Think Direct Materials Negotiations Could be Better? Guaranteed.

Cognitive sourcing is here - and can deliver big ROI

Cognitive sourcing can deliver guaranteed benefits in direct materials negotiations. Get ready.

Can you point to a way to save on your direct materials procurement negotiations? Maybe not. However, most professionals involved in sourcing and direct procurement know that they are leaving money on the table. As timeframes continue to shrink for complex supply chains to introduce new and improved products, it’s become harder to make good decisions.

With today’s advanced analytics, it seems there should be a way to leverage more data in each negotiation. Finally, it looks as if there is new software to identify savings opportunities and risks for direct procurement teams in real-time during negotiations. LevaData announced its Series A financing and Cognitive Sourcing Platform on August 29.

Directing Cognition at Direct Materials

Ever since strategic sourcing software became a big deal this has been something I’ve expected. (Can it be 20 years ago?). Yet most of the systems really have focused elsewhere.

As LevaData CEO Rajesh Kalidindi says, “Direct sourcing teams have been left behind or ignored by most … solution providers in the market today.” I agree. This has left direct materials strategic sourcing scrambling to pull together what they need for each negotiation event or market opportunity. Rajesh should know; he was Director of Supply Chain Operations for Cisco.

LevaData is pulling from third party data as well as the enterprise’s own data  using a  SaaS platform. It’s a continuous sourcing approach that delivers recommendations for action, not just data or market insights. It also delivers a multi-tier view of costs, supplier risk and opportunities, and advanced algorithms to set up a negotiation playbook for each supplier or manufacturer – or for a multi-tier group all working on the same product.

Beyond Software

LevaData’s innovation goes beyond what the software can do. The platform is designed to empower, not replace, sourcing professionals as they make decisions. This comes back to the task-based way of leveraging analytics I believe will transform the nature of work in many domains. LevaData is also delivering human intelligence and coaching.

Perhaps most compelling, LevaData offers its Cognitive Sourcing Platform as a subscription or on a pay-for-performance model. The company guarantees 5X ROI in the first year of adoption.

While the announcement is new, the customer base (now over 20) has been benefiting for the past two years. They have over $50B managed and over $100M in savings already quantified. The customers are mostly electronics companies such as FitBit, and others in industrial automation, electronic point-of-sale, video/voice conferencing, home audio, and memory modules. This creates a strong peer group using the same commodities from which the platform can create further useful analysis on direct materials opportunities and risks.

Options to Ponder

LevaData is not the only company offering cognitive procurement for direct materials.  Last November at Empower 2016, IBM discussed using Watson with Emptoris. The big announcement was of a new Emptoris app, Procurement Intelligence. They also re-named SupplierIQ to Watson Company Analyzer. Another player in cognitive procurement is Trade Extensions, now part of Coupa.

Software buyers must realize it’s good news that there are several strong competitors. These three companies are quite different in scope and scale, as well as software approach. So procurement teams moving into cognitive approaches have options!

Ready or Not, Here it Comes

Spend Matters says “the cognitive era is not yet upon us.” I disagree. I agree that cognitive procurement is in its early stages and will benefit from incorporating machine learning. I also agree that procurement and sourcing professionals will need to spend time training systems to get the full benefits.

Yet that’s not a good reason to delay starting to use it. In fact, overworked procurement teams may find this to be a life-saver. With only a few months to realize ROI, those who adopt soon may gain strategic advantage quickly.

The cognitive procurement era is upon us. Some are already using this software. It delivers significant savings and benefits, and some will even guarantee benefits.

For those who want to lead in their segment, it’s not a time to hide from this next important step. Ready or not, here comes cognitive strategic procurement for direct materials. It will change the market. Guaranteed.

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