Category Archives: Generation Procurement

Is Artificial Intelligence Destroying Your Job?

Just because a machine can learn from mistakes doesn’t mean it is self-aware and about to deploy robots to destroy humanity throughout time and space.  But it does mean that increasingly, machines can take on more and more human work.

By Leremy / Shutterstock

On 11 February this year, President Trump signed an executive order directing US government agencies to prioritise investments in Artificial Intelligence (AI) research and development. There isn’t any detail on how the AI Leadership executive order will be paid for, but as a statement of intent right from the top, it’s pretty powerful.  So, is this something you need to worry about?  Will robots be taking your job next Tuesday?  Probably not, but the answer is not as reassuring as it sounds.

When we think of AI, we probably think of Skynet (the evil computer that hunts humans in the Terminator films) or the similar tricked-up calculator that is the meanie in the Matrix films.  But real AI is a little more mundane.  It is more likely to be making sure your car headlights are on when you need them (and not on when you don’t), sending a nuisance spam call to your voice-mail or suggesting the next thing to watch on Netflix.  AI is the catchall term for software that can solve problems based on rules rather than a linear set of fixed instructions.  Really advanced AI can modify the rules based on how things turned out the last time or patterns that it detects in the environment.

Just because a machine can learn from mistakes doesn’t mean it is self-aware and about to deploy robots to destroy humanity throughout time and space.  But it does mean that increasingly, machines can take on more and more human work.  In recent decades we have seen this kind of automation steadily eat away at assembly line jobs as increasingly AI driven robots replace workers performing limited and repetitive functions.  A robot can sort big apples from small oranges more efficiently than a human and it never needs to take a break (or be paid). 

As the technology advances, it’s starting to creep into areas we might have thought of as immune from automation.  Medical diagnosis is increasingly the target for deep learning AI, the kind that recognises patterns and makes predictions based on those patterns.  During their career a doctor might see a few thousand x-rays or MRI images and get better at noticing patterns.  But AI software can review every x-ray ever made before the doctor has finished her morning coffee. 

A recent study, for example, compared the diagnostic precision of AI software with that of teams of specialist doctors from all over China.  The AI software was 87 per cent accurate in diagnosing brain tumours in 15 minutes.  The doctors could only diagnose 67 per cent and needed twice as much time to do it.  The AI increased precision and saved time because it was able to learn from a much larger base of experience than any individual doctor or team of doctors ever could. It uses like this that are why AI is predicted to add $15 trillion to the global economy by 2030.

President Trump joined the 18 other countries that have announced AI strategies since March 2017, because he wants the US to be a leader in AI rather than a follower.  And it is why investment in AI based startups jumped 72 per cent to almost $10 billion in 2018 alone.  

And even though some analysts are predicting 1.8 million jobs will be lost to AI in 2019 alone, those same analysts are predicting that the AI industry will create 2.3 million jobs in the same timeframe.  You can’t buy buggy whips now because the industry that created them was destroyed by Henry Ford, but there are many more jobs in the automobile industry he created than there ever were in the one he killed.

When analysts from McKinsey looked at the employment impact of AI in five sectors last year, they concluded that jobs which use basic cognitive skills, such as data input, manipulation and processing will likely decline, while demand for higher cognitive, social and emotional, and advanced technological skills should grow, as will the number of jobs that require customer and staff interaction and management.

If your job could be classified as administrative support then the future does not look bright.  And even if it requires you to do years of training so you can manipulate or recognise patterns in data, like those Chinese doctors, a financial analyst or a military strategist then AI will be coming to a workstation near you within the foreseeable future.  Humans are still a little too messy and unpredictable for the average AI bot.  So, if your job needs you to interact with humans and please them, such as in direct sales, management or counselling, then you are probably safe, for now.  And of course, if you are writing the programs that drive the AI then your career is assured.

AI is rapidly changing the face of the modern workplace.  And while nothing much will change by the end of the year, by the end of the decade, most jobs will be unrecognisable.  You’ve been warned. It’s time to transform yourself from a data geek to a people-person, before your computer takes your job.

AI and Procurement: Boldly Going Where No Team Has Gone Before?

The battle of “human vs. machine” is raging in Hollywood and, increasingly, in the workplace. What does the future hold for AI?

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2001: a space odyssey… Terminator… The Matrix…

If you were to believe some of the sci-fi blockbusters, you’d think our future as humans is pretty bleak. They all offer a dystopian view of the future where, if the machines don’t kill us, they enslave us.

The battle of “human vs. machine” also seems to be raging outside of Hollywood, and we humans seems to be losing more and more ground to machines each year. Some of this ground has been lost in the world of gaming. Over the past decade, machines have been beating us at increasingly complex games more and more often. Looking back at these “wins” for the machines, we can see some key stages in the evolution of Artificial Intelligence (AI):

•    Deep Blue won against Kasparov at chess in 1997. It was rather dumb but powerful. With brute-force & human-created logic, Deep Blue was able to test and evaluate every possible sequence of moves at every turn and choose the best one.

•    Watson defeated Jeopardy champion, Ken Jennings, in 2011 and was smarter than Deep Blue. It had to understand natural language and find the relevant knowledge from various sources like encyclopedias, dictionaries, thesauri, newswire articles and literary works.

•    Google’s Alpha Go won against Go’s world champion Less Sedol in 2016. To achieve this result, it had to learn from humans from thousands of past games. This is because, unlike chess, which has a limited number of moves, Go is one of the most complex board games in the world, with more possible moves than the number of atoms in the universe. The second generation of Alpha Go learned by itself by playing against itself millions of times to discover what works and what does not.

•    Libratus beat four expert players of Texas Hold ‘Em poker. It also learned by itself and was able to understand behavior because poker is a game of luck, deception, and bluffing!

While very impressive, these victories also show that machines are still dumb when compared to everything that people can do. Machines excel at one thing and have the intelligence of a two-year-old or less for everything else.

