Bridging The Decision Abyss

Consider this statistic: 78 percent of executives surveyed by Talend say they have faced challenges using data, and a third aren’t even using data to make decisions. Some blame poor-quality data, and others admit to relying on Excel. Still, others lack visibility across the organization. Whether it’s because of lagging digital transformation or organizational siloes, these companies fall into what can be called a “decision abyss.”

What’s a decision abyss?

Think about the transformative effect the internet has had on the world. It has allowed entrepreneurial companies such as Amazon to build a digital retail empire larger than any company in history. The internet disrupted many industries, including music, film, and entertainment. Companies like Apple, Netflix, and Nintendo used it to create new-to-the-world products and services. The internet compressed communication from weeks to seconds. Today, it's unthinkable for organizations to compete without using the internet. It would be like operating in a communication abyss.

It’s the same with data and decision-making. Advanced technologies such as AI automation, data aggregation, and contextualization are rapidly evolving. Teams that tap into these technologies create better, more informed decisions . . . faster. They enjoy significant cost savings, increased part visibility inside of the bill of materials, and improved finished goods predictability. Those still using spreadsheets to manage direct sourcing and rooted in organizational silos will very soon find themselves in a decision abyss. It’s like using the postal service to mail a letter when your competitors use email. This might sound ridiculous, but it’s the reality of supply planning and direct materials procurement in many organizations today.

How to avoid a decision abyss in direct materials procurement? It starts with data.

A company must have data visibility across its enterprise and the external data ecosystem to confidently ensure the best price from the best supplier. As companies aggregate more and more data, having an AI-powered platform that contextualizes this information and delivers actionable insights is key. Procurement teams can then transform their roles within the team and even within the organization. They’ll shift away from spending time updating tedious spreadsheets and focus instead on building and executing strategies and collaborating with customers and partners.

Benefits of aggregated and contextualized data:

• One source of truth for decision-making across the organization
• Visibility into how parts/materials can be linked to finished goods
• Better, more accurate matching of what can be produced with what should be produced
• Significant improvements in operational efficiencies across the organization

Think of AI-powered platforms as a necessary part of avoiding the decision abyss. These tools form the heart of the digital transformation companies must adopt to adequately manage ongoing and sometimes concurrent supply chain shocks. There’s no better time for procurement to lead the charge and transform how sourcing is done across the organization. However, it isn’t just about replacing spreadsheets and manual processes with AI platforms. Companies must reinvent their current workflows to survive.

Reimagining procurement

First, AI will augment procurement teams, not replace them. Armed with new AI platforms, procurement teams immediately gain powerful new insights that contribute directly to the top and bottom line. Next, intelligent automation frees procurement teams to focus on higher-value activities, including negotiations with suppliers and partnering with other functions in the company. This increases the perceived value of procurement within an organization as well. C-suite executives already know procurement teams are important cost-cutting experts. However, as these teams harness the power of AI-powered platforms to deliver top- and bottom-line value, the C-suite will increasingly tap them to participate in more strategic decision-making.

According to a 2021 Kearney study, compared with their peers, leading companies that had strong procurement partnerships across the organization generated nearly two times more total shareholder return, contributed 200 basis points more to the core corporate profitability measure EBITDA from third-party spend, and rebounded three times stronger post-COVID-19.

Here’s the scenario: Using an AI platform across the organization, procurement can see how each part, including constrained or bloated inventory, can affect an organization’s revenue. Commodity managers can use this AI intelligence to optimize costs when negotiating with their suppliers. Teams receive alerts to risk exposure on commodity parts and materials before disruptions occur. Engineering and product teams assess supplier health and model how key components affect the cost structure of a product early in the design process. Ultimately, the entire company benefits from these efficiencies.

The bottom line

With access to better data, more data, and ultimately contextualized data, organizations can quickly gain a competitive edge as they benefit from robust cross-functional collaboration and decision-making. The data divide continues to grow between companies that have AI platforms and those that don’t. Those that have them will find millions in cost savings, avoid risks, and secure alternate suppliers. They’ll increase speed to market and generate higher productivity and job satisfaction for their teams. Those that neglect or delay adopting a digital transformation strategy will quickly fall behind. They’ll literally fall into the decision abyss.

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