Mohammed Kafil is a certified procurement consultant who has been coaching companies to establish resilient digital procurement operating models for over a decade now. With Kissflow Procurement Cloud, a flexible purchasing software that streamlines end-to-end procure-to-pay,purchase management system and also eventually the vendor management system, Kafil helps medium and large enterprises with their digital transformation projects. In the recent past, he has also worked with Fortune 500 companies to implement platforms like Coupa, Ariba, Ivalua, and BuyerQuest.
As the world is going digital at a fast pace, businesses are trying to keep up with the trends by implementing the latest technologies in their processes. These changes are now necessary for a business to operate in a highly competitive market.
Only those who are able to cut down costs, increase savings and cope up with the dynamic market needs efficiently can survive in the ever-changing landscape.
This is causing a shift in how tasks are carried out, particularly in procurement and finance, where processes are repetitive, time-consuming, and tedious.
In order to achieve the best results, the two departments must work together and align their goals. Organizations that allow departments to collaborate as partners gain a competitive advantage and frequently see improved business performance.
If we talk about connecting these two functions, procure-to-pay software, in particular, is in high demand as it provides the efficiency and cost control that every company needs in today's constrained economy.
What is P2P software?
The process of integrating purchasing and accounts payable systems to increase efficiencies is known as procure-to-pay. At its most basic level, this involves creating requisitions, placing orders, and then paying for the orders using invoices from the supplier.
Procure-to-pay software solutions can help you improve compliance and control among vendors, contracts, regulations, and accounts payable by digitizing your procurement process.
In addition, it can also help organizations manage their procurement processes and finances without the manual paperwork and spreadsheet headaches.
An automated P2P system reduces risk at every stage of the procurement lifecycle by eliminating unnecessary costs in manual procurement processes and increasing visibility, compliance, and sourcing velocity.
Both buyers and suppliers benefit from automation because it allows them to obtain real-time, accurate data in order to make informed decisions. In addition, removing manual tasks from the equation boosts processing efficiency.
An automated system provides end-to-end visibility between POs, invoices, and goods receipt notes to ensure that goods have been properly received before issuing payment. As a result, it guards against making cash-flow decisions based on incomplete information.
In a nutshell, P2P refers to a set of tools that businesses can use to manage spend in their organizations as far as payment transactions are concerned.
Why is it no longer in question?
With systems now depending more on technologies, procurement and finance processes are no longer an exception. A procure-to-pay software helps businesses manage their suppliers and transactions by streamlining approvals, requisitions, purchase orders, and invoicing.
A Deloitte survey revealed that 58% of CPOs aligned their digital strategies to their own goals and the overall business strategy. In comparison, 74% of top-performing organizations indicated that those who can align digital tools with business priorities would be the most successful.
Here is why adopting P2P software for your business is no longer an option:
1. Changing Business Goals Post Pandemic
The COVID-19 pandemic has forced businesses all over the world to strike a delicate balance between protecting their employees' health and continuing to operate.
Even as companies are managing the immediate challenges of dealing with the economy's phased reopening, decision-makers must consider what to do next and beyond the crisis — and how they can assist the company in preparing and pivoting for growth.
The impact of the global pandemic on supply chains continues to be one of the most reported and immediate consequences of the COVID-19 lockdown. From procuring critical goods to moving them from one place to another - one way or another, COVID-19 has disrupted the process.
Yet, ingenuity and resilience were required to resolve these short-term impacts to ensure that global supply chains functioned well enough to support communities and commerce.
This has resulted in significant changes in how suppliers are managed and the repurposing of existing management tools and practices to align with the new stresses and strains placed on people, businesses, and interconnected supply chains.
Businesses are now evaluating whether or not they have the necessary mechanisms in place to assess financial and operational risks and respond appropriately. One thing that became evident was that businesses need to be efficient while saving costs to cope with the posed challenges.
According to a recent Gartner report, more than 50% of organizations worldwide will have implemented a cloud-based procure-to-pay suite by 2025. As companies learn more about the benefits and cost-saving opportunities of using procurement software, cloud-based procurement tools are gaining traction.
With today's software solutions, it's possible to improve procurement management and gain cost-effective efficiencies by digitizing procure-to-pay processes. First of all, procurement automation software speeds up the procurement process by eliminating paperwork and mundane tasks, which usually require lots of resources and time. Previously, the processes were slowed down, waiting for the necessary approvals to move forward.
