In the age of disruptive technologies, organizations must evolve beyond traditional business operations, processes and frameworks. This is so that the new technologies can be used to their fullest potential to deliver the actionable intelligence and accurate analysis for maximum business performance.
In order to fully step into digital procurement, an organization must rely on cognitive procurement and the technology it leverages together to achieve a sound and frictionless digitalization journey. This article discusses some digital technologies in the current trend towards cognitive procurement.
Trend of Cognitive Procurement
Cognitive procurement is the next-stage shift of the procurement role from simple transactional duties to complex strategic sourcing activities. This evolution is supported by cutting-edge technologies that removes repetitive tasks, automating many downstream processes and refocuses procurement resources and efforts to true collaborative, value-creation work.
Current trends towards cognitive procurement and the associated digital technologies include the following areas:
- Optimizing the digitalization strategy
- Big data management and smart analytics
- Optimize supply chain efficiency
- Enhancing business risk management
- Automating processes with AI and RPA technologies
- Cutting costs and value enhancement
- Enhancing supply chain operation with blockchain
- Leveraging supplier relationship management
Implementing Cognitive Procurement
Cognitive procurement is the method which disruptive technologies are used to aid the procurement function. It taps into machine learning to process data in order to enhance sourcing activities. AI and smart technologies are also utilized to analyze data and enhance spend visibility. But cognitive procurement goes beyond just technology. It is also the combination of multiple business functions to form an ecosystem that produces synergies, such as agile analytics, data fusion and actionable intelligence.
There are several reasons that hinder an implementation of cognitive procurement; such as unclear goals of digital transformation, incorrect approach to digitalization and imperfect understanding of the company’s processes. The solution is to implement cognitive procurement technologies backed up with some social development.
Social development is the next step following cognitive procurement. The organization develops full cross-functional teams and focuses on supplier development. Using the performance data obtained to differentiate between vendors and suppliers, digital procurement creates opportunities to refine and shortlist vendors for selection into key suppliers.
Optimizing Digitalization Strategy
Businesses must actively pursue digitalization in order to benefit from cost management, improved data, actionable analytics and other new benefits. Businesses that do not embrace digitalization will rapidly find themselves lagging behind their competition. This is especially true when it comes to optimization of processes, reduction of overheads and costs and missing out on new business opportunities due to a lack of timely information.
As a result, the frameworks provided by cognitive procurement can most effectively integrate monitoring, reporting and data feedback so that management can obtain visibility in the progress of the projects. The scalability of the master data technology also allows the company ecosystem to integrate seamlessly, taking in data insights from different functions to value-add the analytical results. Overall the path to digitalization is now fully accountable to all functional leadership and can be adjusted as required when the situation requires them.
Managing Big Data and Smart Analytics
Big data management is a growing trend as businesses are obtaining the capability to obtain and process larger amounts of data. This capability allows companies access to gather valuable insights that can be acted on to take advantage of new opportunities.
In a cognitive procurement framework, this transforms the human task of analyzing spend data into automated spend analytics that can lead into predictive analytics. Procurement professionals can then quickly obtain forecast revenue, preventing negative disruptions and identify new market opportunities.AI-enabled systems can use machine-learning to identify normal patterns in order to clean and curate its own data. This allows the business to benefit from performance reporting without raising overhead costs since the system is now self-managing. This also returns precious bandwidth to procurement professional so they can fully concentrate on studying how to best make strategic decisions with the information on hand.
Traditional supply chain optimization centers around cutting costs up and down the supply chain. But by leveraging technology, human errors are eliminated and labor costs are optimized, leading efficiency to become the greatest cost-saving potential for procurement to prioritize.
Since technology is now used to spot missed cost savings potential, procurement can now focus attention on making internal operations more efficient, accurate and centralized. Time is also saved as professionals are leveraging insights rather than generate reports due to real-time dashboard reporting mechanisms.
The same effort is also spent finding and implementing automation throughout the procurement process so that manual routines are sped up and costly human errors are removed.
Enhancing Business Risk Management
When an organization starts managing greater volumes of data, and they transition to cloud storage and cloud-based applications, there will be growing concerns over data security. In order to manage this, procurement-led cross-function teams must convene to draft a cybersecurity strategy to safeguard sensitive information, especially since a breach can affect the entire supply chain. The breach will also put the company at risk of exposure to liabilities and damages.However, the organization can still benefit from cloud storage and cloud computing as it eliminates the need for localized server rooms and other hardware-based risk factors in the face of man-made or natural disasters. These disasters can render an operational location shut down and subsequent damage to IT equipment leading to catastrophic losses of data.
Cloud systems also allows greater device integration that improves the mobility of procurement professionals who still need access to real-time data and analytics. Reducing the risk of losing access to data simply because the user leaves his desk.
Automation with AI and RPA Technologies
Utilizing cutting-edge inventory management systems, these errors are eliminated and ensure numbers in the software match physical inventory. The system can also be enhanced with machine-learning to identify seasonal patterns, or inventory thresholds to instantly process replenishment orders all without going through human intervention. All these activities are then fed into the data management system so all the professional needs to do is to monitor and tweak settings where necessary but largely stay away from the system to prevent any human errors from happening.
Similarly payment approval or payable received systems can also be automated, utilizing real-time signals triggered by delivery, minimizing human intervention so that the system can continue to run regardless of holidays or instances where people are not around to process.
Cutting Costs and Value Enhancement
With newly available smart technologies, overhead costs within the procurement process itself can also be better managed. With automation and RPA technologies freeing up the bandwidth, procurement professional become the value-creation core of the organization.By allocating this resource into cross-functional teams, the procurement function can start to collaborate internally, cross-training, network with external partners to create new, innovative business models.
With access to real-time market data, procurement professionals can offer valuable information for strategic decisions that affect the top-line as well. Cognitive procurement technologies have fundamentally altered the role of traditionally bottom-line procurement functions. Category management also becomes more sophisticated when procurement is empowered to lead the business to explore opportunities.
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