flexibility
      • Category innovation

What many sourcing professionals don’t realize is that when it comes to predictive procurement, the future is now. The race to adopt predictive procurement is on, and the organizations that make the shift are going to come out on top. Those that don’t will be quickly left behind.


Focus on Strategizing Instead of Reacting

Too many procurement teams are stuck in the past and reacting to issues. Instead, they should be looking forward and strategizing. With predictive analytics, sourcing teams gain deep insights into their business. They can see what the impact of a choice they might make will be—before they make it. This ability means decision-making is faster, simplified, and more effective.

In short, predictive analytics transforms a procurement team into a key strategic contributor to the organization. This makes the role more rewarding while delivering value.    


What’s Holding Back Adoption?

Several factors commonly hold back companies from adopting predictive procurement. 

One is a narrow viewpoint. Too many procurement teams are narrowly focused on the sourcing aspect of their role. Sourcing is a critical component, but procurement has the opportunity to be innovative and strategic. Predictive analytics provides the tools needed to be innovative, offering a clear path to a more strategic role. 

The other key issue is data. Sourcing solutions deployed in recent years don’t usually have an issue in terms of collecting data; the problem comes with their inability to process massive quantities of data in a meaningful way. This requires data that is in a standardized format and updated frequently, and it also requires advanced technology like AI and machine learning.

The good news? You can easily overcome these issues if you adopt a modern procurement platform designed to support predictive analytics.  


A Real-Life Example: Holman Enterprises

The arguments in favor of predictive sourcing are compelling, but there’s nothing like a real-life example to show just how transformative it is.

International automotive distribution and manufacturing company Holman Enterprises (Auto Truck Group) had a problem. Its sourcing team was decentralized, working with disconnected systems and processes. They were unable to forecast trends with any accuracy, ruling them out in terms of strategic decision-making. But with the pandemic raging and disrupting both its supply chain and the market for its products, a strategic procurement approach was critical. Adding fuel to the fire, the inefficiencies and the inability to forecast also meant the company was spending far more money on sourcing than it should have been.

Holman Enterprises chose Arkestro, knowing that its advanced AI-powered predictive analytics capabilities would be a game-changer. They weren’t disappointed. With data centralized and updated in real-time, the company was able to accurately forecast trends such as costs, lead times, and delivery schedules on demand. They had the flexibility to address supply chain and market fluctuations in real-time instead of reacting. This made the sourcing team a valuable part of the strategic decision-making process. 

The benefits from adopting Arkestro and predictive sourcing included reducing a $500k+ stream of spend by 7% on the very first day the system went live. They narrowed their supplier pool from over 40 contract suppliers to five strategic partners. Procurement cycle times were significantly reduced. Perhaps most importantly, predictive sourcing helped the company accelerate the delivery of higher-quality products and services to its customers. That is a competitive advantage that can’t be understated.

To learn more about Holman Enterprises and its experience with Arkestro, be sure to read the full story here.


Even More Reason to Adopt Predictive Procurement, Now

It should be clear that adopting predictive procurement now rather than waiting for the future is a smart move. Doing so is a competitive advantage and transforms the procurement department into a critical strategic business unit. However, as KPMG’s report points out, there’s another reason to make that change now rather than later. Failure to do so can see the organization falling behind:

“For CPOs, predictive analytics also looms as a competitive threat, one that will widen the gap between procurement organizations who’ve mastered the discipline and those that haven’t.” 

In other words, failing to embrace predictive analytics and predictive procurement isn’t just a matter of opportunity cost. It’s also a competitive threat that could see companies seize business from others that have fallen behind. 

Take the Next Step

See first-hand how Holman Enterprises used this predictive procurement platform to deliver impressive cost savings along with a competitive edge. Take the next step toward adopting predictive procurement—now.