For example, without P2P software, procurement managers have to approve the requisitions from the upper management, match POs with invoices and again send it for approvals in order to release payments. This not only requires time but also demands the efforts of the multiple individuals involved in the procurement process.
With P2P software, approvals are made easier as the concerned individual receives automatic notifications and reminders to approve the documents digitally. This also saves businesses from paying fines on late payments and helps them maintain a good relationship with suppliers.
Not only that, but according to McKinsey & Company's research, procurement automation can save up to $70 million per year in profit leakage for a company spending $2 billion per year.
2. Remote/Hybrid Work Environment
Another drastic change that COVID-19 has brought on businesses is how they operate. Before the pandemic, everyone worked under one roof, making it easier to communicate and keep track of the assigned tasks.
However, now that most workers are working from their homes to limit the spread of disease, it has become difficult to ensure necessary checks and balances.
With the distributed workforce and remote work, most procurement departments rely on email and Excel spreadsheets. Unfortunately, despite the fact that Excel is excellent in theory and gets the job done, it actually hinders collaboration and isn't suitable for larger organizations or data sets.
Imagine sending a requisition email for approval then sending it to the procurement manager, who then has to look for suppliers and collaborate with the finance department as well. Multiple emails for a single task can become confusing.
Adding up to the problem, updating all this massive load of data in excel becomes hectic.
Sticking to a chair for hours in a distracting environment also disturbs the work-life balance. This irritates the people involved and leads to stress and burnout if the task is not accomplished on time.
Furthermore, hundreds of emails in the procurement manager's inbox for requisitions and payments make it difficult to track which one is legit and which one is not. This can increase maverick spending throughout the organization and cause businesses to spend unnecessarily.
By implementing a procurement automation system, businesses can get a consolidated view of actual expenses, making it easier to make data-driven decisions for new purchases. It also contributes to ongoing cost reduction by assisting in identifying gaps, such as consolidating suppliers that offer related products and services.
Procure-to-pay software also aids in the improvement and preservation of high-quality data. All the purchase requisitions can be made through the software and sorted on a priority basis, making it easier for managers to approve them.
Once it is approved, procurement managers can procure the required items through the vetted supplier base. This way, it provides businesses with a detailed account of previous purchases, contracts, order history, and supplier quotes.
With the finance function integrated into the software, wherever they may be, the finance team knows which payments are to be released before the due date. Ultimately, the P2P software saves money and streamline spend management and analysis processes.
3. E-invoice Mandate Introduced by Governments Across the Globe
In the past few years, governments have been implementing e-invoicing and real-time reporting to streamline tax payments and move away from manual processes.
Paper invoices that leave no trail to verify are now being discouraged throughout the globe. With increasing frauds and tax-related issues, governments worldwide are introducing mandates to promote e-invoicing in every organization. Apart from providing transparency, E-Invoicing helps in tracking every penny that a business spends.
When it comes to having an invoice management system, procurement teams are all too familiar with poorly managed purchase orders, missing good receipts, irresponsible spending, and submission delays.
They may also have to deal with complicated spreadsheets and a lack of transparency regarding spend culture. Managing invoices manually usually results in late payments and compliance issues, irritating vendors.
High invoice processing costs, duplicate payments, paying for goods that were never received, and the possibility of making late payments to vendors can cost businesses massive amounts of money.
Through P2P software, procurement managers can approve invoices that match the purchase order and goods receipt. This verification step helps businesses ensure that they are releasing payments as per the request generated by the team and the goods received.
E-Invoicing also helps calculate the withholding tax and the actual tax amount that the business is liable to pay. P2P software can also be easily integrated with other accounting and finance tools like QuickBooks that can be used to add more functionality and streamline the process.
4. Gen X Workforce Who Are Tech-First Generation
Gen X is the generation that saw their parents work extremely hard and for long periods, only to be unhappy and unsatisfied in the end. This drives Gen X to seek a healthy balance between work and life, ensuring that their financial, family, and personal needs are met.
They are the first generation to have access to computers at home and in school. In addition, they've grown up in a time of rapid technological and social change, so they're tech-savvy and adaptable.
They thrive on variety, challenge, responsibility, honesty, and the ability to contribute creatively. They are also more peer-oriented than previous generations that did not mind doing desk jobs.
