As supply shortages sparked by the pandemic and the impact of global upheaval begin to ease for European businesses, ensuring cost-effective sourcing is once again becoming a priority for the professionals responsible for it.
“According to European procurement officials, a drop in supplier prices is expected in 2024,”
says Nicolas Olague, head of private sector, enterprise, at Amazon Business.
“We don't yet know how quickly it will happen or if it will affect all categories, but it should definitely happen.
»
For those working in the procurement sector
, this is an opportunity to return to the fundamentals of the business, ensuring that any reduction in purchasing costs translates into a reduction
in
prices for businesses.
However, as many organizations approach key suppliers of essential products and high-value items, procurement teams often have little information regarding lower-value items.
“These categories of uncontrolled spending, however, can reach considerable sums,”
explains Olague.
They typically represent 20% of a company's total spend and approximately 80% of its supplier base.
“If you have no control over pricing and no approval strategy, you can't manage your overall costs,”
he points out.
“It is recommended to reduce the number of suppliers and concentrate purchases on a smaller number of them.
This will allow you to have more control, more visibility and obtain better prices
.
“Grouping together spending volumes in several countries makes it possible to negotiate more advantageous prices,”
he continues,
“and this, thanks to economies of scale
. ”
A second tip is to anticipate purchases before they are actually needed and, if possible, buy in bulk.
“For example, think about how many laptops you will need next year, based on your purchases over the past five years,”
says Olague.
“This way, you will not only save on the price of laptops, but also on hidden costs such as processing multiple invoices.
Setting rules around spending – such as requiring the percentage of sustainably sourced items to increase each year – can also help achieve broader goals,”
he adds.
The effective use of data, and in particular the use of artificial intelligence (AI), is essential to be able to better control these expenses.
“It will be crucial to manage cost challenges, but also to achieve the environmental, social and governance objectives that are at the heart of companies’ concerns,”
adds Olague.
“Many organizations currently don't have access to spend data,”
he adds,
“especially if they are used to sourcing items locally as they are needed.
If they have this data, traditional data management processes are often time-consuming and error-prone, posing a significant challenge for procurement teams.
However, AI-powered spend analytics solutions, such as
Amazon Business Analytics
, automatically analyze data and unlock timely analytics and data-driven insights for better decision-making
.
Many organizations are now open to the idea of using AI to help with their purchasing activities.
According to Amazon's
State of Shopping 2024 report
, which surveyed respondents across nine industries and multiple countries, including France, Germany, Italy and Spain, just under half (45%) would be willing to integrate AI into their purchasing efforts immediately or within one year, and 80% would be willing to do so within two years.
Additionally, almost all respondents (98%) believe their organization will invest in analytics and knowledge management, automation, and AI tools for its procurement operations in the coming years.
In addition to benefiting from the additional insights that AI generates, procurement departments can also save time by engaging in activities that can add value to the business as a whole.
“Building capacity, agility, and innovation in procurement is a top priority,”
said Aster Angagaw, vice president, business, government, and strategy at Amazon Business.
“To achieve these goals, procurement managers must streamline time spent on low-value activities, such as gathering information for reports, manually entering data into disparate systems, and attempting to contact suppliers to get updates on deliveries.
»
One of the challenges, however, is identifying the best way to use these technologies.
A procurement manager for a multinational telecommunications company in the UK says that knowing which digital tools to implement and how to do it is a major challenge:
“They are coming very quickly.
Everyone these days is using automation, machine learning and AI… Should I buy a tool now?
Shall I wait ?
Should I outsource these services?
These are the questions we ask ourselves.
»
Using solutions like Amazon Business, which has extended Amazon Business's AI and ML capabilities – in development for over 20 years – into procurement, is a good place to start.
“Like Amazon, Amazon Business uses AI to improve the search experience and product discovery,”
explains Olague, “which allows shoppers to see different options in one place.
Additionally, Amazon Business' AI-powered product recommendations can help businesses find the same or comparable items at lower prices or with discounts, either through the convenience of the feature
“Plan and Save”
, i.e. quantity discounts for bulk orders.
This information may also be combined with other data relating to sustainability criteria or particular types of businesses, such as those owned by women or small businesses.
This can enable procurement to direct internal buyers towards particular products or companies, helping to achieve broader ESG goals.
Over time, drawing on transactional information, it is possible to gain a clearer picture of the organization's spending and begin to develop strategies to reduce spending while strengthening goals. broader aspects of the company.
This may involve eliminating unnecessary purchases, negotiating a lower price with certain suppliers in exchange for firm spending commitments, or looking for cheaper or more sustainable alternatives.
The starting point, however, is to ensure that purchases are made through authorized channels rather than as individual transactions or through personal accounts.
“It’s important to step back and understand where we are right now,”
concludes Olague.
“How does my company buy and how can I help focus its purchasing?”
Small adjustments can have a big impact.
»
To learn more about how Amazon Business can help you master smart business purchasing in 2024, click
here
.