How can AI drive better supplier negotiations with faster outcomes?

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Today, most of the sourcing teams require quotes by sending a single spreadsheet via email to multiple suppliers and regrouping the resulting mess into a pivot table. Some techniques helped digitize this entire process, but the underlying information contained remains the same. Companies ask for the quotes, and most of the suppliers send what they think is the best bid for this quote.

There are many country programs that are aware of the benefits of adding technology to their purchase. As per Deloitte’s 2019 Global CPO Survey, “increasingly smart electronic procurement systems can direct stakeholders to preferred supply sources or even use various predictive analyzes to warn users of the possibility (of) to approve a purchase requisition.”

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In fact, there has been small progress in incorporating true Artificial Intelligence (AI) into the entire procurement process or program. Most of the sourcing tools used by global sourcing company are still applied to traditional functions such as spreadsheet fields autofill or schedule responses in order to determine the winner of an auction.

Most of the CPOs understand this. According to a recent Deloitte study, it is found that current technologies do not meet their requirements as it automates core business functions, comprising purchase / order requisition, contract management, spending / supply analysis, and supplier management. Approximately, 71% of the respondents expressed their dissatisfaction with the current supplier management technology, and 58% of the respondents were dissatisfied with their old sourcing solutions.

Nowadays, Bid Ops has integrated artificial intelligence in a different way, using it to individualize the entire process for each bidding supplier. Let’s find out the way it works?

When any supplier works within Bid Ops, he establishes a “persona” that helps him understand his appetite for risk (and his willingness to deal). Some of the suppliers do not feel comfortable providing big compromises while other suppliers are much more flexible, provided that their business opportunity is large sufficiently. In truth, most of the suppliers fall somewhere in the middle of this spectrum of 100% rigid to 100% flexible. Regardless, Bid Ops can easily analyze these behavior patterns and offer personalized responses – comments – bringing everyone pretty closer to a potential win in any particular deal.

Ultimately, suppliers want to know their place in this entire process. Bid Ops suggestions are being generated by using 3 main factors – the personality of the individual resource representative, the general personality of the negotiation itself, and the occupation of the relative resource (meaning the old relationship of the resource with the buyer of that specific contract). Some new suppliers are suggested to make a significantly lower opening offer to give them a good opportunity in order to overcome the traditional bias towards existing suppliers. This leads to more options & competitive practices leading to maximum savings.

With Bid Ops, the buyers can easily set their goals and intentions to negotiate the deal in advance or rely on a particular set of negotiation templates for the best practices. It allows the entire contract negotiation cycle so as to run faster. By gaining insight into the way it negotiates with a specific supplier, the buyer can actually offer that supplier better terms, more deals, and faster closing positions.

In addition to this, vendors who win on Bid Ops are recommended to other buyers from the same type of buyer. From the game theory point of view, various traditional supplier negotiations are the dilemmas of prisoner: if the supplier does not take the deal, they will also lose everything in exactly the same way that a criminal suspect who refuses to accept the complete responsibility for the entire crime that can be found (if the other prisoner accepts the acknowledgment deal first).

However, strategic relationships also provide a perfect solution to the procurement outsourcing problem: the dilemma of prisoners where both sides know that the dilemma will be repeated creates an alliance of the mutual trust for its composition because the benefits of long-term cooperation outweigh its short-term benefits of competition. In addition to this, by creating additional advantages for winning suppliers, Bid Ops also allows buyers to align incentives effectively around long-term partnerships with quantifiable advantages for both sides.

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