The adoption of AI in the procurement industry has opened a gap between those who hopped on the trend early and those who stayed behind to watch and wait. Our Cognitive Sourcing Survey 2018 revealed that the shift towards data-driven, computer-assisted negotiation and decision making is well underway in the procurement industry. Increasingly, the only way ahead for companies to get ahead of their competitors and succeed is to undergo a digital transformation.

According to the survey, 85% of senior executives involved in direct material spend agree that a data-driven procurement strategy is crucial if companies wish to keep pace with the competition. There is a competitiveness gap developing between organizations taking action now and those being left behind

The Advent of a Widespread Digital Transformation

Technological advancement has transformed our experiences on both personal and professional fronts. Numerous businesses and industries have undergone extensive transformations owing to technological developments. But, the technological developments that have revolutionized fields like engineering, finance and marketing, have been slower to reach supply chain management and procurement. In the instance of direct material sourcing, these developments have been particularly delayed.

However, based on the indications from the study, technological advancement in the sourcing industry is imminent or underway for the more progressive, far-sighted organizations. According to 75% of the respondents, a supply chain transformation program is already underway in their organization. These supply chain transformation programs are likely to become formalized initiatives in their third or fourth year of maturity. Additionally, another 7% shared that they had a transformation plan in development. These formal programs contrast with our findings around procurement initiatives, most of which are in their infancy and are focused on automation over transformation.

Considering that digital transformation is unavoidable (a belief held by 85% of the executives surveyed), those delaying action might be digging themselves a hole they won’t soon get out of. “Digital Darwinism is unkind to those who wait,” said R “Ray” Wang, Principal Analyst and Founder, Constellation Research Inc. and we couldn’t agree more.

The Perils of Being Left Behind

Even though executives accept that digital transformation is a trend that they must latch on to, defining and formalizing a transformation initiative at the executive level is not without its challenges. While they are trying to improve their smaller day-to-day processes, they aren’t undertaking the transformational change necessary to keep pace with their competitors, leaving them in a precarious position.

The most common sentiment shared by our respondents was that of urgency. Organizations that fail to leverage technology for sourcing processes in a timely manner are likely to be overtaken or out-competed by their peers who have adopted digital sourcing faster. There are a number of factors that will affect those organizations who are dragging their feet.

  • Process inefficiency and skill gaps
  • Reduced agility in responding to volatility
  • Exposure to relatively higher levels of risk
  • Higher cost structures
  • Discontinuity of supply

Organizations need to shed their reservations and move quickly towards transformative change. The best-in-class organizations which have taken this leap are already pulling ahead in the race.