When is it smarter to pay more?
That’s one question artificial intelligence (AI) is helping companies grapple with during their procurement processes. Businesses seeking to achieve “just in time” efficiency and lowest component costs are finding that, sometimes, going penny-for-penny with suppliers isn’t the most strategic approach to prevent cost overruns and foster agile supply chains.
Historically, procurement managers negotiated with hundreds of vendors. The goal was to be as lean as possible and limit inventory supply and cash outlay, working to achieve “just in time” manufacturing. Artificial intelligence (AI) is streamlining this procurement process, reducing human error to achieve the lowest cost and the most efficient solution. The goal is still to have a pull system in place, where components are delivered for product creation at the same pace of consumer demand, avoiding costly inventory build up and cash outlays.
How AI Changes Procurement
AI allows organizations to factor endless variables into their calculations. For example, one vendor might charge more per component, but location proximity to your assembly line could reduce delivery time and shipping costs, enabling a more efficient–– and ultimately more cost-effective––outcome. Or, it may be better to group some components together rather than purchasing individually from 100+ suppliers. The line-item cost for some components may increase, but the overall expenditure may be less.
That’s what happened for an aerospace company, where I recently placed a new hire. By introducing AI into the procurement process, the new hire helped the company achieve unprecedented efficiencies, even though spending on some individual components increased. In procurement, there’s a bias towards “least cost” unit price, and AI helped the company consider scenarios beyond this.
This is a prime example of how AI is changing the procurement game. Now, it’s not only about efficient decision-making but also about eliminating biases to make more strategic choices. The opportunity upsides are significant, but to realize these benefits, you need the right talent.
Hiring for Supply Chain and Procurement Roles in 2020
1. Focus on potential. Finding the right talent to bridge the gap between traditional, manual approaches and basic automation with advanced AI capabilities isn’t easy. Since this technology is so new, it’s difficult to find a candidate with deep experience in both the technology and your industry. I recommend focusing on a candidate’s technical skills and their potential for growth at your company. Industry knowledge can be taught, but leadership potential can’t be.
2. Think holistically. Procurement professionals must work across a range of touch points, not just contract negotiation. The most successful professionals are those with strong people skills who can coordinate with production, supply planners, distribution and logistics, and sales and marketing– in addition to understanding technical essentials like AI.
3. Don’t wait to make the offer. Today’s job market moves very fast, especially for candidates with the most sought-after skill sets. Wait too long to make an offer and you may find that your top choice has moved on to other opportunities. Accelerate your offer process without sacrificing quality: align stakeholders to key job requirements and desired skills before you start interviews. This way, when you do interview someone who checks all the boxes, you’ll be ready to make an offer quickly.
This is also where a recruiter can help. With broad market knowledge, I know what’s possible – and what’s not – from the current candidate pool. I can help ensure you’re focused on hiring the right procurement leaders, and that you don’t miss out on an exceptional candidate.
As supply chains become more sophisticated, exceptional talent is the key to unlocking the promise of cutting-edge technologies like AI. Making the right hire will set your team up for success from day one.