How Can AI Improve Strategic Sourcing Reports?

There is already significant discussion about AI in procurement. Common use cases include supplier research, creating RFP questions, summarizing proposals, contract analysis, and sourcing automation.

Another valuable use case comes later in the strategic sourcing process.

Before a sourcing report reaches the stakeholder, AI can help review it for mathematical errors, missing supplier information, significant pricing outliers, inconsistencies between the executive summary and supporting analysis, unusual assumptions, and presentation issues that could make the report difficult to understand.

The objective is not to have procurement AI select the winning supplier.

The objective is to give sourcing professionals another set of eyes on a large amount of information before stakeholders use that information to make a decision.

Turning Strategic Sourcing Knowledge Into a Repeatable Process

One of the bigger opportunities for AI and strategic sourcing is capturing institutional knowledge.

K2 Sourcing has been conducting strategic sourcing projects since 2003. During that time, our consulting practice has accumulated significant knowledge around RFP management, supplier evaluation, proposal comparison, sourcing analytics, negotiations, reporting, and stakeholder decision making.

We have incorporated that knowledge into customized AI agents that help our team review sourcing reports.

Our analysts and project managers put their reports through the AI review process and work through multiple rounds of feedback before the report reaches an account manager for final approval.

That changes the traditional review process.

Historically, an analyst might complete a report and send it to a senior manager. The manager would identify issues, return the report, review the revisions, identify additional issues, and continue that process until the report was ready for the client.

Much of that knowledge historically resided with the senior manager.

AI allows us to move more of that knowledge earlier in the process.

The agent can look for many of the issues our experienced sourcing professionals have learned to identify over years of reviewing RFPs and sourcing analyses. Analysts receive feedback, revise the report, and can then submit it for another review.

By the time the account manager sees the report, many of the normal corrections and questions have already been addressed.

This does more than save time. It helps make knowledge capital repeatable.

Analysts receive feedback earlier. Reporting becomes more consistent. Errors are more likely to be identified before reaching the client. Senior sourcing professionals can spend more of their time on judgment, negotiation, supplier strategy, and stakeholder decisions.

AI Should Support Procurement Judgment, Not Replace It

There is an important distinction between using AI to review sourcing analysis and allowing AI to make the sourcing decision.

An AI sourcing tool may identify the supplier with the lowest evaluated cost. It may not know that a particular plant had serious performance problems with that supplier several years ago.

It may identify a lower cost substitute without fully understanding the operational implications of changing the specification.

It may calculate substantial savings while being unaware that a stakeholder places significant value on a particular capability, location, service level, or existing supplier relationship.

Those decisions still require people.

Procurement professionals, operations, engineering, IT, finance, legal, and other stakeholders need to apply category expertise and business judgment.

The role of AI in strategic sourcing should be to help those people make decisions using information that is more accurate, complete, consistent, and easier to understand.

Software Sourcing Shows How Complicated Proposal Comparison Can Become

Software sourcing is a good example of where AI can help with complex supplier proposal analysis. Two suppliers may be competing for the same business while using completely different commercial models. One may price by user, another by usage, and another through an enterprise license. On top of that, procurement may need to compare implementation costs, integrations, training, support, optional modules, future growth assumptions, and recurring versus one time costs.

The challenge is not just collecting the information. Procurement has to normalize it into a true apples to apples comparison. AI can then provide another review layer by looking for missing information, inconsistencies, unusual results, or calculation concerns before the analysis reaches stakeholders.

The final test is whether procurement, IT, finance, legal, and executive leadership can quickly understand the real differences between the suppliers without having to become experts in every pricing model.

Multi Site MRO Procurement Creates a Different Type of Complexity

MRO procurement creates complexity through volume. A multi site sourcing event may include several incumbent distributors, hundreds or thousands of SKUs, different buying patterns by plant, product substitutes, freight, rebates, local agreements, and national pricing opportunities.

There may be many valid ways to analyze the results, including by plant, supplier, product family, manufacturer, or SKU. That also creates more opportunities for an incorrect formula, unusual unit of measure, questionable substitute, or pricing outlier to distort the analysis.

AI can help review the underlying calculations, identify outliers and missing information, and assess whether the executive summary accurately reflects the supporting detail. The goal is to turn a very large amount of sourcing data into a recommendation that stakeholders can understand quickly and trust.

Can Your Sourcing Report Pass the 30 Second Test?

A strong strategic sourcing report should contain substantial supporting detail.

But your stakeholders should not have to read all of it to understand what happened.

Ideally, someone opening the report should be able to determine within approximately 30 seconds:

• What are the best economic options?

• Who is the incumbent supplier?

• What is the potential savings?

• What are the major differences between suppliers?

• What risks or assumptions deserve attention?

• How difficult would a supplier change be?

• Which suppliers warrant additional analysis or negotiation?

The detailed sourcing analysis should still be available for anyone who wants to drill deeper.

The key is creating the right layers of information.

Give executives and senior stakeholders the answer quickly. Give procurement and functional experts the detail they need to validate it.

The Bigger Opportunity for AI and Strategic Sourcing

Much of the conversation about procurement AI focuses on generating content or automating individual tasks.

Those are useful applications.

But one of the most valuable uses of AI in strategic sourcing may be much simpler:

Help make sure the work is right before somebody makes a decision based on it.

When artificial intelligence is combined with experienced sourcing professionals and a disciplined strategic sourcing process, it can help identify errors, expose gaps, improve consistency, accelerate analyst learning, and make complicated information easier for stakeholders to consume.

That also changes where experienced procurement professionals spend their time.

Instead of repeatedly correcting formulas, formatting, or common reporting problems, senior sourcing professionals can spend more time where their experience creates greater value.

Strategy. Negotiation. Supplier decisions. Stakeholder management. Judgment.

How Confident Are You in Your Next Sourcing Report?

Open the executive summary from your latest RFP or strategic sourcing project and give yourself 30 seconds.

• Can you immediately understand the economics?
• Can you identify the leading supplier options?
• Can you see the important risks and assumptions?
• Can you understand where additional investigation is required?
• How confident are you that the hundreds or thousands of calculations, assumptions, supplier responses, and data points underneath that summary are correct?

That is where we believe AI and strategic sourcing fit together particularly well.

AI does not need to replace the sourcing professional.

It can help make the sourcing professional, the analysis, and ultimately the stakeholder decision better.

Want to See How Your Sourcing Report Holds Up?

K2 Sourcing can run one of your sourcing reports through our AI supported review process and provide initial feedback at no cost. We can look for potential errors, missing information, outliers, reporting issues, and opportunities to make the analysis easier for your stakeholders to understand.

Get Your Complimentary RFP Report Review

We use Fillout to collect the basic information about your sourcing event and route the uploaded report to the K2 Sourcing team for review.

Concerned about confidentiality? You are welcome to redact supplier names or other sensitive information before submitting the report. You can also submit only portions of the analysis.

If you would rather not upload a document through the form, you can contact K2 Sourcing directly and we can discuss another way to review the information.