Category: Procurement / Supply Chain

What Companies and Industries Need to Know About How the Procurement Process Is Changing | Blog

The source-to-pay and procure-to-pay functions in the procurement process are evolving dramatically as leading companies in several industries, as well as third-party service provider firms, move procurement into their platform operations model. Why is this happening? Simply put, we are in a new, complex business world where change happens constantly, and companies need to be nimble so they can change quickly, at scale, with their market needs.

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Unleashing the Power of Generative AI in Procurement | Blog

Integrating Generative Artificial Intelligence (GAI) into Source-to-Pay (S2P) processes can reshape procurement operations. Our survey of procurement professionals found the technology holds great potential to transform spend analytics and cost optimization while increasing efficiency and saving time. To delve into the research findings and understand the potential benefits of Generative AI in procurement along with its challenges, read on.

In today’s dynamic landscape, leveraging cutting-edge GAI technology holds the promise to revolutionize procurement processes and enable organizations to stay ahead of the competition. By seamlessly integrating advanced algorithms and machine learning, GAI has the power to transform Source-to-Pay (S2P) processes, taking procurement to unprecedented heights of efficiency, accuracy, and innovation.

To understand how procurement professionals view the usage of GAI in procurement, we surveyed a diverse group of procurement experts, including Chief Procurement Officers (CPOs), category/sourcing managers, contract managers, supplier relationship managers, and various other executives.

Our research aimed to comprehensively assess GAI’s potential impact on procurement. In this blog, we examine the implications of GAI within the S2P framework based on the survey results and our expert insights from diligently monitoring this evolving landscape.

Potential for generative AI in procurement

GAI’s capabilities offer tremendous potential across multiple facets of S2P activities, leading procurement professionals toward elevated levels of efficiency and productivity.

The survey revealed that the majority of respondents believe that GAI will have the greatest impact on spend analytics and cost optimization. Additionally, a considerable number of procurement professionals recognized GAI’s potential for supplier identification and qualification. Contract management also emerged as a noteworthy area for GAI adoption.

Source: Everest Group quick poll on Generative AI in procurement
Source: Everest Group quick poll on Generative AI in procurement

Let’s explore the potential implications in these areas:

  • Spend analytics and cost optimization – GAI can help procurement professionals crunch through colossal datasets at an unparalleled pace, unveiling patterns and insights that would be unattainable through traditional means. By analyzing historical spending trends and market fluctuations, GAI can enable organizations to make data-driven decisions, optimize budgets, and identify opportunities for cost reduction
  • Supplier identification and qualification – Supplier identification can be a daunting task, with a myriad of variables to consider. GAI can swiftly scan through vast supplier databases, evaluating factors such as financial stability, performance history, regulatory compliance, and other important aspects for the organization. This not only expedites the supplier selection process but also enhances overall supply chain resiliency
  • Contract management – Manually managing contracts is prone to errors and inefficiencies. GAI can aid in drafting, reviewing, and updating contracts by extracting relevant clauses, identifying potential risks, and ensuring alignment with regulatory requirements. This level of automation can significantly reduce administrative overhead and enhance contract accuracy

Benefits of Generative AI in procurement

Integrating GAI into S2P activities can deliver many advantages that can reshape procurement operations. In the short term, GAI can provide immediate benefits by accelerating decision-making, reducing manual labor, and enhancing data-driven insights. Over the long term, GAI’s continuous learning capabilities enable it to refine its processes, adapt to evolving market dynamics, and become an indispensable partner in strategic procurement planning.

Almost all the procurement professionals surveyed stated that increased efficiency of procurement processes is seen as the major benefit of using GAI in procurement. GAI also is touted to play a key role in improving decision-making accuracy.