Today's generation does not like sitting behind desks and doing tons of paperwork. They look for shortcuts using technology that helps them achieve more in less time. If they are supposed to do the highly repetitive tasks involved in procurement, they could be easily bored.
In order to motivate the coming generation, companies need to have software that not only makes business processes smooth but also makes the life of their employees exciting and fun.
Gen X now has more exposure to different eCommerce sites, enabling them to explore, buy and sell in a single click. As a result, maintaining heavy excel sheets is becoming obsolete. With procure-to-pay software, users can manage suppliers, requisitions, approvals, purchase orders, and invoices while providing the same user experience.
Gen X can concentrate on more productive and meaningful work by automating repetitive, low-value, labor-intensive tasks. A seamless and friendly interface can also aid in high user adoption rates among Gen X.
The rich user experience provided by good P2P software can ensure that the employee stays engaged and motivated to work. With the shorter attention span of Gen X, it is critical that they interact with systems that they love to use.
Let’s take an example of providing a typewriter to Gen X to draft documents. With them being used to editing and erasing documents in soft form on a computer, imagine their frustration when they had to discard the whole page just because of a slight mistake.
Likewise, if you give Gen X to file documents, fill out forms and make manual entries, they will be more likely to quit it. This can not only lead to additional hiring costs but will also lead to lack of creative human resources in the organizations.
5. Procurement is expected to play a strategic role than a transactional role
Procurement's transformation from a transactional to a strategic function is becoming more common in organizations and industries. As a result, procurement's profit-generating potential has now been recognized by top management.
Being an essential part of a business, procurement is expected to save costs to an organization and provide the businesses with a competitive edge in today's dynamic market. This requires carefully analyzing the data and devising strategies to leverage the existing supplier base.
But as the procurement to payment cycle involves hundreds of repetitive tasks that require a significant amount of time of multiple resources throughout the organization, most of the procurement teams are spending their valuable time and talent managing the tasks a software can efficiently perform.
This also means as your business grows, you will need to hire more resources to perform mundane and dull tasks. The traditional procurement practices are wasting the talent of the new hires and hindering their potential to perform creative tasks.
P2P software helps in processing data and removes human interaction from the process. This means workers can focus on more creative tasks and less time-consuming, robotic work.
With the help of automation, businesses can focus on strategic procurement decisions that involve monitoring the current trends, forecasting changes in external source markets, and setting priorities and business goals to become market leaders.
Moreover, procurement managers can leverage their analytical skills along with the insights provided by the software in identifying key suppliers that can support product design and contingency plans to develop new products.
Conclusion
Over the years, there has been a greater emphasis on improving the Procure-to-Pay process. CFOs and CPOs are always looking for ways to cut costs and increase savings through increased efficiency. Unfortunately, manual and paper-intensive P2P processes present a slew of issues, including inefficiency, a lack of spend management visibility, the inability to ensure contract compliance, and so on.
On the other hand, automation enables firms to understand their spending better, boost contract compliance, negotiate better pricing, and reduce ad hoc spending, to mention a few benefits. In today's environment, the requirement for P2P software is self-evident. It is no longer a question to consider P2P for the procurement function.
Supply chain managers at consumer goods manufacturing companies are tasked with meeting mandates from large retailers to implement item-level RFID. Initially these requirements applied primarily to apparel manufacturers and brands. Now, realizing the fruits of this first RFID wave, retailers are turning to suppliers to tag more merchandise.
This is one more priority for supply chain leaders, who suddenly have RFID added to their to-do list. How to integrate tagging into automated production lines? How to ensure each tag functions properly after goods are packed, shipped, and shelved? Where to position the RFID tag on the product? All are important questions to be answered in order to implement item-level RFID. The clock is ticking on retail mandates.
Different products, new RFID considerations
Hangtags, the primary form of apparel product identification, present a relatively easy way to attach an RFID tag. Pressure-sensitive labels likewise can carry an RFID inlay. The inlay, consisting of a microchip and antenna, holds the product’s unique identifying information. This tiny device is activated when the RFID reader passes by it. For nonapparel products, in many cases, there is no way to attach a hangtag. Therefore, a pressure-sensitive RFID label often must be put directly on the product. If the product is packaged in a box, the RFID carrier can be attached to or placed inside the box. Either way involves the use of just the right solutions, including the adhesive, shape, dimension, and placement. Moreover, there must be an efficient way to attach the labels to products. This requires process engineering and sometimes capital investment to integrate RFID labeling into highly automated manufacturing lines.
