Impact of Digital Technologies in Procurement and Supply Chain

Impact of Digital Technologies in Procurement and Supply Chain

In the past decade or so, automation, cloud technology & designing efficient procurement processes were some of the key focus areas for the IT and Procurement leadership at most organizations. Various packaged ERP vendors such as SAP or Oracle have addressed the same very well, which provide customers with options for Cloud as well On Premise installations, promising high automation of processes, zero downtime, scalability, security and lower total cost of ownership. While, the organizations are still transitioning to cloud or reaping benefits of the automated software, newer digital technologies are making inroads to building cognitive capability in these tools and beyond. Artificial Intelligence (AI), Machine Learning (ML), Natural Language Processing (NLP), Robotic Process Automation (RPA), Internet of Things (IoT) and Block chain are the buzzwords, which are generating much interest among executive and technology leaderships. These technologies have the potential to make enterprises intelligent and augment the existing decision making ability, which could help propel organizations to higher market share, revenues and profitability. Organizations that can harness the capability of these technologies will not only transform their business but will also lead the future.

Businesses all over the world have been relying on Digital transformation specialists more than ever to help them navigate through this change faster than their competitors. This article intends to discuss the latest advances mentioned above and its impact on the procurement landscape.

Artificial Intelligence (AI), Machine Learning (ML), Natural Language Processing (NLP) and Robotic Process Automation (RPA)

AI simply defined is a simulation of human intelligence. A smart algorithm, which gives key insights and solves complex problems, could be termed as AI. ML a subset of AI are statistical based programs that can be trained with varying degree of human intervention to solve problems. NLP gives the ability to read and interpret human text, which has its application in scanning offline and online documents & generating useful information. RPA is helping organization by using bots to automate redundant tasks or improving operational efficiency by workflow automation, monitoring inventory levels, payment processing and so on. The following section highlights some of the key applications of the discussed technologies:

Enhance User Experience & Better strategic decisions

Use big data, which includes data on users, suppliers, master data or transaction data built over time to find patterns and give recommendations on products.

Reduce Supplier Risk

Using supplier profile and transaction data to determine risks associated with continuing business with a supplier or finding any peculiar price variations of commodities from suppliers.

Vendor and Spend Categorization

Analyzing large number of invoices to understanding spend across commodities or product categories, or to find relationships between multiple suppliers involved for freight or procurement but which are subsidiaries of a large international supplier. Machine Learning algorithms can help classify spend data into product taxonomies.

Mining Contracts and other Procurement Docs

Natural Language Processing can enable text parsing of contracts, invoices to generate key insights. Optical character recognition (OCR) can infer texts from images. Moreover, voice based assistants or chat bots can help automate redundant tasks and facilitate order or payment processing.

Block chain and Internet of Things (IoT)

Block chain and IoT have the potential to redefine how contracts are managed or how orders & payments are processed. A trusted distributed network of suppliers and customers, which has its own governance framework on a block chain based ecosystem will allow enterprises to ensure product authenticity, track governance, enhance customer loyalty and improve inventory management. While IoT can allow seamless exchange of data between ERP systems, shipment vehicles and logistics vendors to create a self-sufficient and intelligent model to track shipments, manage inventory, supplier discovery and spend visibility.

A block chain solution will provide a single source of truth and smart contracts will enable automated ordering and vendor payments. In addition, accurate forecasts, preventing over ordering and minimized lost sales are some of the key benefits of the improved & well-integrated supply chain using block chain across multiple organizations.

Cognitive Procurement

Advanced digital technologies working together has given rise to a new term called Cognitive Procurement. When AI, ML, NLP, RPA, Block chain and IoT operate in harmony, they bring in means to crunch vast amounts of data and apply intelligent algorithms to augment advanced decision making, minimize manual intervention in processes and give a highly automated & enriching experience to the user.

Looking Ahead

AI may not be able to replace a human procurement expert who drives strategic sourcing, price negotiations, organizational change or supplier relationship building including personal experience interacting with a human. However, the benefits of these technologies will transform how organizations function. The varied application are still evolving and discussions underway as to how AI can be made more responsible and effective. In addition, early adopters will be able to influence the development of these technologies, networks and may have a say in the governing rules defining their application.