What we can learn from sci-fi movies and the battles being waged on the gaming front, is that AI has many faces:

Today, despite all the hype and buzz, computers are still only at the narrow intelligence level. But even at this level, the potential applications of AI are endless.

As far as Procurement is concerned, the same applies: machines are far from being able to replace Procurement teams. Instead, new technologies have another purpose: augment people to achieve better outcomes.  This is a definite shift from the last waves of technologies, which were mostly focused on automation and staff reduction.

Machines in procurement get a promotion: from admins to colleagues and consultants

AI, in short, is all about learning from data to develop new insights and using this new knowledge to make better decisions. It is also about continuous learning and improvement. AI is a master of the “Kaizen” philosophy! This makes it a precious ally for Procurement and AI should therefore be considered as a team member within the broader Procurement ecosystem. Experience shows that “people + machines” get better results than people alone or machines alone.

Of course, in Procurement and in general, it is undeniable and unavoidable that AI will impact the future of work and the future of jobs. Work will continue to exist, despite potentially significant job displacements. While some jobs may disappear, new ones will come to take their place, and most will be transformed by the imperative of cooperation with smarter machines. Procurement jobs will also be impacted and future procurement professionals will require a new set of skills. For example, data analysis and modeling will become a core competency next to more traditional business and relationship management skills. This is because the “data analyst” component in activities will grow due to the collaboration with AI in order to:

•    Train AI and ensure that data is relevant, complete, and unbiased

•    Monitor outputs (recommendations, actions, insights, etc.) of the AI system to ensure relevance, quality, take more contextual / soft aspects into account, and safeguard against AI shortcomings.

Space: the final frontier. These are the voyages of the starship Enterprise. Its five-year mission: to explore strange new worlds, to seek out new life and new civilizations, to boldly go where no man has gone before.

To conclude on a more positive and optimistic note than where this article started, I have taken inspiration from another sci-fi classic.  I believe that the future lies in a new type of cooperation between humans and machine.

The duo Dr. Spock and Captain Kirk illustrates, to some extent, how such cooperation is possible and can offer the best of both worlds. By combining Captain Kirk’s instinct and emotional intelligence with Spock’s logic and reasoning skills, they were able to successfully tackle any challenge they encountered.

New developments like explainable AI (XAI) and “caring AI” will make machines of the future even more human and will allow them to take an even more active role in our personal and professional lives. AI will continue to augment us, not replace (or kill or enslave) us.

So, Procurement people, live long and prosper!

Voicemails Are Dead So Why Do We Use Them?

Why do we all have a voicemail system and why do people continue to leave them? Abby Vige discusses instant gratification

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When we’re stuck in the work grind and we see our phone light up with news from beyond our present moment, our spirits buoy a little! Yay! Then we drop when we realise it’s just a voicemail. It’s almost as bad as when you think have a text but it’s just spam from your telecommunications provider. Sigh.

Confession

I have to admit that I never clear voicemails, some people even state in their voicemail greeting that they do not clear them, so why do we all have a voicemail system and why do people continue to leave them?

Voicemails date back to the late seventies when a chap patented his unique “Voice Message Exchange” and sold the electronic message system to 3M. Since this master stroke of genius, we have never looked back. When voicemails were invented they made sense, there were no emails and faxes were yet to reach their peak. But do they make sense as a business or connection tool in this modern era?

A message from beyond

The reason I don’t tend to clear my voicemails, is because as soon as someone leaves one the news instantly old. Or, there is very little information that warrants the effort of clearing them all and then phoning each individual back “hey, Susan from accounts here, phone me back” why should I?

Enter the experiment phase…

After having this question kick around my head for awhile, I decided to scratch the itch of my curiosity and prove what I thought to be true. I listened to every voicemail across 2-3 days and phoned each person back, the top results were:

  • They had already emailed me the query and was surprised I was phoning them
  • The issue at hand had substantively evolved
  • They had found out the answer themselves

The motivation for them to leave the voicemail had initial merit, but in some instances, just minutes later the situation had changed. My stark conclusion was that most of the conversations were in effect, a waste of time.

Now, I don’t want to be seen as a VM hater, Procurement is a customer centric, customer service industry. But this is not the way I add value to my customers or to my organisation. Voicemails fall in to a “reactive” space for me and I’m much more of a pro-active gal. I love to be accessible to my customers, but you’ll often find me at their desks in person because face to face conversations are worth it.

What’s driving Susan?

The experiment was interesting and somewhat validating but the question remains, why do we feel the need to leave the dreaded VM in the first place? Most people assume that it’s because email as a written form, takes longer to write out verses simply phoning the person and requesting that they phone you back. It’s also generally accepted that voicemails enable us to convey emotions and urgency.

But what is really driving us is more of a simpler basic human need, the need for instant gratification. The term itself is self-explanatory but it in this context what is driving us is our self-centric view of the world. Even though we know it makes sense to write an email and include more information and leave it for when the person is available to digest it, we forgo these long-term benefits in favour of short term benefits that resolve something in our world, we feel better.

This is subject that has piqued curiosity for many years and found its roots in pop culture through the 1960’s infamous “Marshmallow experiment”. This was a major psychological study conducted by Stanford Professor Walter Mischel where children between 4 and 5 years old were given the choice of having one marshmallow to eat right away or they could wait for the researcher to come back and they would get two. The results of watching the kids wait has been the subject of many a video and even adverts.

How this plays out at work

The desire for short term gratification is often exasperated by the pressures of a work environment where the sense of needing to get things done and done quickly rules supreme. What underpins the need for instant gratification? The need for the issue to be passed on, to be received – ultimately to be heard.

We eat the marshmallow over and over, we can’t wait, we can’t help ourselves. Those of us that don’t leave voicemails most likely transfer the gratification to other media or medium. Even your neat and pretty to do list or post it note system fits the short term satisfaction bill.