Metals, liquids, and low-surface-energy (LSE) materials pose hurdles for RFID item tagging. Tag and label inlays cannot be read properly through metals and liquids, and the pressure-sensitive labels do not always stick well to product surfaces containing silicone, vinyl, polyethylene, and polystyrene. Very small items are also difficult to tag. Metal paint cans, caulk or paste tubes, lipsticks, and reusable water bottles are just a few products that present RFID tagging challenges.
In other cases, it is not so much the product itself that hinders readability but rather the shipping method. For example, it is relatively straightforward to apply an RFID tag or label to a bag of fertilizer. But the fertilizer bags might be stacked 60 deep on a pallet. The pressure is too much. It damages the inlay, killing the tag’s readability. So, RFID tags, which were perfectly fine coming off the production line, are now dead from the stacking pressure.
Solutions and testing
RFID tagging and labeling programs take time to get right. While some manufacturers can set up a successful process in a few weeks or months, for others it can take six months, nine months, a year or longer. Variables influencing implementation time include capital equipment investments, the product types (for example, are the materials, shapes, or surfaces potentially problematic?), label supplier capacity and capabilities, and third-party testing rounds.
The good news is that best practices are being refined every day to incorporate RFID on difficult-to-tag products. A case in point is finding answers to RFID-inlay readability issues on metal or liquid products. There are ways to attach an RFID label to the product’s lid or cap.
The University of Auburn RFID Lab is the de facto U.S. authority on all things retail RFID. Through its ARC program, the lab works with end users to make sure RFID tags meet or exceed their required performance and quality levels. Walmart, for example, requires its suppliers to source from Auburn RFID Lab’s ARC program-approved inlay companies. “ARC is a test system and database that stores comprehensive performance data of in-development and market available RFID tags,” according to the lab’s website. “ARC has been working with end users to translate RFID use cases into specific levels of performance in the ARC test environment.”
High-quality RFID tags and labels are at the heart of it all. The following are some considerations to keep in mind when choosing an RFID tag and label provider:
What are their quality control and testing capabilities? Can they confirm that every tag is readable? Do they have software to verify that UPC and RFID information match up? Do they possess familiarity with Auburn’s RFID Lab approval process?
What is their capacity? How many thousands or millions of inlays do they create per day? Are there minimum order quantities?
What are their order management and shipping processes like? What is their delivery speed? How easy are they to order from? Where are their print facilities located?
Do they offer customization? Do they possess specialized equipment? Can they die cut irregular shapes, including very small dimensions? Do they possess adhesive expertise and application equipment? Do they have solutions for metal, liquid, and other difficult-to-tag items? Are they able to configure label rolls to work on automatic label dispensers?
It takes trial and error to implement RFID item tagging for nonapparel products. Effective, compliant programs do not manifest overnight. Collaboration with experienced label providers and the Auburn RFID Lab will help manufacturers overcome even the most complex RFID tagging challenges. There will be a roadmap to success, and the results in the form of better inventory visibility, swifter sell-through, and stronger sales will be well worth it.
Forklift batteries power the fleets at the center of facility operations. If your batteries are well-maintained, your team is empowered to drive efficient, sustainable, and productive operations. Given your forklift battery can also be as much as 30% of your forklift’s total cost, taking care of it is crucial not just for its longevity and efficiency, but in creating a safe, productive, and cost-effective facility. Improper battery care can create a financial strain on your company along with plenty of safety hazards.
Pulling from decades of experience helping some of the largest and busiest facilities across the country with their power management challenges, I’m sharing the most common mistakes that can shorten your forklift battery’s life by up to 60% or one to three years.
Most common forklift power system design mistakes
Four of the most common mistakes are associated with how a company designs its forklift power system, which includes not just the battery but also chargers and changers.
Not considering your batteries as part of a power system. Your system design should be based on more than just the forklift’s battery specification. The best power systems are built after an assessment of your facility’s applications and workflows, such as when and how batteries are watered. To drive higher uptimes and longer battery life, companies need to optimizing not just for everything they do today but also consider their future plans.
