Levadata and IBM announced on Thursday a joint project that delivers a cognitive analytics and direct procurement sourcing services solution to supply chains. Known as DirectSpend IQ, the solution uses IBM’s managed services and LevaData’s Cognitive Sourcing Platform to give supply chain management teams insights and recommendations for direct procurement cost savings opportunities and more efficient processes, according to a press release.

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“IBM is taking the LevaData cognitive platform and delivering it to its clients, and then augmenting the services around providing analytics and insights,” said Richard Barnett, senior vice president of marketing at LevaData. “This helps sourcing professionals gain the most from the platform and the recommendations that it’s making, driving a full transformation of their organization and their processes to bring new levels of efficiency, agility, and competitive advantage.”

Further, “applied AI, analytics and process automation have become essential to innovative supply chain transformation,” said IBM Chief Procurement Officer (CPO) Bob Murphy in the release.

Supply chains often conduct both indirect and direct procurement operations. Indirect procurement refers to expenses used on materials and services necessary to operate a business, while direct procurement refers to buying the parts that go into the assembly of a product, Barnett said. DirectIQ focuses on direct materials procurement.

Supply chains have become more complex because of the volume of manufacturers, supplies, and systems supply chain managers are attempting to organize. This causes many manufacturers to use artificial intelligence (AI) solutions to handle these workloads, reported ZDNet in Using AI to secure the global supply chain. If manufacturing companies want to remain competitive, CPOs must re-engineer current workflows with connected experiences by increasing agility, driving efficiencies and reducing risk, IBM added in its Cognitive Procurement: Seizing the AI opportunity report.

“The technologies that transformed disciplines like engineering and finance have been slow to reach supply chain management and procurement. In an era defined by software, data and AI, the mission-critical procurement function needs to operate with the full benefit of AI-based predictive analytics,” added LevaData founder and CEO Rajesh Kalidindi in the release.

Barnett outlined the following three benefits cognitive analytics and direct procurement sourcing services solution particular, brings to business:

1. Incremental cost savings

The solution is able to give suppliers insights and recommendations for money-saving opportunities. “This could often times be up to 10 to 30% incremental cost savings above and beyond what they’re usually targeting to achieve in any given year,” Barnett said.

2. Improved control and strategic management

Large manufacturers deal with high degrees of complexities such as handling large numbers of suppliers, parts, and manufacturing locations.

“It’s very difficult for them to treat them all the same. These teams that are managing the spending are under a lot of pressure to have a deep strategic management of these suppliers,” Barnett said.

This could mean improving the “strategic span of control, anywhere between 50 to 60% of a company’s total annual spending,” he continued.

3. Increased agility

The solution allows organizations to move and react much faster to fluctuating supply market conditions.

“Many companies traditionally have annual or quarterly sourcing events that they attend to market and engage with their suppliers and to review cost and commitments for the following year. With this new capability they can move to more of a continuous sourcing model, where they’re able to move very quickly instead of taking weeks or months to engage with the supply base,” Barnett noted. “They can sense a new change in the market and interlock with their key suppliers and make decisions, in a few weeks end-to-end. That really is like up to a 75% reduction in total response time to changes in the market.”

However, if companies want to experience these benefits, they must start their journeys now, said Kalidindi.

“It takes a year or multiple years at times to embed this capability into the DNA of the organization,” Kalidindi said. “Companies with that early start are the ones that are going to be successful in this transformation, versus the ones that are going to be left behind by starting too late in the game.”

This solution is particularly significant since supply chains have been so slow to digitally transform, as Kalidindi mentioned. AI and digital transformation are so important that they determine the success of a business, which means supply chains must jump on board before being left in the dust.

For more, check out AI, IoT, and analytics top Gartner poll for top supply chain trends on TechRepublic.

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