• Written by Sonali Subhadarsini, Product Manager

A procurement team in logistics often finds itself waiting for a report to answer questions about spend, supplier performance, and contract compliance, only to discover that the data is outdated or incomplete, leading to suboptimal decisions that can have far-reaching consequences, such as increased costs, reduced service quality, and strained relationships with suppliers and customers.

The procurement questions that currently wait on a report

The procurement team may need to know which suppliers are not meeting their contractual obligations, or which categories of spend are not being properly managed, but these questions often go unanswered due to the lack of timely and accurate data, and the team is forced to rely on manual processes, such as reviewing paper-based contracts and invoices, or waiting for periodic reports from other departments, which can be a slow and laborious process.

For instance, a category manager may want to know the current spend with a particular supplier, or the shift supervisor may need to verify the delivery schedule for a critical shipment, but without access to real-time data, they are forced to make decisions based on incomplete or outdated information, which can lead to mistakes and inefficiencies.

The data behind them: purchase orders, supplier contracts and terms, invoice history, category structure

The data that underlies these procurement questions is complex and multifaceted, encompassing purchase orders, supplier contracts and terms, invoice history, and category structure, all of which must be carefully managed and analyzed in order to provide accurate and timely insights, and this requires a deep understanding of the procurement process and the ability to integrate data from multiple sources, such as enterprise resource planning systems, supplier relationship management systems, and transportation management systems.

A procurement team that has access to this data can begin to ask more sophisticated questions, such as which suppliers are consistently meeting their delivery schedules, or which categories of spend are experiencing the greatest price variance, and this can help the team to identify areas for improvement and optimize their procurement strategies, for example by renegotiating contracts with underperforming suppliers or identifying opportunities for cost savings through better management of inventory and logistics.

Sector constraints: carrier performance variance and dwell and detention

In the logistics sector, procurement teams must also contend with a range of constraints and challenges, including carrier performance variance and dwell and detention, which can have a significant impact on the efficiency and effectiveness of the supply chain, and require careful management and optimization, for example through the use of data analytics and performance metrics to identify areas for improvement and track progress over time.

For example, a logistics manager may need to analyze data on carrier performance in order to identify the most reliable and efficient carriers, and to negotiate better rates and terms with these carriers, and this requires access to detailed data on carrier performance, including on-time delivery rates, transit times, and claims rates, as well as the ability to analyze this data in the context of other factors, such as fuel prices, weather, and traffic patterns, and to use this analysis to inform procurement decisions and optimize the supply chain.

What improvement looks like: spend under management, price variance to contract, supplier concentration

Improvement in procurement can take many forms, but some common metrics include spend under management, price variance to contract, and supplier concentration, all of which can provide valuable insights into the effectiveness of procurement strategies and identify areas for improvement, and a procurement team that is able to track and analyze these metrics can begin to optimize their procurement processes and achieve better outcomes, such as reduced costs, improved service quality, and increased supplier compliance, and can use tools such as operations management software to streamline and automate their processes.

For instance, a procurement team that is able to reduce its price variance to contract can achieve significant cost savings, while a team that is able to increase its spend under management can gain greater visibility and control over its procurement processes, and a team that is able to reduce its supplier concentration can reduce its risk and increase its flexibility, and can use these improvements to inform its procurement strategies and optimize its supply chain, and can contact our team for more information on how to achieve these improvements.

What this does not do, or when it is the wrong choice

While AI for procurement in logistics can provide significant benefits, it is not a panacea, and there are certain situations in which it may not be the best choice, such as when the data is incomplete or inaccurate, or when the procurement processes are highly complex or nuanced, and in these cases, other approaches, such as manual analysis or consulting with procurement experts, may be more effective, and it is also important to note that AI for procurement in logistics is not a replacement for human judgment and expertise, but rather a tool to support and augment these capabilities.

Additionally, some procurement teams may find that their needs are better met by other solutions, such as

• transportation management systems
• supply chain visibility platforms