Using the wrong charger. Many companies, trying to save a little money, switch to new batteries but use old, mismatched chargers. For example, they change their batteries every five years, but only buy new chargers every 10-20 years. While the battery technology has improved, the charger (the intelligence) hasn’t, and that means they may not be getting the most out of their new battery equipment as far as charge profiles and efficiency. This shortens battery life, drives up power bills, and in the long term, ends up being more expensive than simply buying new chargers.
Having malfunctioning chargers. Chargers are designed to provide power to batteries up until 100% capacity. When a new model of charger is unable to provide full power, it is often due to malfunctioning power modules or communications issues between battery modules and the charger itself. Additionally, older style high frequency (HF), silicon controlled rectifier (SCR), and Ferro chargers may experience output capacity drop off due to malfunctioning fuses, diodes, SCRs, insulated-gate bipolar transistors (IGBTs), and capacitors. If left unchecked, the reduced output of these chargers will cause batteries to sulfate and ultimately fail.
Not planning a charging standard operating procedure (SOP) in advance. Most companies charge when it’s best for the operator, but it’s important to set up a charging schedule that also takes into account the needs of your facility and your batteries. A schedule that accommodates both the operator’s and the battery’s needs will lengthen lifespan tremendously. This requires regular monitoring to ensure compliance with the charging SOP. If this is not maintained, batteries will often fail due to the lack of consistent charging.
Most common forklift power maintenance mistakes
The remaining common mistakes focus on how a company maintains its batteries and chargers.
Not implementing an equalization schedule. Lead acid batteries require an equalization charge on a regular basis to maintain their long-term health and capacity. Build a plan for equalization into your battery charger plug-up times, then set those schedules into your chargers.
Not watering correctly. Batteries need to be watered on a schedule. Ideally, batteries are watered right after charging to avoid electrolyte overflow issues, chemical spills, and degradation. Proper water levels ensure electrolytes stay in balance and batteries don’t overheat. These expensive mistakes add up over time.
Having a malfunctioning single-point watering system. Single-point watering systems are employed for labor savings in the weekly watering of batteries. While useful, these systems are subject to failure due to abuse and just normal wear and tear. Oftentimes, these systems will fail at individual watering points and are not noticeably malfunctioning. This will lead to unequal watering and ultimately a series of battery failure points over time. This too must be regularly monitored for proper function.
Not responding swiftly to maintenance issues. It’s important to set up a maintenance schedule so you can ensure every battery and charger gets attention when it should. Early identification of issues, paired with course correction, can nip issues in the bud, greatly extending the life of your equipment.
Your forklift batteries are the preservers of power at your facility. If properly cared for, they power smooth and reliable operations that keep downtime at bay. The unexpected can and will happen every single year—that’s just a part of business. But the expected, that is something we can prepare for. Companies that take a proactive approach to their power and their facility’s unique power are poised to take on any challenge with an uninterrupted power supply.
More than ever before, supply chain businesses are faced with dynamic conditions due to consumer buying trends, supply chain disruptions, and upheaval caused by other outside forces including war, political instability, and weather conditions. Supply chain companies, including warehouses, must be able to pivot quickly and make changes to operational processes without waiting for weeks or months.
As a result, warehouse management systems (WMS) need to be agile enough to make changes to operational processes and turn on a dime in today’s fast-paced world. Traditional warehouse management systems, however, are rigid and complex, not easy to customize or change. In addition, integrations—especially to modern technologies such as the internet of things (IoT), artificial intelligence (AI), and machine learning—can be problematic.
Furthermore, traditional warehouse management systems depend on the expertise, experience, and knowledge of software developers to hand code applications. This type of technical labor is costly and can be hard to find, leading to dependence on the WMS software developer. Whenever changes or customizations to traditional WMS are needed, experienced software developers are needed, and this effort is usually time-consuming and expensive.
One solution is to consider a warehouse management system built on a low-code application platform (LCAP). Unlike traditional warehouse management systems, software applications built on LCAPs are more flexible, adaptable to meet changing business requirements, easier to integrate, and scalable.
[subhead] What are low-code application platforms?
LCAPs give users a visual, drag-and-drop interface that allows them to create applications by assembling prebuilt components, integrations, and templates. This simplification of the software development process facilitates faster prototyping, iteration, and deployment.