The biggest insight gained from the experiments was the link proven between delaying gratification and being successful in life. Those 4 and 5 year olds from the 1960’s that waited for the second marshmallow, had higher academic scores, lower levels of substance abuse, lower likelihood of obesity, better responses to stress, better social skills as reported by their parents, and generally better scores in a range of other life measures.

What we can learn

If we train ourselves to be less reactive and to delay those hard wired gratification urges, we can increase our productivity in focused and targeted areas. Ultimately raising our value to the organisations we work for, whether that is a company or working for yourself.

Take the challenge….

  1. Don’t leave voicemails
  2. Pay attention to your inner world, before you take action, think about what is driving that action
  3. Start small and repeat that small action each day
  4. Keep visual reminders about your top priorities
  5. Keep yourself accountable

Dynamic Purchasing Systems – The New Normal?

The framework is dead – long live the framework? As the public sector moves to make collaborative procurement easier, the Dynamic Purchasing System may be the key to long-term planning.

By Andrey Yurlov/ Shutterstock

So you know all about collaborative procurement frameworks in the public sector? Are you planning on using them in the short-term to kick start your year? You might want to hold on a second as there’s something that you might want to try out.

We have touched on collaborative frameworks that are available to public sector organisations in a previous article. Continuing the theme of the difficulties of collaboration, we come to a relatively new beast in the procurement jungle. This is the Dynamic Purchasing System (DPS).

Speaking from experience, it’s one of the hardest exercises I’ve done in my procurement career to date. Not only do you need to have all your stakeholders and requirements lined up before you even start (more on that shortly), but the complexity of the set-up has the ability to leave you scratching your head in utter confusion.

As hard a beast as it is to tame, once it’s in place it has the potential to solve a number of woes commonly associated with frameworks.

Let’s Get Dynamic

There are an increasing number of public sector organisations beginning to use a DPS as an alternative that still bears more than a passing resemblance to traditional frameworks. Buyers still have a list of pre-qualified suppliers who can compete in subsequent tenders, while suppliers can widen their chances by applying for as many Lots as they feel are relevant to their operations.

The key difference is that at the conclusion of the first stage, any suppliers who have been unsuccessful in their application for one or more Lots may reapply. They’ll then be re-evaluated and informed if they have been successful. A kind of ‘wash, rinse, repeat’ situation.

There are standard timelines involved both the first and second stages (see more here) and, unfortunately, it’s not a fast process. If you have never used a DPS, then you might wonder what actually makes it different from your standard frameworks. We’ll cover some Pros and Cons shortly, but in essence there are two key differences.

  1. The length of the DPS – Where a framework may be limited to 3-4 years, there is no upper time limit on a DPS. The buyer would make a decision on an appropriate length, taking into consideration the goods or services being procured, the market and any anticipated changes in scope or market conditions.
  • The ‘open’ application – The DPS is more dynamic than a framework (it’s in the name really!). Suppliers can apply to join at any time during the life of the DPS and are then on it for its duration. This is particularly good if there are new suppliers in the market, but also that unsuccessful suppliers don’t miss out on the chance of business for a number of years.

The Pros – Buyers and Suppliers

Beyond the longer length of the DPS and the fact that suppliers can be added at any time, there are a number of other benefits on both sides of the fence.

  • Reduced Timescales – see, I said we’d get back here! The length of time tenders are out in the market for can be as little as 10 days. This is a major reduction based on the minimum of 25 days for most Restricted procedures. And there’s more…
  • One Notice, No Standstill – Once the first Contract Notice has been sent out, there’s no requirement to do an individual one for each tender. And Award Notices can be grouped over a longer period to be issued in one go. AND there’s no requirement for a 10 day Standstill period on awards. All this means less time and valuable resources being spent on administration.
  • Access for SMEs – the DPS naturally sets up a greater number of smaller Lots and work packages, meaning that it’s much more attractive for SMEs to get involved. It maximises their involvement and means that they are competing on a level playing field with larger organisations.
  • Fully Electronic – further to this, all documentation has to be available in electronic format within the DPS, for its full duration. This means a level playing field again for any suppliers joining later in the process.

The Cons – Is it really for you?

Before we get carried away thinking a DPS is the panacea we’ve all been waiting for, there are a couple of caveats. Some are obvious, others come only with the painful experience of setting one up.

  • No Direct Awards, No Call Offs – unlike a traditional framework, there’s no scope of Direct Award or Call Offs from a DPS. Any procurement projects put through it need to have a full set of tender documents.
  • Set Up Isn’t Easy – as you might expect for something this size, scale and value, the early stages need some hard graft and infinite patience. You’re going to need to have outline specifications, tender documents and T&Cs, as well as a firm idea of what is going through each Lot. Set up alone could take a number of months.
  • No Guarantees – as we found, much to our chagrin, there are no guarantees that the suppliers you want will join. You can lead a horse (or supplier) to water with the notices, emails and follow ups, but they may choose not to drink. After all, from their point of view, they still have significant competition to go through to get any business.
  • It’s not for everything – there are categories and commodities for which a DPS will be brilliant. Markets where there is a fast pace of change or large number of new entrants are good. Commodities with a high volume of transactions, or less complex scope, can greatly benefit. But if you have a highly complex good or service and low number of contracts in your category or commodity, it may not be for you.

The New Normal?

It’s unlikely that Dynamic Purchasing Systems will completely replace traditional frameworks in the future. However, it does provide a powerful and useful tool for buyers both in getting tenders to market and ensuring a good level of on-going competition. Suppliers will benefit from reduced administration too, as they only need to pre-qualify once, but may be put off by the sheer size and scale of the DPS if you have a large number of Lots.

