From compliance to data-driven procurement: are you there yet?

MlulekiNtlemeza.jpgWhile some procurement professionals may be stuck in the rut of policy, procedures, and process compliance, the growth of data has reached levels where “we don’t know what we don’t know”.

When a pilot – entrusted with the safety of all passengers on board – flies through a thick haze of fog without a glimpse of the horizon, in preparation for landing, she relies on the data provided by the aviation navigation system, for a safe descent.

As with aviation navigation, data is the DNA of corporate strategy, from which procurement derives its own objectives. Without proper analysis and understanding of its data, the enterprise – to use the above analogy – will be lost in the fog, writes Mluleki Ntlemeza (MCIPS), e-Procurement specialist at PetroSA, in this month’s SmartProcurement.

The understanding and analysis of data however poses a challenge, as there are limitations to the amount of data humans can consume, and the time they are able to work. IBM’s huge investment in cognitive computers was chiefly to address these challenges.

What do these cognitive technologies mean for procurement?

Cognitive technologies are modelled on the complex network of neural nodes in the human brain, as opposed to the linear information processing architecture of the traditional computer. This ground-breaking innovation in design allows for information to be processed concurrently, instead of being queued in a slower, linear process.

In the article “The Cognitive Procurement Ecosystem”, Andrew Bartolini argues that cognitive procurement is not only about data and artificial intelligence (AI), but also the sum of different components in the business environment. He maintains that cognitive procurement is not possible without process automation.

Through process automation, algorithms are built to address compliance requirements. This allows procurement practitioners to focus on strategic objectives – which is the reason why data matters.

Data flows through organisations from different streams and in different forms and formats. As it grows exponentially every day, data analytics help sanitise it, and predict the future outcomes of business activities.

The value of big data analytics does not only lie in analysing data and forecasting possible outcomes, but also in enabling fast- and smart decision making. Smart decision making being an essential ingredient in an agile procurement- and supply chain.

Category managers derive great benefit from big data analytics in the form of early warning systems for risks, in certain commodity markets.

Apart from the traditional variables of quality, cost and on time delivery of products or services, the right time to go to market – or to negotiate a contract (essentially the sourcing strategy choice) – is as important.

Research conducted by Ardent Partners titled “Cognitive Procurement: The Age of Intelligence” corroborates the potential benefits mentioned earlier. Machine learning and big data analytics – among other AI technologies – helped crystallise the concept of cognitive procurement, which is steadily gaining momentum as a formidable force of change in the supply chain management environment.

The question is: Is your organisation ready for the cognitive procurement revolution? Are you positioned as a laggard or a frontrunner in this innovative journey?

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