Amazon Business is a client of Business Reporter.
Due to the impact of the pandemic and ongoing global disruptions, supply shortages have begun to improve for European businesses. As a result, procurement professionals are once again prioritizing cost-effective supply solutions. Nicolas Olague, corporate leader at Amazon Business, reports that feedback from procurement leaders in Europe indicates an anticipation of suppliers lowering their prices in 2024. The specifics of this price reduction, such as the timeframe and affected categories, are still uncertain.
For procurement professionals, this presents an opportunity to revisit the fundamental aspect of their role – securing lower prices for businesses by implementing supply cost reductions. However, although many companies expect their teams to negotiate with key suppliers of crucial components and expensive items, they may not have the same level of visibility into more affordable products.
Unregulated spending categories can accumulate large amounts of money, according to Olague. On average, they make up 20% of a company’s total spending and account for around 80% of its suppliers. Without control over pricing and approval strategies, overall costs cannot be managed. Olague suggests reducing the number of suppliers and focusing on fewer ones to have more control, visibility, and better pricing. Combining spending volumes across multiple countries can also aid in negotiating better prices due to economies of scale.
One suggestion is to plan ahead and buy in large quantities if feasible. According to Olague, this includes considering the number of laptops needed for the upcoming year, based on past purchasing habits over the previous five years. This not only saves money on the laptops themselves, but also reduces expenses like handling multiple invoices. Implementing spending guidelines, such as requiring a growing portion of purchases to come from sustainable sources each year, can also contribute to achieving broader objectives, according to Olague.
The proper use of data, specifically artificial intelligence (AI), is crucial for gaining control over spending. “This will be vital for addressing cost challenges and achieving environmental, social, and governance objectives, which are top priorities for businesses,” commented Olague. Many organizations currently lack access to spending data, especially if they regularly make local purchases as needed. Furthermore, traditional data management methods can be inefficient and prone to errors, posing significant difficulties for procurement teams. Fortunately, AI-powered tools like Amazon Business Analytics can swiftly analyze data and provide valuable insights for more informed decision-making.
Numerous companies are currently embracing the concept of implementing AI to assist with their purchasing processes. Based on findings from Amazon’s 2024 State of Procurement Report, which included responses from various industries and countries such as France, Germany, Italy, and Spain, almost half (45%) would be open to integrating AI into their procurement methods either immediately or within a year, and 80% would be open to doing so within two years. Additionally, almost all participants (98%) predict that their company will invest in tools for analytics, automation, and AI for their procurement operations in the coming years.
Besides the advantages of enhanced understanding that can be provided by AI, procurement can also profit from having increased time for pursuing activities that can contribute greater value to the overall business. According to Aster Angagaw, VP, head of commercial, public and strategic sector at Amazon Business, “Building stronger procurement capabilities, flexibility, and innovation are key objectives.” In order to reach these goals, procurement leaders must streamline the amount of time spent on tasks of lesser importance such as compiling data for reports, manually inputting information into various systems, and attempting to communicate with suppliers for updates on deliveries.”
A difficulty that arises is determining the most effective way to utilize this type of technology. The head of procurement at a large telecommunications corporation in the UK explains that understanding which digital resources to adopt and how to do so is a significant hurdle. “Technological advancements are happening rapidly – many are taking advantage of automation, machine learning, and AI. Should I invest in a tool now or wait? Should I outsource these services? These are all inquiries that we are faced with.”
One good way to begin is by utilizing services like Amazon Business. It has integrated Amazon’s AI and ML technologies – in the works for over two decades – into the procurement process. According to Olague, similar to Amazon, Amazon Business uses AI to enhance the search experience and make it easier to discover products, enabling buyers to view various options in a single location. Additionally, Amazon Business’s product recommendations, powered by AI, can assist organizations in finding identical or comparable items at lower costs or with discounted options, either through the convenience of ‘Subscribe and Save’ or bulk order discounts.
This can also be integrated with additional information regarding sustainability requirements or specific industries, such as those operated by female entrepreneurs or small enterprises. This can aid procurement teams in guiding internal buyers towards specific goods or organizations, contributing to the achievement of broader ESG objectives.
As time passes, by gathering data from transactions, it becomes feasible to gain a better understanding of where the company is allocating its funds and create plans to decrease spending while also improving other business objectives. This may involve cutting out unnecessary purchases, bargaining with suppliers for lower prices in exchange for consistent spending, or exploring more affordable and eco-friendly options.
To ensure that purchases are authorized, it is crucial to assess whether they are being made through official channels instead of individual transactions or personal accounts. Olague suggests taking a moment to evaluate the current purchasing practices of the company and identifying ways to streamline them. Even small changes can make a significant difference.
Discover how Amazon Business can assist you in effectively purchasing for your business in 2024 by clicking here.
Source: independent.co.uk