It also enables application development to be open to nontechnical users who may have significant experience, knowledge, and expertise in warehouse operations. Nontechnical users can work alongside IT resources to automate workflows, create business rules, process flows, and data models. To do this, visual tools are used to replace the need for writing complex code. Event-driven triggers and actions are leveraged to automate repetitive tasks and integrate with other systems. This can lead to better alignment of operational processes within the warehouse.
Low-code application platforms may also include features to promote team collaboration. Multiple users can work on the same project simultaneously, and version control mechanisms help to ensure that changes can be tracked and managed efficiently. In case it becomes necessary, rollback can be used to return to previous versions.
Low-code application platforms include tools for deployment, hosting, and maintenance. Applications can be deployed by users to a variety of environments with only minimal configuration. Maintenance and updates can be handled within the platform, and automated testing and deployment pipelines are frequently used.
Seven benefits of LCAPs
There are many benefits to using an LCAP as opposed to a traditionally coded warehouse management system, including:
1. Adaptability and ability to customize. LCAPs provide significant value for a WMS due to the speed at which applications, features, and customizations can be developed and deployed. This can help to ensure higher customer satisfaction and the ability to adapt more rapidly to supply chain disruptions, changes in demand, and advances in technology.
LCAPs help solve the challenges faced by a rigid traditional WMS by making the WMS faster and easier to tailor to meet customer or business requirements without high-priced IT resources. This can translate into time and labor savings for the warehouse operator.
2. Integration. Atraditional WMS often does not have the capability of integrating with cloud-based services, limiting the ability for it to take advantage of the cost benefits, flexibility, and scalability of cloud computing. In addition, it is often challenging for traditional warehouse management systems to integrate with automation technologies including robotics, autonomous guided vehicles (AGVs), conveyor systems, and other technologies.
Because LCAPs leverage built-in connectors as well as application programming interfaces (APIs) that facilitate integration with other systems, integration is seamless, ensuring a more efficient, cohesive ecosystem. This ease of integration can aid in unifying data across different systems to improve decision-making and information visibility.
3. Scalability. As a business grows, warehouse operations typically become more complex. This complexity typically leads to the need to handle increased volumes of data and more complicated workflows as well as expanded warehouse operations. This can present challenges for traditional warehouse management systems.
Low-code application platforms are able to scale more easily to handle increased volumes of data, more operational complexity, and additional functionality without a complete overhaul of the WMS. It is faster and easier to make quick adjustments on a WMS built on an LCAP. The system can easily scale up or down to handle new business requirements, changes in demand, and much more.
4. Security. Older warehouse management systems may lack the advanced security features required to protect sensitive data from cyber-attacks. Modern low-code application platforms typically include robust security measures to ensure that data is protected.
5. Up-to-date user interface and user experience. The outdated user interfaces commonly found with many older warehouse management systems can hamper productivity and lead to errors. WMS users need to have a streamlined user interface, designed to focus their attention on operations, without distractions.
Using a WMS built on an LCAP can improve the user experience and boost productivity. This is because LCAPs often feature intuitive, user-friendly interfaces that enhance the overall user experience. This makes it easier for warehouse workers to navigate the software, reducing errors and frustration.
6. Real time visibility. Older warehouse management systems may not be able to provide visibility into warehouse operations, inventory levels, and order status in real time. This can reduce the responsiveness to customer and market demands and delay decision-making.
One advantage of using a WMS built on an LCAP is that it can be integrated to IoT devices and sensors. This will enable the capture of real-time data on inventory levels, environmental conditions within the warehouse, equipment status, and more.
7. Data management. Today, with the popularity of online shopping, a WMS needs to be able to handle a high volume of orders with many individual items per order. A traditional WMS, which is designed to handle goods by the case or pallet, rather than by the individual saleable unit, may have performance issues, such as with data lock up or data retrieval, when handling large volumes of data.
Using a WMS built on an LCAP can facilitate the integration of multiple data sources into one unified platform, improving data accuracy and consistency. All data is available in one place. In addition, there are built-in tools for data validation, cleansing, and governance. This helps to ensure high data quality, essential for reliable real-time data visibility.
Transformative potential
Technology continues to advance. Software development continues to evolve. By taking advantage of low-code application platforms to simplify the software development process, supply chain professionals can ensure that they are able to keep up with these changes.
LCAPs enable rapid development, customization, and deployment of software applications, enabling businesses to respond to changing market conditions and technological advances. The result is notable cost and time savings, increased efficiency, and more effective operations. Using LCAPs, companies can take advantage of increased flexibility, scalability, and adaptability to be more competitive, drive operational excellence, and support growth.
