Fifteen years ago, when I first worked on a procurement spend analytics engagement with a big aerospace company, the stated objective in the first slide was ‘to get the spend visibility across multiple plants globally and then to rationalize it to identify potential savings.’
Last week I heard an executive from a manufacturing company asking, ‘how can I possibly use innovations like IoT, AI, Blockchain, etc., to get better and real-time spend visibility, and identify areas where I can save and then implement those strategies in sourcing?’
So in almost two decades the problem statement remains nearly the same, but the expectations from innovative and disruptive technologies to solve these problems have changed. Now the industry wants it in real-time, wants it accurate, and wants to go beyond identifying things; the industry wants to implement changes and gain benefits. It also shows the gap w.r.t developing business cases for the industry. Everybody is talking about how big the IoT industry is going to be and how Blockchain will turn your world upside down, but only a few have come up with real-world business solutions that leverage these technologies.
The Supply Chain and Procurement world is witnessing a fundamental shift due to digitization, and the convergence of both is imminent. IoT, AI, Blockchain, and Analytics are breathing life into an extended digital supply chain, where the availability of real-time information, authenticity of the information source, traceability, and monitoring plays a vital role.
IoT brings visibility or rather gives clarity as to what is needed and what is being used. The ability to accurately predict needs will impact the sourcing strategies and contract management. It will improve procurement productivity and gain actionable intelligence through analytics.
Smart Contracts using Blockchain will bring another shift in tracking and compliance. It’s an ‘electronic’ contracts based on automated actions that are triggered by predefined events. Such agreements will be used for automatic execution of payment terms in case of an in-quality and on-time delivery. In a multi-stakeholder contracting, the fully automated order calls through smart contracts, bringing much ease to contract compliance monitoring. Blockchain will help solve some of the challenges faced until now in Supply Chain procurement like lack of transparency because of inconsistent or unavailable data, the high proportion of manual work, lack of interoperability between functions, and limited information on the product’s lifecycle journey.
As such, machine learning was always used for automating processes of data collection, data profiling, cleansing, normalization, and classification to get the right data and spend visibility. Leveraging the massive compendiums of the historical knowledge base and patterns matching these algorithms were often successful in identifying potential savings in limited available datasets. The advancement in AI technology will accelerate this further. The ability to use and process big data, identify right categories, and parent-child relations of suppliers using AI will bring much-needed accuracy in spend visibility. To make an informed sourcing decision, all one now needs is clean and consistent data of suppliers and materials across systems, which would enable them to unearth hidden spend. In doing so, AI will help procurement as a continuous real-time process.
With more data becoming available and the number of connected devices increasing, procurement users will move towards mobility to manage things. Mobile procurement will therefore become a vital strategy. Right from requisitions, approval workflow to analysis and insights into purchasing activities, everything will be facilitated through mobility.
So will these innovative technologies bring you better spend visibility—yes. And it will be in real time, it will be more compliant, more predictive with better insights to define future strategies and be more accessible. Better technology solutions are needed though to stitch them together for the organization. Let’s talk about that some other day.