Cognitive Sourcing Study: Manufacturing Organizations Making Slow, Steady Progress Towards Digital Transformation, Led by Early Adopters – Business…

SAN JOSE, Calif.--(BUSINESS WIRE)--LevaData, the company that delivers applied AI to transform strategic sourcing and procurement, has announced the results of its 2019 Cognitive Sourcing Study. The full report is available today at the 2019 Cognitive Sourcing Summit in San Jose.

The study addressed the concerns of more than 200 senior procurement and supply chain leaders at global manufacturing firms in the high tech, consumer goods, industrial, automotive, and life sciences industries and looked at the practices and systems manufacturing companies use for sourcing and new product introduction (NPI), with a focus on the adoption of transformative technologies.

This years survey shows that a surprisingly high number of enterprise NPI and sourcing teams are still using the same analog systems and processes that they have been using for more than 20 years: individual category managers with spreadsheets. The lack of centrally located data alone exposes these companies to significant risk, explained Rajesh Kalidindi, founder and CEO of LevaData. Meanwhile, a small but growing number of companies are adopting transformative technologies that will allow them to strategically consider millions of data points affecting the supply chain and product engineering. These companies are able to significantly outmaneuver competitors.

U.S.-China Tariffs Are Top of Mind

Almost all of the respondents, 89%, are concerned that tariffs will cause production costs to increase over the next year. The top five U.S. industries they expect to be hardest hit are industrial manufacturing, consumer goods, automotive, technology, and telecommunications.

Respondents noted a range of tactics theyre likely to take to reduce the impact of the expected cost increases:

As manufacturers consider restructuring their supply chains in the wake of tariffs and global uncertainty, they cited U.S. cities with a high cost of living that theyll seek to replace or avoid New York (32%), Los Angeles (15%) and Miami (9%) in particular. Hong Kong (15%) and Shanghai (9%) were the two Chinese cities in the top five that manufacturers plan to move away from.

And, while respondents think the tariffs will be more harmful to North America than China in the near term, a majority believe the U.S. (45%) and Canada (26%) will benefit in the long term.

Progress Toward Digital Transformation Is Slow but Steady

A surprising number of manufacturing organizations still rely on outmoded analog processes, but there is increasing movement toward advanced technology solutions:

While only 8% report using a purpose-built sourcing platform in 2019, this signaled significant AI adoption compared to 2018 (5%).

Organizations Limited by Narrow View of Strategic Sourcing Success

But manufacturing organizations arent just limited by analog processes. There is also a pervasive failure to think about strategic sourcing on a larger scale.

Although theres a clear opportunity for strategic sourcing to improve a companys speed and agility, only 5% of respondents cited building a competitive advantage as a key measure of strategic sourcing success. The majority (68%) were focused on cost- cutting.

Additionally, strategic sourcing, procurement and NPI teams continue to be handicapped by the amount of time they spend fighting fires: 46% of respondents say at least a quarter of their time is spent on these tasks. Compare this to best-in-class companies, which weve found spend less than 15% of their time this way, Kalidindi added.

Finally, despite the fact that most respondents (60%) view their procurement teams as excellent partners, they may be considering them from a traditional perspective. Confidence in this team to handle digital transformation continues to decline; in 2017, 52% of respondents felt this team was somewhat or very ready for digital transformation, but this figure declined to 46% in 2018 and to 40% in 2019.

About LevaData

LevaData helps global enterprises improve gross margins by reducing supply chain costs, with a focus on delivering measurable and accountable supply chain solutions and strategies that transform companies. The unique LevaData Cognitive Sourcing Platform allows customers to sense, recommend, act and learn. Customers include leaders in the top global supply chain organizations, as well as medium-sized OEMs seeking to achieve best-in-class direct materials sourcing practices. LevaData is headquartered in San Jose, California. For more information, visit http://www.levadata.com.

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Cognitive Sourcing Study: Manufacturing Organizations Making Slow, Steady Progress Towards Digital Transformation, Led by Early Adopters - Business...