Gartner recently published a report discussing the big changes being wrought by artificial intelligence (AI) for procurement. The analysis begins with some intriguing data points:
By 2026, virtual assistants and chatbots will be used by 20% of organizations to handle internal and supplier interactions, and by 2027, 50% of organizations will support supplier contract negotiations with AI-enabled tools.
Data literacy and technology skills will be equally as important as social and creative skills (that is “soft skills”) for procurement staff.
By 2027, 40% of sourcing events will be executed by nonprocurement staff.
By 2029, 80% of human decisions will be augmented—not replaced—by generative AI (GenAI), as humans will maintain their comparative advantages in ingenuity, creativity, and knowledge.
One of the reasons for the forecasted rapid adoption of AI is that the technology seems to respond to a key pressure point on procurement as a function: the lack of staff or staff with the right skills and experience. Staffing concerns are driving procurement organizations to increasingly lean on digital technologies, especially AI and automation, to help. Let’s explore Gartner's argument.
Substantial increase in interest
Thanks to the advancements in the technology skills of procurement professionals and decision support software, there has been a remarkable 17-fold increase in interest in AI applications for procurement in 2023 compared to 2022. Gartner's team anticipates a substantial surge in AI pilot initiatives in 2024. It also sees this as a trend expected to establish widespread acceptance and utilization of AI in procurement in the years ahead.
In particular, the application of GenAI is expected to expand throughout the entire procurement process—presenting opportunities to enhance both the speed and efficiency of operations within the department. For example, autonomous sourcing solutions driven by AI are progressively becoming more adept at handling responsibilities and decision-making that traditionally demanded the expertise of seasoned sourcing professionals.
This expansion enables organizations to streamline sourcing events effectively, transforming them into a more accessible process. Consequently, individuals outside the professional sourcing realm, such as those in the line of business, can now define requirements, pinpoint supplier sources, and initiate and manage sourcing events. In essence, sourcing is evolving into a skill rather than merely a function.
As outlined by Gartner, failing to adopt AI technologies in procurement may place organizations at a significant competitive disadvantage in terms of cost efficiency and agility compared to their peers. To avoid falling behind, the analyst firm is advising procurement leaders to wholeheartedly embrace transformative technologies that will promote and cultivate collaborative relationships with suppliers.
Making AI your servant, not your master
To be clear, procurement professionals will remain pivotal decision-makers. While human decisions will be enhanced by GenAI, humans will continue to make a vital contribution via their knowledge, creativity, and insight.
The unique contribution of GenAI is its ability to generate fresh content, complete missing information, and formulate sample outcomes or scenarios. This capability will play a supporting role in strategic decision-making, augmenting the human decision-making process. Procurement organizations, for example, will want to use virtual agents to automate repetitive tasks, such as purchase request (PR) approvals, internal and external communication, and supplier approvals, enabling human teams to focus on other areas.
To make this work, procurement staff will need to adapt as technology changes the nature of their work, and companies will need to make attracting top talent a priority. Certain skills will be at a premium as AI becomes more prevalent in everyday operations.
This “future-proofing” of skills needs to occur along two axes. One axis is technical. The cornerstone of all AI models is high-quality data and that means organizations need to foster proficiency in data literacy. The ability to identify pivotal data elements influencing decision-making becomes paramount in unleashing the complete potential of technology investments. This ensures that AI incorporates the most relevant data for its intended purposes.
However, the human element will also remain crucial, and this is the second axis. The creativity of procurement staff will be even more highly valued than it is today, given that AI's limitations lie in comprehending problems lacking sufficient data or precedent. Here, skills such as critical thinking will be essential. It will also be important to make connections with internal and external stakeholders. As a result, the ability to make effective presentations and secure stakeholder engagement are also expected to be in high demand. Companies need to think long-term when it comes to professional development and prepare for a future when these capabilities will be essential.
As another analyst firm, McKinsey, has said, it’s the procurement leaders capable of demonstrating quantifiable and long-term value to the enterprise who will become strategic partners to the C-suite.
Moving the needle in procurement
While these predictions are close at hand, they can sound future tense. Yet leading global companies, like adidas, BT, Tesco, and Santander Bank, are already using AI to maximize returns on billions of dollars of spend via autonomous sourcing.
