Sourcing Intelligence - Making the right sourcing decisions

Explore the Sourcing Intelligence to create the right sourcing decisions

PurchTips Edition #429

Sourcing Intelligence can be stressful, time-consuming, loaded with rework, and duplication of effort. A typical sourcing process has supplier selection, logistics, customs, payments, government regulation, channel management, and risk management processes. These events consume huge amounts of time, people, effort, and coordination. If one is sourcing from foreign origins, sourcing processes can be even more complicated and constrained.

Sourcing Intelligence

Sourcing intelligence or intelligent sourcing can break many of the above constraints and provide profound benefits to sourcing departments and procurement professionals. Two very powerful methodologies immediately come to mind, artificial intelligence and blockchain. AI mechanisms leverage robust data analytics platforms to execute various functions. Data analytics falls into several categories, descriptive, diagnostic, predictive, prescriptive, adaptive and autonomous.

AI in sourcing can provide the following benefits to sourcing intelligence processes:

  1. AI descriptive analytics: Sourcing professionals can access huge spend profile information provided through machine learning. This can be done at a fraction of the cost and effort with a significant reduction in errors.
  2. AI diagnostic analytics: Sourcing professionals can gain insight into the root causes of an increase or decrease in Total Cost of Ownership. The leverage of AI systems in this regard can yield great benefits and cost reduction.
  3. AI predictive analytics: AI can leverage analytics by using inferential statics and confidence levels to make decisions about the future. This can be heavily leveraged in forecasting raw materials requirements versus future customer orders.
  4. AI prescriptive analytics: AI can provide a set of decision options to sourcing professionals on how to approach their work. Decisions of when to negotiate, vendor selection, when to conduct bidding can be done more efficiently.
  5. AI adaptive analytics: Al systems can adapt to abnormal patterns in the sourcing process and provide dynamic insight on cost-effective courses of action.
  6. AI autonomous analytics: This type of AI and analytics are in infancy, but we may soon see critical parts of the sourcing process executed solely by machines.

Blockchain brings a great sense of visibility into the status of all areas of the sourcing process. Other ways blockchain makes sourcing intelligent:

  1. Greater accountability
  2. Greater efficiency
  3. Reduced risk and fraud
  4. Lead time reduction
  5. Reduced Total Cost of Ownership

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Copyright 2018. This article is the property of the Next Level Purchasing Association and may not be copied or republished in any form without the express written consent of the Next Level Purchasing Association. Click here to request republishing permission.

By David Millington, SPSM, SPSM2, SPSM3 - Director of Education (Next Level Purchasing Association)

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