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Use AI to bridge the gap between marketing and procurement for better profitability
Al Girardi |
April 11, 2024 |

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It’s no secret that marketers have sometimes viewed procurement teams with suspicion if not outright hostility. Make no mistake, we have seen real progress in recent years but some friction persists.

Unfortunately, this friction creates a cascade of problems, beginning with the lack of insight into product profitability. Marketers driven by consumer trends and brand promotion often find themselves operating in a vacuum, detached from the financial implications of their strategies. Procurement and supply chain leaders are charged with minimizing costs across a complex, multi tier and multi geography value chain comprising hundreds and thousands of suppliers, not infrequently with little awareness of consumer or marketplace trends.

This misalignment results in excess inventory, leading companies to resort to steep discounts to clear shelves. Over the last two years, retailers of every stripe from Costco to Target have had sizable inventory gluts. Several were forced to aggressively discount prices, hurting operating margins, working capital and share prices.

We’re now witnessing this play out in computer chips. Just 16 months ago, a global scarcity nearly shut down manufacturers. Today automakers have excess inventories, which may lead to a selloff in shares of auto chip suppliers later this year.

With many years and millions of dollars invested in ERP systems and consumer data, how did so many great companies get this so wrong? And how can we do better?

Marketers, like me, need to understand that supply chain management is not a remote back-office function but integral to sustainable, cost-efficient and profitable growth. Similarly, procurement professionals must be far more agile to meet the market’s fast-changing needs. Yes, three year fixed priced contracts with key suppliers have downsides as well as upsides.

The good news is that AI is creating opportunities for marketing, procurement and supply chain professionals to work better together, which will enable companies to better integrate these functions to drive competitiveness.

Here’s how companies are resetting the pivotal relationship between marketing and procurement:

1. Integrating Sales Forecasting With Supply Chains

Sales forecasting is notoriously difficult, requiring a wealth of accurate data as well as the ability to analyze it fast enough to deliver insights in time to be useful .AI excels at processing data, crunching the numbers and providing insights. As a result, companies should look for opportunities to deploy AI to help their marketing and procurement teams make real time, data driven decisions regarding vendor evaluation, risk analysis, supply chain predictions and more.

2. Gaining Visibility Into The Entire Supply Chain

AI plays a critical role in end to end transparency by giving real time insights into the entire supply chain.

Procurement teams should be using AI to gain real-time awareness of their supply chain and the various components that comprise it. Teams should especially be relying on AI to quickly adjust for supply shocks, such as oil spikes, tariffs and more, giving them the ability to mitigate associated risks.Siemens is one such example of a company that uses AI to mitigate supply chain disruptions. The company recently experienced a shortage of Surlyn and used an AI solution to quickly find alternate suppliers.“Technology doesn’t give you visibility to reliably prevent supply disruptions before they happen, but it can give you information that can help you respond to supply-chain disruptions much faster than human buyers can,” Michael Klinger, Siemens’s senior director of supply chain excellence, told the Harvard Business Review.

3. Providing Real-Time Intel On Sales Prices To Power Procurement

To compete with Amazon, Walmart, a renowned leader in supply chain management, is investing even more heavily in its supply chain capabilities by increasing fulfillment capacity and warehouse automation and equipping distribution centers to deliver aisle and department-ready pallets to stores, all the time reducing both shipping time and cost. In short, Walmart has upped its game by better integrating its global supply chain and marketing initiatives to optimize inventories and maximize product margins.

Today, agility and adaptability are essential to survival in the commercial world. The fact is that the traditional disconnects that separate marketing, procurement and supply chain teams impede not only profitability but also core competitiveness. Indeed, inertia here is a sure path to eclipse, irrelevance and collapse.

Author: Al Girardi

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