Why on-demand AI-powered benchmarking is procurement’s next big advantage

AI - and machine learning-powered procurement benchmarking is poised to help purchasing leaders develop best-in-class…...

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AI – and machine learning-powered procurement benchmarking is poised to help purchasing leaders develop best-in-class procurement functions, generating major competitive advantage, a procurement executive explains. Writing in Future of Sourcing magazine, procurement consultancy CEO, Johan-Peter Teppala, details the advantages of digital over static benchmarking. The latter has been available for some time to help organisations gauge how they compare with the competition. While the finished static report is highly detailed, it involves time-consuming and often costly consultancy engagements, yielding only a snapshot of a moment in time, rendering it out of date by the time it’s finalised.

Enter, emerging digital technology – and on-demand benchmarking comes into being. The technology can process vast data pools and monitor multiple performance metrics and strategic sourcing opportunities in real time. As Teppala notes, it allows procurement pros to get on-demand insights into a raft of crucial metrics, from the outcomes of category management to peer benchmarks and financial performance. As a boon to good supply relationship management, the latter can measure supplier payment terms but can also reach into other crucial spend analytics, e.g., the number of suppliers taking 80% or more of spend, spend as a percentage of revenue, and spend per employee.

With on-demand benchmarking as ‘live’ and accurate as this, procurement leaders can set more intelligent and efficient targets, tweak their strategic sourcing strategies to yield better value and more savings, and enhance opportunity assessments.

Measuring procurement performance against industry peers, Teppala emphasises, is crucial for any high-performing business. But the real value of on-demand benchmarking comes next – acting on the insights yielded to enhance performance. Teppala writes: “The great thing about benchmarking is that procurement organizations can unveil value from insights about categories that previously may not have been considered. Organizations could go into the benchmarking process with certain metrics in mind but come out with insights about a different set of KPIs that could improve.” In short, this technology turns data into dollars.

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