As the global economy continues to evolve, supply chains have grown more interconnected, complex, and prone to vulnerabilities. This evolution, paired with increasingly stringent regulations that require businesses to report on sustainability practices, has necessitated that procurement teams deliver enhanced transparency into increasingly dynamic supply chain operations.
Yet, this has become a challenge for chief procurement officers (CPOs) who often lack information on the supplier base. In fact, a recent study from Procurement Leaders and SAP found that suppliers are often reluctant to disclose privileged information, leading to miscalculated procurement decisions.
Against this backdrop, how can procurement professionals elevate their role and transform the depth of insights the function can offer? I believe this starts with three key actions.
1. Go Beyond Reporting
Environmental, social, and governance (ESG) initiatives have become a priority for procurement teams in recent years. Unfortunately, buyers often fail to receive accurate or complete sustainability information from sellers, according to the Procurement Leaders study. This lack of transparency can increase the potential for regulatory violations, especially as climate-focused laws like the European Green Deal come to fruition.
While reporting should remain a key tactic, it is not sufficient to deliver on sustainability goals. Organizations must invest in software that fits within the organization’s scope, generates more touchpoints with sellers, and provides visibility into suppliers’ social and environmental impacts.
Software can help organizations increase regulatory compliance, reduce costs, and develop healthy relationships with sellers. Of course, there are limitations as suppliers can be reluctant to share information – like financial statements or internal regulatory policies.
However, software that is augmented with predictive analytics can deliver metrics and insights into supplier emissions and energy usage that enable organizations to evaluate suppliers against their sustainability objectives.
2. Take the Lead Through a Bold but Methodical AI Strategy
As procurement teams take on more responsibility in increasing transparency across the supply chain, they should be courageous but vigilant in efforts to uncover supplier insights. Consequently, many CPOs have opted for strategies involving AI.
AI can provide procurement teams with intelligent business data that can lead to more informed purchase decisions. Additionally, according to the Oxford College of Procurement & Supply, AI can reduce time spent on buying processes by up to 60% and reach cost savings of up to 40%.
Adopting AI throughout the source-to-pay process has obvious benefits, although many companies lack the internal skills needed to leverage the power of this technology. Organizations should take a holistic and careful approach, ensuring that internal and external stakeholders are “bought-in” and empowered through cohesive training and change management programs.
Similarly, CPOs should take steps to maintain rigorous data privacy policies to build trust with suppliers. Procurement teams should only implement AI technologies that are relevant, responsible, and reliable, ensuring that the implementation of AI follows guiding principles and protects the privacy of all users.
3. Select a Trusted Technology Partner
Leading procurement teams are realizing the importance of cultivating trusted and mutually beneficial relationships with suppliers, particularly those offering resources vital to business continuity. Identifying a technology partner who understands the needs of different industries and the power of developing connections can empower procurement teams to optimize decision-making.
This is where SAP is in a unique position to help. We not only have unmatched access to business data, but we’ve processed data responsibly and reliably for decades through our ERP systems, SAP Ariba solutions, and now SAP Business Network. This makes it possible to help organizations counteract supplier reluctance, as SAP Ariba solutions work with millions of trading partners to help develop connections and provide greater visibility.
In addition, SAP Ariba solutions can provide guided recommendations for buyers, supporting internal compliance even if the user is unaware of regulations. This can enable deeper knowledge of spend management, helping to reduce redundancies and complexities and provide employees with more time to solve harder problems.
Procurement’s visibility into the supply chain is paramount for informed decision-making and mitigating risk. By moving beyond reporting, investing in AI methodically, and partnering with a trusted solution provider, procurement will not only achieve greater supply chain visibility but also lay the foundation for increased innovation and competitive advantage in today’s global economy.
Now is the time to rethink your procurement technology strategy.
Baber Farooq is senior vice president and head of Market Strategy for SAP Ariba.