Four Cs of Procurement – How AI is impacting each
In our previous blog, we looked at Four Cs of Procurement. Something that procurement stands for and the journey it takes to go from simple cost management entity to something more integral and value add function.
In the age of AI, we are going to look at how this journey can be enhanced or accelerated.
1. Cost: The Foundational Pillar
While traditional cost management involved identifying opportunity using manual categorization, spend analytics and then strategic sourcing. The AI angle can bring in the below difference
- Category management can now be more widely done and not reserved only for some categories. Because AI can now pull in relevant information from the sources even though they are unstructured and put this in perspective for the category managers. Allowing for easy decision making with category in context.
- Strategic sourcing now can be enhanced with negotiation tactics supported by AI which can bring quantitative, qualitative and phycological aspects into play.
- Spend analytics can be more real time, sometimes even on bad data. Note, if your data is too bad, then you are out of luck.
- AI can help identify all possibilities of cost reduction including contract clause negotiation, payment terms etc. allowing us to effectively manage TCO.
2. Compliance: Navigating Regulations and Standards
Ensuing procurement compliance is not a heavy lift any more. AI will do the heavy lift for you. AI can do things like
- Ensuring suppliers you use are not in any sanction list
- Ensuring contracts have the right clause.
- Ensuring users are not buying outside the contract
- Ensuring users are not adhering to procurement policies and more
AI can do all these by understanding the procurement policy and general guidance and acting on each purchase, contract activities.
3. Catalog: Providing Easy Buying Options
We said, Catalog in this context is about providing ability of buying a wide range of goods or services as much out of the box as possible. AI can help with this by
- Flagging items for Catalogs based on historical purchases.
- Looking at historical data to understand what can be catalogued
- Turning contracts into Catalogs
- Creating preferred supplier list for future purchases etc.
4. Convenience: Enhancing User Experience
Convenience can be for both end users and also procurement users. This involves a lot of automation and some amount of contextual guidance to
| For Procurement | For End-users |
|---|---|
| Auto-sourcing | Auto-ordering |
| Policy implementation | Policy guidance |
| Data management (classification) | Auto GR entry |
| Risk management using real-time use | |
| Real-time analytics |
The Future of Procurement: Integration and Innovation
The evolution of procurement is characterized by an increasing integration of advanced technologies and strategic thinking. As organizations face volatile markets and complex supply chains, procurement must become more agile and resilient. Key trends shaping the future of procurement include:
- Predictive Analytics and AI: Leveraging data to anticipate market changes and optimize procurement strategies.
- Sustainability and ESG: Integrating sustainability into procurement decisions to meet regulatory requirements and corporate social responsibility goals.
- Supplier Collaboration: Developing deeper partnerships with suppliers to drive innovation and value creation.
- Automation and Digitalization: Embracing digital tools to streamline processes and enhance efficiency.
Conclusion:
The Four Cs of procurement—Cost, Compliance, Catalog, and Convenience—are critical dimensions that guide the maturity and effectiveness of procurement functions. As organizations navigate the complexities of the modern business landscape, a strategic approach to procurement that leverages advanced technologies and focuses on holistic value creation will be essential.
By evolving from a cost-centric model to one that integrates compliance, easy buying options, and convenience, procurement can significantly contribute to the overall success and resilience of an organization.
In summary, the maturation of procurement involves a shift from simple cost-saving measures to a comprehensive strategy that balances cost efficiency with compliance, optimized catalog management through easy buying options, and user convenience. This holistic approach not only enhances procurement performance but also supports broader organizational goals in today’s dynamic and challenging environment.
