Imagine being on the world’s longest roller coaster. You started in 2020 and now it has been over a year since, but it is still going on. This is the case not just for individuals, but also for corporates. More specifically, the procurement departments have been taking a lot of heat to deliver something more. Savings, as we all understand, is one of the primary KPIs for the procurement department in any organization. But the corporates of today want more than just monetary savings. They want to realize value beyond savings.
Before we deep-dive, we need to understand what is value? There are several definitions to what value is. Here are some of them commonly found and perceived –
“Value, as we believe, should be something which goes beyond the traditional cost reduction or cost savings, towards realistic, tangible outcomes.”
“Value in business markets is the worth in monetary terms of the technical, economic, service, and social benefits a customer company receives in exchange for the price it pays for a market offering.”
“Value is the monetary, material, or assessed worth of an asset, good, or service.”
While all these are definitely true, we are trying to understand what is value beyond savings? Especially in the procurement and supply chain domain. Everyone seems to be talking about it, but we are unsure if everyone is really on the same page. So here is how we have tried to define it, or rather outline it:
Embracing innovation and boosting strategy decisions
Procurement as a function, has never been at the forefront of strategy and planning. They have always been at the farther end of the spectrum, performing all the operational tasks at hand. But with innovation and technology, procurement can now contribute much more than they could. Innovation in the procurement processes, right from taping into granular-level transactional insights to guided buying, procurement is adapting newer technologies and is changing drastically. If procurement functions get a seat at the table from the onset while building strategies, they will be able to make the right impact with the right stakeholders and at the right time.
Partnering with Suppliers to discover new approaches to business issues
Procurement as a function, sits at a position, where it has a huge access to suppliers. These suppliers are experts in their varied domains, and access to their expertise can be valuable. Procurement functions have the ability to identify and understand newer approaches that the organization can take to tackle certain business issues. From looking at different delivery methods to identifying new raw materials, exploring different kinds of packaging and so on, is the kind of value that procurement departments can help the organization with. Finding the right suppliers and collaborating with them is just one side of the coin. Organizations would have to do several other things, like embedding a culture that supports and promotes supplier-friendly processes or articulating tangible benefits to the suppliers, which makes the suppliers delighted. Eventually, this will create value that can help enhance revenue for the organization.
Improving Convenience and creating a win-win situation for all
In today’s age, convenience is crucial. Just to draw an analogy, global cabs aggregator and food aggregator brands, all have a model that promotes convenience to the customers as well as those enabling them. Customers can choose from their preferred or convenient services, while the service suppliers can select whether to opt-in for it or not. Hence, convenience is being looked at as a thing that is highly valued by all. It is the same in the case of organizations. Organizations and procurement functions seek to bring out results that benefits all the parties, the organization as well as the suppliers.
Time is money
As we all say, time is money, and in case of enterprises, it is a lot of money. Its value is higher than any other value, even beyond savings. According to BCG, new digital solutions can reduce the end-to-end time for this process by as much as 80% for simple items like office supplies and 40% for complex items like capital projects. These improvements can in-turn boost savings on spends by 1% to 3% and relieve procurement professionals from labor intensive activities. The speed with which procurement functions deliver insights, proves vital in achieving a competitive advantage. If companies want to stay ahead in the game, it is important that processes are sped up without hampering the quality.
While building value beyond savings is much needed, it is also essential to identify the right ways through which this can be achieved. Artificial Intelligence and Machine Learning play an important role in achieving that. ignio Cognitive Procurement, is one such solution which uses AI/ML techniques to help an organization identify opportunities to save money as well as build value that will eventually improve the overall effectiveness of procurement. It is a closed-loop solution that provides organizations the ability to Explore, Monitor and Intercept transactions to take corrective and preventive actions.
Thus, ignio Cognitive Procurement is the solution which will help in building value beyond savings. Check it out!