It’s definitely worth looking in more detail at the available information to see if a DPS is for you, and how you would set it up. Make sure you communicate with the market to see if it’s applicable (also good as a heads up that it’s coming) and how the Lots might be split down. Internally, gear everyone up and get everything in place. Once you explain the benefits, people are likely to get on board quickly!

Ultimately, don’t be put off by it. Yes, it’s something completely different that you may never have done before. But then, when’s that ever stopped procurement before?!

I’d love to hear your thoughts on this article and the series of articles on the challenges facing public sector procurement in 2019. Leave your comments below, or get in touch directly, I’m always happy to chat!

The Science And The Art Of Procurement

As we move towards a new decade is the emphasis in the procurement world changing – are we going to see a new age, where the Art of Procurement comes to the fore?

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Much of our focus in the last twenty years or so within the procurement profession and within our specific procurement functions has been on what we might call the “Science of Procurement”.

The huge growth in the use of technology has been the most visible part of that developing picture. Over the years, we have moved from the first spend analysis initiatives, laboriously building Excel-based “spend cubes”, through to today’s automated, cloud-based, AI-driven, integrated, holistic (add your own buzz-word here…)  procurement platform. Technology has radically changed procurement activities and procurement roles across virtually all our spheres of activity.

Outside the technology field, we have also seen “science” come to the fore in terms of codifying processes such as Category Management. There may be different models in use, but there is a pretty well-accepted logical methodology behind how organisations approach their management of major spend areas. Professionalisation of the function, logic and analysis has also extended into other areas, with a growth in relevant qualifications, all the way through to procurement and supply chain MBAs and even Doctorates.

But, as we move towards a new decade, perhaps the wind is shifting, and we may see a different focus in the next ten years.  Is the emphasis in the procurement world changing – and are we going to see a new age, where the Art of Procurement comes to the fore, alongside the scientific approaches?  I first saw this term used a few years ago by Philip Ideson, as a title for his website and excellent series of podcasts, and it feels like this may be an idea whose time has come.  

However, we would stress that doesn’t mean forgetting the science and (of course) the technology. After all, we’re only just beginning to see what AI and machine learning might do to revolutionise procurement and supply chain management; the possibilities are endless and hard to predict.

But we are also seeing increasing focus on issues such as;

  • how procurement can successfully influence, engage and collaborate with internal stakeholders to drive value;
  • procurement being asked to support development of unconventional business models that move beyond traditional buyer / seller (partnerships, JVs, large firms running start-up incubators, etc); and  
  • capturing and exploiting innovation from supply markets and individual suppliers becoming a top priority for organisations and therefore procurement functions.

When we look at that sort of activity, we can see that it is very different to the standard procurement processes – spend analysis, competitive sourcing, purchase to pay management. Now those core tasks and issues are not going to go away, and we would not want to suggest procurement leaders take their eyes off those particular balls or stop trying to execute this work as effectively as possible! But adoption of technology, automation, and best practice process is not the ultimate objective; it is a means to an end. 

The emerging strategic priorities for our organisations require different approaches from procurement, different skills sets amongst staff, and critical success factors such as creativity, flexibility, adaptability and even imagination really start to come into play. In addition, our expectations and requirements of technology must evolve as well, to support not just rapid deployment of standard best practices, but the ability to bring our best ideas to life and promote agility.

So, this talk of creativity, agility and innovation all starts sounding and feeling much more like “Art” rather than pure “Science”, and it is interesting to see that technology firm Ivalua has titled the Ivalua Now 2019 conferences this spring (in Chicago and Paris) the “Art of Procurement”.  To support that, the firm hopes to challenge the speakers to go beyond the usual “journey to best in class” descriptions and include their reflections on how procurement is embracing change in their organisations. How will procurement leaders contribute to generating real competitive advantage, to growing business revenues through innovation – supporting the top-line as well as the bottom line, as it were.

I’ve argued elsewhere that actually, if procurement doesn’t change and widen its scope, we in the profession may face existential issues of survival, as technology advances further. So, in our next two articles in this series, we’ll look at case studies that demonstrate the sort of innovative approaches procurement organisations are taking and how considering the Art of Procurement might secure our future. And finally, you can register for the Ivalua Paris event here if you want to participate in what should be a stimulating couple of days, from April 10th-12th.

Ivalua are sponsoring Big Ideas Summit London on March 14th. Sign up now as a digital delegate to follow the day’s action wherever you are in the world. 

Could RPA Make Procurement Jobs More Human?

The new “hot” technology generating hype in 2019 is Robotic Process Automation (RPA). Here’s how it can help procurement…

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Procurement is, by nature, in the business of relationships. Whether it’s managing suppliers or stakeholders, the success of any procurement organisation relies heavily on building relationships between people.

Despite this, many procurement professionals do not have the time to focus on the human side of their job. Data collection, reporting, transactional activities, urgencies, etc. are all tasks that eat up their precious time and prevent them from focusing on relationships that could generate more value and better outcomes.  This problem isn’t new and is the main driver behind the constant, growing interest in procurement technologies that automate processes and increase efficiencies.

What is new, though, is the pace of innovation and the hype around some of the latest technologies.

Emerging technologies have begun to dominate discussions in the procurement space, and it has become impossible to avoid debates, articles, publications, etc. on artificial intelligence (AI) or blockchain. The new “hot” technology that has been generating a lot of hype in 2019 is Robotic Process Automation (RPA).

Before jumping on the RPA bandwagon, it is critical to look beyond the features to understand the bigger picture. In the case of the latest RPA technology that has integrated AI, it is about making procurement jobs more human by offloading even more mundane, robotic tasks to… robots!

The goal is to augment, not replace, people by combining the best qualities and capabilities of both human and machine to achieve better outcomes.

RPA: Copy/paste on steroïds…

“[RPA is] a preconfigured software instance that uses business rules and predefined activity choreography to complete the autonomous execution of a combination of processes, activities, transactions, and tasks in one or more unrelated software systems to deliver a result or service with human exception management.”

