Competitive procurement involves statistical models to calculate the importance and scope of every purchase. The models are used to study interdependencies within price movements. It requires the power of automation and spend-management systems to help supply chain companies come up with sound procurement strategies. The systems also help understand if the strategies need to be altered.
Predictive Helps Correlate Pricing
Owing to data processing, businesses are able to forecast price trends, avoid risks, and extensively analyze data for procurement. Using predictive analytics, one can easily correlate the different price indices and material prices across units. Probable cost drivers can also be found with key indicators. Hence, predictive informs about trends in pricing much ahead of time.
Predictive used in Yesteryears
Earlier, all predictive analytics was a matter of time-consuming and inaccurate calculations. It was considered that selecting a supplier or managing the supplier base requires brainstorming for a few weeks or months. However, relationships would take a beating as word would slip out about discarding some suppliers in the middle of the process. With integrated supply chain platforms, businesses started developing better understanding with suppliers. The better visibility can help fight volatility and prevent disruption in supply chain planning.
Why Supplier Visibility is Essential
Companies incurred losses due to improper handling of raw materials and damaged goods. Some studies revealed only 4% businesses possessed superior quality of supplier visibility. However, organizations now realize that maintaining close relationships with suppliers has long-term benefits. Forty-nine percent organizations now have some visibility of tier-two suppliers. Thirty-two percent organizations have full visibility of tier-one and tier-two suppliers, while 9% organizations run with complete visibility.
Natural Hazards Disrupting Supply Chain
Natural calamities like cyclones and earthquakes make organizations consider not just finance, but the risk of suppliers failing due to force majeure. Hence, to consider supplier worth, businesses need to take into account geographic and related factors as well.
Alternate Plans to Deal with Risks
There must always be an alternate plan ready with businesses that can deal with unknown disruptions occurring in supply chains. This makes it essential for businesses to take new approaches towards suppliers to act accordingly and minimize risks. Of course, the main priority in business is proper relationships with important suppliers.
Solution Provided by Predictive Analytics
With predictive, organizations can create futuristic models. They provide a rough sketch of how future programs will look. This makes supplier alliance easy. Businesses are enabled to identify worthy suppliers and they can take initiatives to maintain long and healthy relations with them. The organization understands from its past activities and can find out if they will be preferred by the suppliers they wish to work with. They can build models to understand the consequences of situations and actions.
A procurement firm can bring into practice appropriate strategic changes that will be beneficial. Predictive analytics is not just restricted to managing supplier relations, but link procurement data with market demands to deliver interesting inputs. With predictive, businesses can handle top and the bottom lines and become capable of giving new direction to procurement.