Cognitive Procurement — Autonomy, Agility and still in it’s Infancy.
Procurement is undergoing a digital facelift.
The ball has started rolling, but when will it reach its final destination?
Some experts in the field would say the nearest finish line — in sight — is cognitive procurement. While this may be the case, few procurement pros have any idea how to reach that goal. Moreover, technology is linear, and infinite. Meaning, the finish line is continuously inching forward.
Best we can do…. Put intelligent solutions in the hands of capable professionals, and continue to push the envelope in our discussion of emerging technology.
Where there’s a will, there’s a way
Transforming the traditional confines of today’s procurement will take time, money and education, but where there’s a will there’s a way.
Deloitte’s 2017 Chief Procurement Officer (CPO) Survey illustrated that there is a will to adopt emerging digital solutions and technologies, but the timeline for integration is very uncertain.
“90% of executives anticipate that their industries will be disrupted by digital technologies.” However, “only 44% are adequately preparing for disruptions to come, and only 5% have leading class capability” (Deloitte CPO Survey 2017).
There is a strong feeling that an inadequacy of preparation of coming technological disruptions stems from a lack of internal competencies regarding digital procurement.
Leaders of the pack are already working with intelligent solutions within their procurement operations and strategies. One of the technologies most sought after for purposes of integration, within procurement, has become Artificial Intelligence (AI).
To learn more about AI, and its applications within procurement and supply chain management read here.
AI is the basis for the future of procurement autonomy. Today’s autonomy serves as a great aid for procurement professionals; streamlining daily tasks. Tomorrow’s autonomy may serve as a replacement for procurement professionals.
KPMG’s Managing Director of procurement practice, Len Prokopets, offers a framework for understanding procurement autonomy and the capacity of procurement AI by breaking it down into 3 classes (techemergence.com 2017):
- Class 1: Basic Process Automation — streamlines daily transactional activities that are rule-based and repetitive.
- Class 2: Enhanced Process Automation — ability to restructure and comprehend unstructured data sets, and utilizing that intelligence to adapt in a business environment.
- Class 3: Cognitive Automation — operated with complete autonomy based on the intelligence of complex algorithms. Cognitive automation can serve as an embryo of decision support based on comprehension of data set patterns (KPMG 2017).
What is Cognitive Procurement?
In order to understand what cognitive procurement is, it’s important to first understand what cognitive solutions are.
Procurious offers an easy-to-grasp definition of cognitive technology:
“Cognitive technologies are products of the field of artificial intelligence. They are able to ingest data and continuously learn as humans would, but with data on an enormous scale. They can perform tasks that only humans could, thereby allowing the workforce to concentrate on more innovative work streams. Cognitive technology now brings the capability to ingest all (even unstructured) data, and can understand its meaning, reason and context to generate hypotheses, arguments and recommendations […]” (Fekete 2016).
So, cognitive procurement is procurement aided by the autonomous capabilities of cognitive — artificially intelligent — technologies. The capabilities of cognitive computing — to be implemented by procurement teams — are things such as data mining, patter recognition, forming of predictive analytics, and natural language processing.
How can Cognitive Technology become Cognitive Procurement?
Application is the key to cognitive procurement, and more autonomous procurement operations as a whole.
The technology exists. So, finding areas for application and perfecting the operationalization of digital solutions is where the real challenge lies. Thanks to the movers and shakers of the procurement world, many of these applications have been — at the least — theorized.
Keep in mind, cognitive procurement is a method, utilizing disruptive technologies. It will not just aid the traditional role of supply chain management; it will replace the role of supply chain managers.
Some of the low-hanging fruit for applying cognitive procurement methods would be:
- Replacing the use of supply chain assistant
- Replacing the need for purchase order systems
- Ability to replace the need for supplier on-boarding workflows
- Ability to automatically forecast prices, create templates and assess/evaluate suppliers (Zagorin 2017).
Bertrand Maltaverne, a respected digital procurement thought-leader, dives a bit deeper into the potential for cognitive procurement assistants.
The capability of cognitive technologies could create a more intelligent assistant, that could create opportunities for procurement agility like never before.
Maltaverne hypothesizes his intelligent procurement assistant by placing it in the context of reacting to a natural disaster. This is a situation arising in global supply chains on a weekly basis. Lack of agility for reacting to these sort supply chain risks can be detrimental for a procurement body and consequently, top-line brand value.
Cognitive technology could start a chain of automated messaging, based on data gathered from open-sourced data, regardless of its structure-state.
“The Procurement assistant learns immediately about the event because it is connected to external sources of information (there are many providers of supply chain risk management technology that enable that) or to public sources of information (news outlets or social media, for example). It will then:
· list all impacted suppliers and what the organization buys from them
· identify existing alternate sources
· prepare a report with prioritized recommendations for action” (Maltaverne 2017)
Shown below is a hypothesized conversation that a chatbot function — within a cognitive system — would initiate with the pertinent procurement professional.
Other applications of cognitive procurement could be contract management, sourcing and market analysis, market intelligence and spend analysis (ncsu.ed 2016). Some vendors have already begun exploring the capabilities of providing completely autonomous/cognitive solutions.
These are thoughts and dreams for now. But, they’re not far off from becoming a reality.
Keeping it real
Let’s take a step back from our buzzword fuzz.
Agility and disruption will continue to happen in the field of procurement, and other elements of supply chain management. But, the boundaries to adoption must be addressed for the simple fact of keeping things real.
There is a lack of understanding amongst businesses and procurement leaders as to how AI and like-technologies will be implemented into the daily operations of supply chain management.
I apologize if this is news to you.
In fact, Deloitte CPO Survey found that 50% of the 480 CPO’s don’t see automation and robotics (AI, ML, Chatbots etc.) as a concern whatsoever in today’s procurement functionality.
However, by 2025, that percentage will be marginalized to only 7%.
The classic dichotomy:
The want to chance vs. the capacity to change
Regardless of where you fall on this spectrum, technology is carrying on without you; literally.
Until next week.
This publication is brought to you by author Sam Jenks, but also on part by Kodiak Rating — A Supplier Relationship Management SaaS functioning out of Stockholm, Sweden. Kodiak Community intends to challenge traditional business practices with innovative thinking and creation.