Source: Everest Group Quick poll on Generative AI in procurement
Source: Everest Group Quick poll on Generative AI in procurement

The survey found respondents believe GAI will deliver the following five key benefits:

  • Increased efficiency and time savings – Automating routine tasks with the help of GAI can free up procurement professionals’ time to focus on strategic activities, leading to faster cycle times and improved productivity
  • Improved accuracy in decision-making – GAI’s ability to analyze complex data and generate insights can help in making more accurate decisions, minimizing human biases and errors
  • Better risk management and compliance – Data analysis enabled by GAI can highlight potential risks posed by suppliers, enabling proactive risk mitigation strategies to be put in place and ensuring compliance with regulations
  • Cost reduction and savings – By helping procurement professionals optimize spending patterns and negotiate better contracts, GAI can contribute to significant cost reductions and overall savings for the organization
  • Enhanced supplier collaboration and relationship management – GAI can enable proactive scenario planning, data-driven insights into supplier behavior, and customized contract generation. It can streamline negotiations and nurture long-term partnerships

Challenges of using Generative AI in procurement

Despite its transformative potential, integrating GAI into procurement presents several challenges. Next, we explore the multifaceted issues that procurement professionals might encounter when harnessing GAI’s capabilities within the intricate procurement landscape.

Most survey participants viewed the difficulty of integrating GAI with the current procurement systems and processes as a major obstacle to adopting GAI in procurement operations. Data input quality and availability followed as the next major impediment. Furthermore, the precision and reliability of responses generated by GAI is a concern, suggesting this also could pose a substantial barrier to successful adoption in procurement.

Source: Everest Group Quick poll on Generative AI in procurement
Source: Everest Group Quick poll on Generative AI in procurement
  • Integration with existing systems and processes – Adapting GAI to fit seamlessly within an organization’s existing procurement systems and processes can be complex and requires significant technological integration
  • Data input quality and availability – The accuracy of GAI’s insights heavily depends on input data quality and quantity. Inaccurate or incomplete data can lead to unreliable outcomes
  • Accuracy of GAI responses – While GAI is highly advanced, it may still generate inaccurate or irrelevant responses, particularly when faced with complex and nuanced queries

Along with these challenges, navigating legal and regulatory frameworks, especially in industries with stringent compliance requirements, presents additional barriers to deploying GAI in procurement.

GAI’s potential in procurement is vast and transformative. By leveraging its capabilities across spend analytics, supplier management, contract optimization, and other S2P activities, organizations can reap numerous benefits. However, challenges about integration, data quality, accuracy, and regulatory compliance must be addressed for successful implementation.

As the procurement landscape evolves, its future lies at the intersection of the expertise of procurement professionals and effectively utilizing AI’s capabilities. Augmented procurement, where AI assists procurement professionals in decision-making, strikes a balance between harnessing AI’s efficiency and preserving human judgment, creativity, and intuition.

Everest Group will continue to follow the evolution in this space. To discuss the potential of Generative AI in procurement and S2P processes, please reach out to [email protected].

Adding Diverse Outsourcing Partners to Global Services Categories: Why Supplier Diversity Matters | Blog

Supplier diversity has become more than a compliance necessity as companies realize that intentionally including diverse outsourcing partners in their portfolios can improve business outcomes and positively impact society. Read on to learn about six benefits of supplier diversity that sourcing and procurement professionals should take advantage of.

Join our virtual roundtable to hear thought leaders and Everest Group experts explore the best practices that sourcing leaders follow to measure the impact of supplier diversity programs, report on key metrics, and align supplier diversity efforts with business goals, Supplier Diversity and Outsourced Services Spend: Advance Your Sourcing Strategy with Diverse Suppliers.

For many sourcing organizations, Environmental, Social, and Governance (ESG) considerations have become more visible criteria in selecting strategic suppliers. While supplier diversity programs have been in place for years, they have captured the spotlight recently due to rising societal awareness and investor and customer pressure. Businesses are supporting supplier diversity to advance their culture of workforce inclusivity, demonstrate social responsibility, improve brand image, and increase supply chain competitiveness.

