FinTechAutomationThe case for AI in procurement

The case for AI in procurement

If your procurement organization is ready for digital, it's ready for artificial intelligence, according to one of the opening keynotes at SAP Ariba Live 2019.

In the opening session of SAP Ariba Live 2019, Kathy Hinton, founder of Agilitology LLC, a firm dedicated to making leaders and their supply chain organizations more agile to accelerate performance, and Tamara McCleary CEO of Thulium, a social media marketing agency focused on strategy and analytics, discussed the role of technology in procurement. Here’s a round-up of the Q&A.

What’s the big talking point in procurement technology at the moment?

Kathy Hinton, founder of Agilitology (KH): “Artificial Intelligence (AI) is the buzzword of the year, I think we can all agree. Every conference you go to, AI seems to be the focus on conversation. And with reason – almost every day we hear of innovative ways that AI is transforming business practices. But what does this have to do with procurement?

“If your procurement organization is ready for digital, it’s ready for artificial intelligence. It’s no buzzword we’re talking about – it’s happening – IoT asset tracking big data benchmarking, supplier risk identification, AI chatbots supporting sourcing, spend classification with machine learning and so on is here. Machine learning spend classification is already advancing the long tail spend management.”

What about the challenges of AI disruptive technologies?

KH: “Besides the obvious security implications, data privacy issues and considerations, there’s catastrophic issues and system wide failure if the tech is implemented prematurely. The people aspect is absolutely critical. If any tech is implemented prior to human workers being properly educated and fully understanding what the technology is about, you can have a huge fallout.

“A strong data foundation is absolutely mission critical for machine learning too, because we know it absolutely craves and eats data, so you have to have that strong data foundation. And then there are integration issues. You need your CRM, your ERP and financial systems fully integrated in order to access all the data required to make effective strategic decisions.”

How do you address these technological challenges around innovative technologies with your customers?

Tamara McCleary CEO of Thulium (TM): “Within supply chain management, you have to foster and reward innovation. You have to allow your people to take risks, because true innovation is taking chances, taking a leap forward. You have to work and encourage innovation, and you have to work with your suppliers to help them adopt your technology, whether it’s SAP Ariba or something else. You can just leave them on their own and throw out a memo to them saying we’re going live today. They’re integral to your success. And your people are integral to that success as well. The message they deliver to business stakeholders is extremely important. If they’re all walking around grumbling it’ll be a difficult day. People are extremely important even though AI may feel threatening.

Could you give us a tangible example of how to integrate innovation into the supply chain?

TM: “One way I’ve done it in the past is to ensure that in the quarterly business reviews that you’re holding with your suppliers, and the scorecards you’re delivering to them, that you include an element of innovation into that scorecard. You actually evaluate supplier performance on all of the usual factors, but also on their ability to bring innovative ideas to you which are implementable. Your ability to share back with them is also important so that you can improve one another over time. This has been a very effective tool in creating something that’s measurable.

How can disruption help the world spend better?

TM: “From identifying new markets, tracking exchange rate volatility, to managing risk and identifying the best suppliers, I think we can spend better using artificial intelligence to leverage big data to streamline processes and improve decision making. AI is right there at the helm of advanced strategic planning.”

KH: “I think it’s still something of a dream. We’ve got disparate data and disparate systems. When you buy a company you find they have very different data sets, and you have to have a way to pull together all those spend analytics, so that they’re normalized, so they make sense, and so that you can consume that data in a way that enables you to deliver value to your company. So really, it’s matter of trying to get intelligence and data.”

TH: “I think when spend analysis is unlocked with artificial intelligence, business can really understand the total cost of doing business with a supplier, which is absolutely critical. And my biggest takeaway from all this is the need to ask yourself what the cost of failing to implement new technology really is.”

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