Source: IEEE Guide for Terms and Concepts in Intelligent Process Automation (whose purpose is to provide standard definitions of concepts, capabilities, terms, technology, types, etc. for emerging process technologies)

This technical definition of what RPA is and how it works can be summed up with a simple analogy. Imagine that you have to repeatedly copy data from one Excel file to another to produce a monthly report. One way to eliminate these mundane, low-value, tedious tasks would be to create a macro that would do all the copy/paste for you. In addition to saving hours of your precious time over the course of the year, it would also reduce the risk of errors. This is, essentially, a simplified definition of what RPA is about. It’s a way to automate repetitive and scripted actions that are usually performed manually by users (not just copy/paste!). It is a form of business process automation.

The typical benefits of RPA are:

  • efficiencies to free-up resources usually spent on manual tasks and re-focus them on core business (efficiency fuels effectiveness)
  • better consistency and compliance in data entries by reducing errors
  • from a system/IT perspective, RPA is a valuable workaround to break data silos. It avoids the costs (investment, change mgmt.) and risks associated with replacing an existing system or creating interfaces. RPA solutions sit on top of the existing infrastructure and simply simulate user actions to take data from system ‘A’ and put it in system ‘B’.

RPA has limitations and it is important to be aware of them and consider if the trade-offs are worth it. Some of them are:

  • RPA can do one thing and only one thing. If there are changes in the source or in the destination systems, then it will stop to work correctly
  • It requires extensive programming to ensure that the RPA solution takes all cases into account. If not, it will not work or, even worse, it will create even more issues as it is very consistent in executing rules. If something is off, the same error(s) will be consistently repeated
  • For the same reason, it is vital to ensure that processes are running well before implementing RPA

If RPA only Had a Brain…

There’s no getting around it: RPA is a very dumb technology.  It does exactly what it’s told, blindly executing whatever set of rules it’s given. Such technology has been in use for years but on a limited scale. However, with the advancement of other, smarter technologies opening up new opportunities to make RPA more useful and less “dumb,” it is experiencing a revival. AI is one of the emerging technologies revitalising RPA, and stirring up hype. These days, it’s rare to see RPA without an AI component, which has also lead to a lot of confusion between RPA and AI.

“[AI is] the combination of cognitive automation, machine learning (ML), reasoning, hypothesis generation and analysis, natural language processing and intentional algorithm mutation producing insights and analytics at or above human capability.”

Source: IEEE

By nature, RPA and AI are very different technologies:

Because most business processes require a combination of “DO” and “THINK,” newer generations of RPA solutions integrate AI components to:

  • Understand input via natural language processing, data extracting and mining, etc.
  • Learn from mistakes and exceptions
  • Develop/enrich rules based on experience

It is this new, smarter generation of “RPA+AI” solutions that has broader applications as a valuable tool for Procurement.

RPA Applications for Procurement

“It is not the type of business process that makes for a good candidate for RPA, but rather the characteristics of the process, such as the need for data extraction, enrichment and validation.”

The Hackett Group on Procurious

RPA is particularly well-suited for operational and transactional Procurement because these areas are characteriSed by countless manual activities. Here are some examples:

  • Automation & elimination of mundane tasks
    • Invoice processing: It is possible to drastically reduce efforts and cycle times to extract essential information from an invoice and perform an m-way match by using a combination of RPA and AI (Optical Character Recognition + Natural Language Processing)
    • RFx preparation: Tasks related to data collection (quantities from ERPs, specifications from PLMs or other file sharing systems, etc.) and even the drafting of RFXs can be streamlined by using RPA.
  • Data compliance and quality
    • Supplier onboarding: RPA can automatically get more supplier data or data needed to verify registrations or certifications by crawling the web or other data sources.
    • Data mappings and deduplication: RPA can be a great support in Master data Management (MDM) by normalizing data (typos, formatting, etc.) and by ensuring that naming/typing conventions are respected.
  • Support to gain better insights
    • Supplier scorecarding: This is an activity that requires thorough data collection. RPA can be leveraged to collect data from various sources and integrate the information into one system either for internal purposes and/or for the preparation of a negotiation or business review
    • Contract analysis: RPA can crawl file sharing systems, network disks, and even emails to collect and gather contracts in one central location. Then, it can extract key terms and store them as metadata in a contract management solution.

Conclusion

RPA, in combination with other technologies, is an efficient way to connect silos (from a data perspective) to win back valuable time and remove the “robot” work from the desk of procurement teams so they can focus on the human side of their job.

On top of that, procurement organisations can gain tremendous insights from implementing RPA because it can make new data digitally accessible and more visible.

However, it is important to keep in mind that RPA is only a workaround; it does not break silos like an end-to-end procurement platform would do.

Cybersecurity – What Does It Mean For Procurement In 2019?

How should procurement professionals be addressing cybersecurity within their organisations and addressing the weak links?

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Google and McAfee estimate there are 2,000 cyber- attacks every day around the world, costing the global economy about £300bn a year.  The widespread adoption of digital solutions for the management of big data is a threat that is making organizations vulnerable to security breaches.   The proliferation of new SaaS products on the market and the use of cloud-based solutions are focusing our minds on how to protect our data and intellectual property.  The growing use of bring-your-own-device (BYOD) is adding to the complexity of defending organizations from attacks. 

Protection from data hackers has traditionally been the responsibility of the I.T. department where it should be taken seriously, although some companies have been inclined to put the issue on the back-burner.  Procurement’s interest in cyber-security is two-fold: 

a) it has to manage the myriad of potential security issues within the supplier community

and

b) it has to concern itself with data security issues within its own operations

Cybersecurity at suppliers  

Cyber-attacks do not always come in through the front door.  Many breaches come through weaknesses in the lower layers of the supply chain:   e.g. importers, agents and other service providers. Hackers, whose main objective seems to be to hold organisations to ransom, can infiltrate any of these layers. 

