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    AI for Better Supplier Collaboration: First, Get Your Data in Order

    Innovation | Supplier Management

    Most software vendors have taken an applications-driven approach to delivering solutions. They have identified the main challenges faced by procurement professionals and developed applications that address those specific challenges.

    This has brought benefits but not sustainable value, especially when buyers have looked for “best-of-breed” point solutions with limited interoperability. The result has been isolated applications, eg for supplier management and for P2P working in parallel with siloed data sets and limited or no synergy. In the worst-case scenarios, this can lead to arguments about whose data is the “truth”.

    Another disadvantage is that suppliers see little or no value. As the Gartner research note published in September 2018, entitled The Impact of Artificial Intelligence on Procurement Software Applications states: “Procurement software applications have been traditionally designed to address mission-critical priorities of procurement leaders. This has resulted in software applications that do not include features that deliver value to suppliers, resulting in poor adoption among suppliers. ”

    Previous reports noted a low level of supplier satisfaction with P2P solutions, stating that in addition to discontent with fee-based networks, due to a legacy of software vendors not prioritizing supplier-facing enhancements over buy-side features.

    A “wish list” was given in the area of supplier chain collaboration on the part of “mature procurement leaders”:

     

    1. Supplier enablement: accelerating time to value and driving supplier loyalty.
    2. Solutions that provide better alignment between supply chain and procurement management.
    3. Enablement of continuous data collation from various sources, and
    4. Incorporation of new lessons of such data into algorithms through machine learning to drive solutions autonomously.

    Gartner recommends that in the early phase of such developments, vendors should focus on transactional use cases that reduce cost and improve efficiencies, proposing the following use-case examples:

     

    • Standardized contract management
    • Automated compliance management
    • Competitive intelligence
    • Expedited payments

    Gartner wisely suggests that in order to move forward, “Product managers must define and run limited duration pilot projects with strategic suppliers to validate the benefits delivered by addressing these use cases.” Only by demonstrably delivering business value will procurement leaders and their vendors gain the traction needed to take AI-powered supplier collaboration solutions to the next level. 

    JAGGAER was created with precisely the objective of overcoming these shortcomings by taking a data-driven, rather than an applications-driven approach. Three companies, each with best-in-class solutions for different chunks of the procurement value chain, came together and set about creating a common data platform to support all applications.

    A second important development objective was to improve supplier enablement and onboarding, thereby reducing costs to the buyer and improving efficiencies for suppliers.

    Today, JAGGAER is the only turnkey supplier onboarding and catalog enablement services for more spend under management, higher contract compliance and more efficient supplier collaboration.

    There are real cost savings and efficiency gains to be made here. The cost of onboarding and enabling suppliers is much higher than most companies realize, because they only see the visible IT part of the cost (XML/EDI integration process, see Figure 1). JAGGAER estimates this as typically in the order of $10K per supplier.

     

    Figure 1: Average visible IT cost: $ 10K per supplier

    Figure 1: Average visible IT cost: $10K per supplier

     

    In fact, the bulk of the expense is a combination of front-end planning ($2K per supplier), roll-out ($2K) and, most of all, ongoing support ($9K). See Figure 2.

     

    Figure 2: The hidden costs of supplier enablement - these are substantially reduced by JAGGAER One.

    Figure 2: The hidden costs of supplier enablement – these are substantially reduced by JAGGAER One.

     

    These costs add up – $2.3 million per 100 suppliers. But they are substantially reduced with JAGGAER One supplier enablement. As far as we are aware, no other procurement vendor offers this additional value, and the integration of all supplier data on one platform (four million of them in the JAGGAER network) as well as integration with so many third-party vendors and data sets provides a good basis for further development with artificial intelligence technology.

     


    Disclaimer:

    Gartner, The Impact of Artificial Intelligence on Procurement Software Applications, Balaji Abbabatulla, Magnus Bergfors, Patrick Connaughton, 14 September 2018

    Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner’s research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.

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