How Manufacturers Leverage Procurement Trends for a Competitive Advantage

Modern manufacturers operate in a challenging environment that doesn’t always allow immediate procurement of necessary goods. However, some have learned to harness trending technologies to gain a competitive advantage. Here are some eye-opening examples of how they do that.

Talk to a Chatbot to Make More-Informed Choices

People have hotly debated generative artificial intelligence (AI) lately, largely because of ChatGPT. Many discussions center on whether this tech will take people’s jobs. Perhaps people should instead talk about how it could make their work easier.

One recent case comes from sourcing startup Globality, which uses AI to replace the outdated request-for-proposals process. That approach involves engaging with several suppliers to get the lowest bids.

The company has launched a generative AI-powered chatbot called Glo. People can use it to find appropriate suppliers while following their companies’ sourcing policies. Then, once the chatbot creates a list of potential suppliers, it gives users negotiation suggestions to increase their chances of getting the best deals. People can also use Glo to create a professional brief that’s sent to suppliers who seem like the best options.

The company’s internal data indicates customers using Glo become up to 70% more efficient while saving 10%-20% on costs associated with indirect spending. British telecommunications brand BT Group is a client. Using Glo has allowed it to achieve more than £3 billion in procurement expenses annually. Cyril Pourrat, the company’s chief procurement officer, says this generative AI application helps people make the best decisions, even with limited training.

Even though that example is outside manufacturing, such remarkable outcomes will undoubtedly spur more manufacturers to at least try chatbot tools. Such procurement applications are in the early stages. However, with ChatGPT continuing to stimulate people’s interest, users will keep pushing the boundaries to see what it can do in today’s workflows.

The University of Huddersfield’s Dr. George Bargiannis believes the most valuable procurement applications will occur if companies train generative AI on internal data. He explained that the open-source version of ChatGPT does not have the specific historical details a procurement manager would need to get actionable information.

Build a Digital Twin

Many manufacturers are already familiar with digital twins from using them during research and development for new products or planning new facility layouts. Those are valid and now common uses, but exciting applications are also coming to light in procurement.

One of the great things about a digital twin is that it allows people to run multiple potential scenarios. No one can predict the future with certainty, but a digital twin might at least make them better prepared for whatever happens. Such knowledge is a significant asset in the procurement world.

Consider the example of an automotive original equipment manufacturer. It created a digital twin of its value chain and relied on third-party sites for automated data flows. The resulting tool allowed the company to monitor over 1,000 components and 100 raw materials and get insights across regions from 60 data feeds. The digital twin also evaluated different volatility sources, showing decision-makers how impactful they might be on procurement efforts.

Having that kind of all-encompassing visibility makes it easier to react with confidence as conditions change. People can also get a clearer understanding of what happens along the entire length of the supply chain. Manufacturing a transformer takes up to 70 weeks in the current climate. Producers of those in-demand industrial items must know what’s in their control to influence within such timelines. A digital twin can provide that information and more.

Use the IoT to Facilitate Automatic Replenishment

Automatic replenishment has been a major trend in recent years, largely for business-to-consumer transactions. Many customers hate running out of essentials, whether the products are diapers or toilet bowl cleaners. That’s why companies increasingly offer automatic replenishment programs.

They can happen in various ways. Perhaps a pet owner knows they use about four bags of dog food every eight weeks and agrees to an automatic replenishment service fitting that time frame. However, it’s also common for devices that use consumable goods to have IoT connectivity so companies can see precisely how customers use their products. For example, a printer manufacturer might have a program where people automatically receive new cartridges when the current ones have 20% ink remaining.

This approach — often called vendor-managed inventory (VMI) — can also assist procurement specialists at manufacturing plants. One academic paper focused on a high-tech manufacturer relying on 47 VMI agreements to get 326 products.

The researchers investigated the ideal approaches for setting desired inventory parameters. They determined the best option was to create specifics based on the type of supplies in question and how readily those entities could supply the goods. The researchers also recommended measuring supplier performance before grouping each partner. The outcomes showed that these actions could cause cost reductions of 4%-6% without bringing service-related declines.

Capitalize on Trends When Appropriate

These real-world examples show how it often makes sense for manufacturers to explore how relevant trends could positively affect their work and help them retain or gain competitiveness. However, procurement professionals must also ensure they aren’t just fixating on the latest changes without a clear plan to benefit from them.

Emily Newton is the Editor-in-Chief of Revolutionized Magazine, an online publication that explores innovations in science and technology.