Procurement Gets Smart

Victoria Kickham is a freelance writer specializing in manufacturing, distribution and supply chain issues

Cognitive procurement solutions aim to improve supplier management, contracts and sourcing, Cognitive procurement By Victoria Kickham.

Technology has done much to improve the efficiency of the procurement process, but even more change is ahead as the supply chain becomes increasingly digital. Cognitive procurement — namely artificial intelligence platforms such as IBM Watson — may just be the next big thing.

“What can be automated is going to be automated — that is the reality,” says Paul Devlin, general manager, Europe, Middle East and Africa and Middle and Eastern Europe, for SAP Ariba, which announced a new partnership with IBM to develop cognitive procurement solutions for business to business buyers and sellers. Such technologies will not only enhance and streamline daily processes and procedures, but, more importantly, shift employees’ focus from the mundane to the value-added.

Devlin explained: “In the context of procurement and supply chain, that means better, more meaningful relationships.”

SAP Ariba and IBM’s global strategic alliance will develop cognitive procurement tools bringing together intelligence from procurement data, such as transactions and pricing, with predictive insights from unstructured data, such as weather and other supply disrupters. This will help companies make better decisions about supplier management, contracting and sourcing. The companies will also develop a ‘cognitive procurement hub’ to research emerging technologies, such as blockchain, to see how they can best be applied to procurement.

Better buying decisions
So, what does all this mean for electronic component buyers? The crux of the issue is information, with cognitive technology applications promising better access to better information.

Devlin added: “Cognitive technology is about presenting new opportunities that allow you to predict and respond. That’s what we believe starts to fundamentally change how buying and selling is being done.”

Applications that help buyers choose the right type of request for proposal, the best time to buy a particular part, or that alert buyers to supply disrupters in real time, will enable better decisions. And that can go a long way toward levelling the playing field for small and mid-sized companies, says vice president of engineering at 3M, Deb Fronczak, who notes that large companies often have easier access to such information today.

Fronczak commented: “All of a sudden, Watson is telling you live, and giving you information in terms of your data, your sourcing, your procurement. Those types of data points are going to potentially level the playing field on sourcing.”

Streamline processes
Devlin points to contracts as an area where procurement professionals can expect to see some initial applications of cognitive technologies. For example, when you find a new supplier in China or Russia or India, how do you bring the unstructured data of the two companies together to create a contract?

The IBM/SAP partnership aims to create applications that can automatically identify relevant terms and conditions matched to a legal library and taxonomy, uncover similar contract terms for a specific commodity by industry or region based on benchmarking data and suggest optimal prices, based on anticipated volume and contractual discounts.

Devlin concludes: “Everything is geared around the user experience and how you simplify it — how you shrink things that today are very complicated. We are enabling companies to understand and deal with the outliers in their industry so they can focus on where value is driven.”