US legislation defines supplier diversity as the practice of intentionally sourcing goods and services from businesses that are at least 51% owned and operated by individuals from traditionally underrepresented groups, such as women, people of color, veterans, LGBTQ+ individuals, and people with disabilities. Let’s explore the unique attributes a diverse supplier portfolio offers, which sourcing professionals should consider to ensure greater inclusivity and a stronger supplier base.

Six benefits of supplier diversity

Drives cost savings: By expanding the group of potential suppliers and encouraging competition, an inclusive procurement strategy can increase product quality while reducing costs. Additionally, inclusiveness can strengthen supply chains’ adaptability and resiliency by presenting more sourcing choices, providing a significant benefit in these turbulent times. Also, diverse service providers that are relatively smaller can potentially have lower overhead costs compared to their peers and reduced transportation costs due to their local presence, making them more agile in their offerings.

Enhances innovation: Including diverse suppliers in an outsourcing portfolio can enhance innovation by bringing in new perspectives and ideas. For example, GEP, a minority-owned US-based procurement consultancy firm, received the 100 CPO Forum Awards 2022 from the United Arab Emirates along with GIG Gulf, one of the largest insurance groups in the Middle East. The two teams were recognized for their collaborative efforts in standardizing and transforming source-to-contract processes and operations at GIG Gulf using GEP’s unified procurement tool GEP SMART, when they received this award in Best Technology Partnership – Best Use of Digital Technology category. The 100 CPO Forum Awards honor international businesses for their creative supply chain and procurement accomplishments that improve organizational adaptability, efficiency, and resilience.

Improves corporate social responsibility: Having a diverse supplier base demonstrates a company’s commitment to corporate social responsibility and can enhance its reputation. Many stakeholders are scrutinizing corporations’ diversity, equity, and inclusion results as they prioritize the good enterprises can do for the community. he supply chain, communities, and a company’s brand are strengthened when visibly working toward shared objectives of supplier diversity and CSR.

Meets customer expectations and generates market credibility: Customers are increasingly expecting companies to prioritize diversity and inclusion in their supply chain. Large companies such as Johnson & Johnson not only share how much money they spend annually in each diversity category, but they have also made supplier diversity a key component of their overall corporate mission. Among other initiatives, Toyota has a dedicated Facebook page for supplier diversity and distributes a quarterly newsletter about supplier diversity. These leaders have introduced a diverse range of suppliers as part of their businesses.

Generates employment opportunities for disadvantaged communities: The National Minority Supplier Diversity Council reports that certified minority business enterprises (MBEs) generate $400 billion in economic output, which has led to creating and preserving 2.2 million jobs and $49 billion in annual revenue for local, state, and federal tax authorities. And those numbers are steadily increasing.

Aligns with government policies: Including diverse suppliers can help companies meet government goals and requirements. According to a report by the Small Business Administration (SBA), companies that support supplier diversity are more likely to win government contracts, as federal, state, and local governments have established programs and goals to support minority-owned and women-owned businesses.

Why supplier diversity matters

Supplier diversity goes beyond meeting compliance requirements; it is a strategic imperative that offers tangible benefits. By intentionally including diverse suppliers in their outsourcing portfolio, companies can achieve multiple benefits. These include driving cost savings through increased competition and adaptability, enhancing innovation through new perspectives and ideas, and improving corporate social responsibility and reputation. Companies can also better meet customer expectations and generate market credibility, create employment opportunities for disadvantaged communities, and demonstrate their alignment with government policies.

Not only does supplier diversity reflect a company’s commitment to inclusivity, the practice also is a pathway to improved business outcomes and positive societal impact. As enterprises continue to prioritize ESG considerations, sourcing and procurement professionals should embrace diverse suppliers in outsourcing strategies.

To discuss supplier diversity further, contact Amy Fong, [email protected], Partner for Sourcing and Vendor Management.

Don’t miss the virtual roundtable as we uncover the key aspects of supplier diversity, Supplier Diversity and Outsourced Services Spend: Advance Your Sourcing Strategy with Diverse Suppliers.

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