For example, telecommunications company BT is using an autonomous sourcing platform to manage two-thirds of the organization’s £13 billion annual indirect spend—a percentage that BT wants to increase over time to 100%. Buyers have so far put more than 1,000 projects through the platform, automating admin-heavy tasks and cutting go-to-market time for project delivery that made a difference in overall performance. The platform supports various sourcing scenarios, including requests for proposal (RFP), requests for information (RFI), requests for quote (RFQ), sole source, delivery of staffing, supplier panels, and more. It also enables the creation and customization of requirements and the collection of supplier responses in different formats. Consequently, BT reports that autonomous sourcing allows nonprocurement team members to effortlessly initiate a request “with one sentence.”
Clearly, procurement leaders should make plans now to leverage the full power of procurement AI and GenAI. As Gartner recommends, organizations need to start by:
Building a roadmap that shows the technologies organizations need in key areas such as collaboration, negotiation, and sourcing;
Exploring which types of work can be commoditized; and
Looking very carefully at AI procurement vendor offerings—including their research and development (R&D) spend and focus.
But whatever you do, don't delay. CPOs need to start working with CFOs to introduce AI-powered sourcing quickly and secure the results the organization needs to meet the challenges of an uncertain global economy.
Why? Because this AI future is here today. As committed autonomous sourcing user BT has said, “We’re not thinking about if GenAI could help us. Instead, we’re doing it—and across billions of pounds of spend.”
In a male-dominated industry like supply chain technology, there is a growing opportunity for women to lean in and contribute their unique skills and perspectives. Research consistently demonstrates that diverse teams outperform less diverse ones, emphasizing the importance of inclusivity and gender diversity within the industry.
According to research by McKinsey & Company, companies with more than 30% female executives are more likely to outperform companies with only 10% to 30% of women leaders. The study also found more gender-diverse companies outperform the rest by 48%.
In light of this research, every supply chain company should take a moment to examine how to better diversify its leadership team and enable women to advance in the industry.
Strengthen the university-to-supply-chain pipeline
With no end in sight to the supply chain talent crunch, this protracted crisis presents an opportunity for more women to jump into the supply chain field. At Optilogic, we have found working with universities with supply chain management programs a great way to encourage budding female practitioners as well as create a future talent pipeline.
We connect with local University of Michigan students to teach them about supply chain design and get them involved in hands-on testing, training, and networking events. I am also working on a joint initiative with the female leader at the University of Michigan Ross Master of Supply Chain Management program on a STEM panel for women in supply chain.
Promote clarity and dispel bias about supply chain careers
Even in 2024 misconceptions and biases exist about supply chain roles for women. Women may perceive supply chain roles as being not well suited for females, especially some front-line roles in logistics and warehousing where women are underrepresented in traditionally male-dominated roles. Conscious or unconscious bias may exist with hiring managers as well.
Employers can also consider improvements to supply chain roles to make them more flexible and family-friendly. For women in the workforce, especially those with children, benefits like flexible hours and roles that allow them to balance work and other responsibilities can help address real barriers to entry.
Practical ways you can support women in supply chain today
Below are three ways the industry can help support female leaders.
Create a personal “board of directors.” Support female executives in the supply chain industry to move ahead in their careers by enabling them to cultivate a personal board of directors. This may consist of a few individuals who can offer advice, mentorship, support, and diverse viewpoints. These mentors can be both men and women who are inside or outside of the industry and can create a well-rounded network for personal and professional growth.
Join a women leaders platform. Organizations, platforms and groups designed to provide networking opportunities, mentorship, and skill-building resources are another great opportunity for female executives in the supply chain industry. For example, the Optilogic Women Leaders platform empowers the next generation of female leaders to thrive, leading to a more diverse and fair work environment.
Pass it forward. Female executives in the supply chain industry can also advance the cause by sharing their experiences with other professionals and supporting educational programs that promote women leaders. They can also attract young women to the supply chain industry by promoting their successes and encouraging them to pursue careers in the industry. Another simple yet effective way to support other women is to stand up for one another in meetings, give each other the floor, and promote others to encourage high potential female leaders.
It’s important for everyone in the supply chain industry to support women who are ready to rise in the ranks through the recruitment and development of female executives. Doing so will help ensure companies remain competitive by harnessing the power of gender-diverse teams.