SUNNYVALE, Calif.–(BUSINESS WIRE)–LevaData, the company that delivers applied AI to transform strategic
sourcing and procurement, today released the results of its 2018
Cognitive Sourcing Survey on data-driven procurement capabilities by
medium to large manufacturing firms, including those in high tech,
consumer goods, industrial equipment, automotive, and life sciences
industries.
The survey addressed the concerns of senior executives who oversee over
$420 billion in annual direct material spending. Almost all of the
respondents, 87 percent, believe that a data-driven procurement process
is vital to achieving long-term value, cost reductions, and efficiency
gains. This year’s survey showed that an increased number of
manufacturing executives are making steady progress towards digital
transformation — and the ones that aren’t are falling further behind.
“People know that digital disruption in the supply chain is already
underway. Given this, we were greatly surprised to learn how many
procurement managers are still using outmoded management tools,”
explained Rajesh Kalidindi, founder and CEO of LevaData. “A world-class
sourcing and procurement organization could examine at least 1.5 million
data points affecting the supply chain, which is more data than any
individual could possibly digest and respond to strategically. As more
companies implement AI-powered strategic sourcing technologies, those
that don’t will find themselves at a crippling disadvantage.”
A Significant — and Widening — Performance Gap
The LevaData survey documents key metrics of best-in-class versus
average performers, according to supply chain executives. They include:
Strategic Control Across Supply Base: average organizations
engage in competitive bids with just 40% of their suppliers at least
once a year. Best in class organizations actively cover over 85% of
their supply base at least once annually.
Cycle Time for Request for Quote (RFQ): 3-4 days versus 31 days.
-
Total cycle time for a best-in-class organization is 3-4 days: 2 days
for preparation, 1 day for negotiation and 1 day to award the business. -
Total cycle time for an average organization requires 31 days total to
complete, with 14 days devoted to preparation, 7 devoted to
negotiation and 10 days to award the business.
Sourcing Event Frequency: Ongoing, regular discussions on a
quarterly or more frequent basis versus once-a-year events.
-
Best-in-class procurement managers engage with their suppliers on a
constant basis (6 percent), with average performers still following
discrete sourcing events with a subset of their suppliers on a
quarterly basis (13 percent), annually (31 percent) or only reactively
(51 percent) on an ad-hoc basis. -
Best-in-class organizations engage in competitive bids with 80 percent
of their suppliers annually, while “average” organizations engage with
just 40 percent.
Management Tools for Strategic Sourcing: Best-in-class
procurement organizations use integrated market intelligence systems
that provide a consolidated view of the market versus siloed business
intelligence tools or information from direct supplier relationships.
-
8 percent — up from 5 percent last year — of survey participants are
using third-party, purpose-built technology solutions. -
58 percent are now leveraging some form of AI-enabled risk detection,
which represents a significant adoption of AI. -
But 64 percent — down from 67 percent last year — are still using
internal business intelligence solutions or Excel spreadsheets which
primarily aggregate information from multiple internal, enterprise
systems, with limited tracking of market intelligence. -
Fewer than 10 percent of companies surveyed were using four or more
sources of insight.
Cross-Functional Collaboration: Best in class procurement
organizations engage in cross-functional collaborative decision making
across supply chain, finance, engineering, and external manufacturing
organizations.
-
62% of companies surveyed believe that it is important to have a New
Product Introduction (NPI) system that tracks risks and opportunities
during development and connects to sustaining cost systems and
processes.
In reviewing these trends, Donald Farmer, a renowned data scientist and
principal at Treehive Strategy, said his key takeaway was that “the real
gap, and the real opportunity here, is to enroll more sources of insight
from outside the organization, integrating them with historical data and
internal insights, and then applying them to new and developing
negotiation strategies. Organizations now have access to a much wider
scope of information that is potentially relevant to sourcing decisions
they make.”
Request a copy of the ebook summarizing the survey findings here.
About LevaData
LevaData helps global enterprises improve gross margins by reducing
supply chain costs, with a focus on delivering measurable and
accountable supply chain solutions and strategies that transform
companies. The unique LevaData Cognitive Sourcing™ Platform allows
customers to sense, recommend, act, and learn. Customers include leaders
in the top global supply chain organizations, as well as medium-sized
OEMs seeking to achieve best-in-class direct materials sourcing
practices. LevaData is headquartered in Sunnyvale, California. For more
information, visit www.levadata.com.