The weak links

  • Your suppliers’ suppliers are often targeted because they are more vulnerable.   They may have access to important information of yours and only have a very immature approach to data security.  It is estimated that over a third of corporate IT breaches are via third-party suppliers.
  • A lack of awareness among employees about how hackers gain access to systems.  The act of “phishing” which attempts to acquire usernames, passwords and credit card details via email for fraudulent purposes is a widespread activity that preys on peoples trust.   
  • The lax use of BYOD at suppliers can cause major security issues as malware protection and detection on these devices is often inadequate. 

 “Cybersecurity is never just a technology problem; it’s a people, processes and knowledge problem.”

US National Institute of Standards and Technology (NIST)

How to tackle the weak links

  • Due diligence.  Conducting risk assessments on each supplier before contracting will allow you to identify any areas of concern.  Firstly, potential suppliers should be vetted to ensure that they are not on any denied party or watch lists. On-boarding of new suppliers should include asking leading questions about their approach to data security and which protective systems they are using.  Many large organizations are adopting ISO 27001 which accredits them through an auditable security management system.               
  • Access control.   The level of access of each approved user to information needs to be monitored especially when there is any change in the relationship with a supplier.  This could be an organisational restructure or a takeover at the supplier which affects access to a shared system.  The aim is to prevent unauthorised access to data and procedures.
  • Education and training of staff Awareness programs and training staff about their responsibility for data security should be standard practice, both in-house and at suppliers.  Advice such as don’t click on unknown attachments, always use strong and unique passwords, and keep an up-to-date backup is a start. 
  • Notification about breaches   A contract clause that requires a supplier to inform the organisation regarding any security breach that may impact either business should be included in any supply agreement.

Cybersecurity within procurement

Large warehouses  of data are used by procurement professionals to identify cost-saving opportunities through spend analysis within their organisations.  Other files include supplier contracts, financial information and many P2P transactions.  We need to protect the confidentiality, availability and integrity of our information.   Cyber-attacks can be delivered through counterfeit hardware or software that is embedded with malware.  Outsourcing procurement functions with no due diligence or using unreliable and untested software packages can open the door to hackers.  Security gaps can arise due to the incompatibility of legacy systems with the outsourced solutions.  

Remember the data breach at TalkTalk in 2017?  The then CEO, Baroness Dido Harding said,

“There was the IT equivalent of an old shed in a field that was covered in brambles, all we saw was the brambles and not the open window.”

 She was referring to the weakness in their legacy systems.  The firm was fined £400 000 by the Information Commissioner’s Office.

What can we do today?

  • Collaborate with our IT department to regularly monitor systems, frequently update internal policies to create a security fence for the organization
  • Assist suppliers to build a robust cybersecurity plan to strengthen their IT infrastructure and cyber resilience
  • Stay updated on the latest innovations in data protection  
  • Work with suppliers to ensure that their IT systems and infrastructure are regularly updated. Ongoing reviews at regular intervals will help to identify emerging concerns
  • Develop a contingency disaster recovery and continuity plan to accommodate any potential supplier failure, including alternative suppliers. Always have a plan B.

Traditionally, procurement-specific risks just meant price fluctuations, delivery disruptions, supplier failure, fraud and non-compliance but no longer.   

Besides the reputational risks such as environmental crises, unfair treatment of staff and safety issues, the loss or corruption of corporate information can severely disadvantage a business.  The extent of the financial and reputational damage depends on the size of the breach, number and type of stakeholders affected and how quickly and effectively the company acted. 

Three Technical Terms Procurement Pros Should Stop Using Now

Do these technical procurement terms have a place in today’s organisation?


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Technical procurement terms. Whether you love ’em or loathe ’em you’ll probably have experienced definition disagreements and C-suite confusions. And that begs the question, do they have a place in today’s organisation?

For Nick Dobney, Former Global Head of Procurement – Puma Energy, procurement terms is the one thing that really gets under is skin. “There are terms that my C-suite won’t understand, my stakeholders won’t understand and, frankly, in procurement we spend a lot of time debating them as well.”

Nick believes that all the time and effort spent defining and redefining technical procurement terms is distracting procurement professionals away from delivering on behalf of the business. At Big Ideas Zurich last year, he outlined three of the terms causing him the most grief.

1. Tender

“My team know full well to never come to me and talk about tenders,” Nick jokes. He argues that “tender” is such a broad word, open to so much interpretation, that it has actually become meaningless.

“What do you want to do?” he asks. “Are you selecting a supplier? Are you exploring the market? Are you benchmarking your costs? If those are the things you’re doing, let’s say them. Let’s not wrap them up or hide it into the word “tender.”

2. Direct/Indirect

In procurement we constantly talk about direct and indirect spend.

“I’ve been in procurement for 25 years and I’ve never worked in a manufacturing company.” In a manufacturing company it might make total sense to use these terms and easy to understand the difference between direct and indirect spend. But the same can not be said for service companies.

Nick worked for an airline, where the distinction is unclear. “We bought aircraft, we bought fuel, we bought engineering services, we bought food and drink, we bought ticketing systems, we bought call centre operations. What’s direct and indirect?”

“In my world when I talk to the C-suite I need to talk about impacting operating expenditure, capital expenditure or the cost of goods sold.” Whilst it might be ok to reference indirect and direct spend amongst procurement professionals Nick advises not to waste energies trying to explain the terms to the wider business.

3. SRM

Some call it Strategic Relationship Management. Others say Supplier Relationship Management. “I don’t think [a room full of procurement professionals] could come together with a single definition,” says Nick.

“I know I’ve never used the words SRM in conversations with the CEO. The fundament of SRM means getting the best performance I can out of the suppliers I choose. So let’s talk about it as performance. Let’s talk about it as a means by which I get the performance I require in my business from my supply base and from my suppliers.”

Speaking in these accessible terms makes the procurement function accessible to business leaders and that’s what procurement professionals should be striving for. “We want to break those doors down. There’s lots of talk about getting procurement a seat at the top table and the first thing we have to do is make sure these terms we’re talking about – we only use amongst ourselves!”

Impacting the business

“The terms we use with our business leaders has got to be the terms that they understand,” Nick explains. “Can you explain simply and straightforwardly the impact you are having on the business?”

Leaders in your business want to know:

  • Are you taking assets of our balance sheet so we can free up resources to invest in product development?
  • Are you improving our margins?
  • Are you getting a better return on our investments?
  • Are you reducing our net debt?

And as Nick says, “the language we use is fundamental to how we can move away from being seen as a very technical function into being a function that really does contribute to the business.”

Nick Dobney speaking at Big Ideas Zurich 2018


Three Key Mindset Shifts To Lead In The Digital Age

The wonder of digital is the array of choice and opportunity it brings. To drive a successful digital agenda and succeed in the digital age however, mindsets need to build on leadership fundamentals while also shifting to respond to the new environment.

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Digital, the awe and the promise, filling us with inspiration and fear at the same time. Initially, the digital discussion was all about technology. After all, technology is cool, and we all want the cool factor. It demonstrates that we are at the forefront, leading the way, innovating. All great things when organisations and individuals are in a highly competitive environment and looking for a point of differentiation.

The wonder of digital is the array of choice and opportunity it brings. RPA? A great place to start. Mobility? It’s all about anytime, anywhere. AI? Not quite sure what it means, but let’s go with it anyway.

As many organisations sought to implement technology and transform themselves, the promised utopia did not quite eventuate. Technology moves fast and the innovation of today is tomorrow’s nostalgia (Any 80’s movie featuring a brick cleverly masquerading as a mobile phone will make this point all too well for those of us who were there to remember it the first time). That’s because digital requires a reinvention in how an organisation operates from business models, to systems and processes, through to engaging with the market and customers. It turns out that without a mindset and cultural shift, the full benefits of the technology are never realised or sustained. And so, for leaders this poses an interesting question. What does leadership look like in this digital age?

There is a multitude of research, writing and discussions on leadership in general. It is no surprise therefore that the conversation around digital mindset is met with cynicism, or fatigue. Don’t throw out those books yet (unless you received a kindle for Christmas). The fundamentals of what we know to be great leadership endure; humility, curiosity, emotional intelligence among others are key call outs and are as relevant today as when they were first identified. To drive a successful digital agenda and succeed in the digital landscape however, mindsets need to build on leadership fundamentals while also shifting to respond to the new environment. So where can you start to make a shift like this?

1. Experiment and embrace learning, not failure

Everybody knows about this one. In the strive to be innovative, there is a focus on experimentation. Experimentation is a call out for me because it brings together a number of attributes that differentiate digital leaders; challenging the status quo, creativity in seeing something the rest of us do not, courage to advocate for it, curiosity and determination to pursue it.

Interestingly enough, this also requires what might be considered a high tolerance for risk (which is why I mentioned courage). The default position for many leaders and organisations is to say “no” in a variety of ways.  I am not sure how many times I have heard “that’s not been done before”, “that won’t work here” or “we tried it and it didn’t work”. And there were times when I listened, and others when I thought there was something worth pursuing and did, demonstrating probably more hope and naivety , than courage.

The real issue of risk in experimentation arises because we need to be comfortable with  failure. Failure here is not an aspiration, it is simply highly likely when trying something new or doing something for the first time, even if it has worked somewhere else. Failure is problematic because it makes us susceptible to self-doubt, and the critique of others. Both are tough. And the idea that we celebrate failure in the digital world is a confusing and honestly, a little ridiculous to many. So, let’s be clear, that with experimentation, it’s the learning that needs to be celebrated, not the failure. Gary Pisano makes this point clearly in his book “Creative Construction: The DNA of Sustained Innovation”.  Try something new, take what worked, evolve it and get it right. Or work out whether it is even worth pursuing further, or call it quits and move on.

2. Understand skills, cultivate expertise

There is no shortage of dystopian views of the end of the human workforce as the result of automation and AI. If failure incites fear, there is no doubt that human redundancy as a result of technology amps up the anxiety level. The McKinsey Global Institute estimates that workforce transitions due to automation will impact approximately 14 per cent of the world’s workforce, so the scale of the impact is significant. My first implementation of digital analytics was in 2011, long before we were even having the conversation so I have seen the potential and the limitations. Developing an executive dashboard of key business metrics including daily sales, was a great start to automating analytics and producing actionable insights. So much more would be possible today. I am optimistic about the future of humanity and the ability of the man + machine interchange.

There is no doubt that many tasks will be automated. Many routine ones in fact already have been. At the same time, demand for new skills is emerging. And these skills present an opportunity to generate value in ways that may not have been possible previously. Digital savvy leaders adopt a mindset that see this threat as an opportunity. They understand the impact for themselves, their teams and the organisation. Anticipating what is coming, they identify the skills and behaviours that are needed and develop them, positioning themselves at the forefront through different ways of learning. With so much being so new to so many, expertise and differentiation comes to those who are willing to learn, try, and apply. Equally important, they cultivate this mindset with their employees and enable them with the skills and attributes needed.

3. Operate within new models, divest old paradigms

Welcome to the new world of work. Expertise exists in unlikely places; traditional reporting structures don’t always work and teams operate with autonomy and accountability. It takes a distinct mindset shift to relinquish decision making and control. The more important the initiative, the greater the risk, the harder it becomes. Yet the digital world values and rewards expertise, speed and adaptability. That means setting the agenda and outcome, defining parameters and empowering the team with expertise to execute. It does not mean abdicating accountability for progress and delivery, nor does it mean micro-managing the team because things aren’t being done as you would do them.

For many leaders, the paradigm shift to new models of leadership is challenging. The results however are inspiring. When I was tasked with working on the National Emergency Warning Project with the amazing Joe Buffone who was leading the Government’s Emergency Services response, we both knew that we needed to assemble an A-team, give them guidance and clear direction, and then let them do their thing while we did ours. The result? A first-of-a-kind initiative, with media attention, up and running (and more importantly working) on time and within budget, which is practically unheard of in either public or private sector, was the result.

There is no doubt that the digital landscape presents challenges that many may find uncomfortable at best. Embracing new ways of thinking and applying mindset shifts is a tremendous opportunity for leaders to transform themselves, their teams and their organisations. Time to be inspired by the potential of what is possible.

Are Smart Contracts A Game Changer for Procurement?

Are smart contracts, enabled by blockchain, the next big thing or just a temporary hype?

What is a contract? Put simply, a contract is any agreement that is built on the logic “if…[ABC] – then…[XYZ]”. And we make these kind of arrangements very day both in business and our private lives.

  • If I’m working on the development of the Procurement department at a particular company from 8am to 5pm Monday to Friday – then I’m paid £5000 on the 25th day of every month and I earn the right to have 25 vacation days per year
  • If I pay £45 on the first day of the month – then I get an unlimited internet package for the entire month delivered to my IP address from this internet provider

This is the basic logic behind all kind of contracts.

What is the no.1 problem with contracts today?

Nobody can guarantee the implementation of a contract’s conditions on both sides.

The employee might come into the office every day, but half of their working time is spent watching YouTube in the coffee area.

Maybe you pay each month for your internet service, but the traffic is too slow and connection gets lost at the most important moments…

In business these potential problems are solved by official contracts where a breach of contract could result in legal action.

But why should I trust my lawyers, my banks and the courts more than I trust my own business partners? Ultimately we are mutually dependent on each other so my business partner should be interested in maintaining that mutual trust. Moreover, why should I pay all these middlemen to implement and monitor contracts, why should I spend my time and money on court cases if the contract conditions have clearly been violated by the other party?

Blockchain is already addressing these issues with some success. And these “if… – then…” algorithms created with Blockchain technology are called smart contracts.

Example of Smart contract logic: Purchase of manufacturing equipment

Imagine a manufacturing company, MANCOM, needs to double its packaging line capacity. They are planning to get the new packaging equipment according to their technical specification, with production output of 10,000 pieces per shift, up and running at full capacity until 1st of June 2019.

After running their request for quotation (RFQ) – they have selected a company, YOURPACK, and prepare their Smart contract.

These Smart contract can include the following conditions in the protocol:

In the best case YOURPACK delivers the equipment to MANCOM before the 1st of March 2019, and gets 50 per cent payment automatically. Then before the 1st of June equipment runs with the planned capacity, and gets another 50 per cent automatically from MANCOM’s account.

If there are delays with delivery or installation – payment is reduced accordingly. So YOURPACK’s interest is to do everything in their power to make things in time.

If MANCOM delays the payment – the equipment blocks itself and cannot be used. So it is in MANCOM’s interest is to pay in-time and in full.

Once again, the main principle of the Smart contract is to use “if…then…” logic. And to decide upon the precise triggers that will lead to specific consequences. An important aspect of Smart contracts is automation – that is avoiding the human factor after the agreement is validated from both sides.

Invest time and efforts in writing down the causes and effects, which should be clear and transparent and which cannot be misinterpreted.

After you have agreed on the principles and the “if… then…” algorithms – give the assignment to programmers who will create their codes and protocols based on Blockchain.

Blockchain: the enabler of Smart contracts

At the heart of Blockchain we need the following core ingredients:

  • asymmetric cryptography – which gives the ability to create the records and protect them
  • distributed systems – which gives the ability to transfer value by making updates to the records

And the beauty of blockchain is that is allows us to digitally sign transactions. And what is even more important – you can prove it. After the record is created and distributed to the network, no one can modify or change it without others being aware of it. The levels of security and traceability are incomparable to traditional contracts and transactions.

Today we create huge contracts with numerous clauses and appendices. We hire expensive lawyers to create these contracts and then we hire yet more expensive lawyers to protect our rights, and prove in court what we meant by all those numerous clauses when the contract was first written.

Comparison table: Smart and Traditional contracts

Smart contractsTraditional contracts
Program or protocol, which uses Blockchain technology Paper documents composed using corporate and legal standards
Based on code, written in computer language Based on legislation and written by lawyers
You need assistance with defining terms of contract and with coding You need legal assistance to compose and register contract
Contract conditions are unchangeable once approved by all parties. They are transparent and automatically checked. If contract terms are violated – certain penalty, punishment or sanction occurs automatically Can be amended or interpreted differently by different lawyers. Conditions may be partly fulfilled or poorly fulfilled. If contract terms are violated – you resolve conflicts by negotiations or in the courts
The security of the transaction is guaranteed No guarantee, most laws can be bypassed
All transactions carried out without third parties and intermediaries Transactions are made with a number of other involved parties: lawyers, banks, courts or public services…
Transactions may happen using Crypto-currencies Transactions are made using traditional currencies through banks
When the terms of the contract are fulfilled, the exchange of values takes place instantly Exchange of values occurs with delays
The contract can be concluded with a person from anywhere in the world without personal presence The contract is signed only with the personal meeting of the two parties
Protection from corruption or fraud High risk of fraud, corruption or bribery

The next big thing or just a temporary hype?

Smart contracts are facing many challenges on the way to mass application in Procurement.

I don’t know how fast it will become a common practice, or the full possibilities behind blockchain technology for Procurement and Supply Chain Management, because we are only at the beginning.

In today’s world new technology can challenge and change the status quo within a matter of years. And I advise you to be at the forefront of these changes.