Tag Archives: automation

Automation: Who Says You Can’t Manage What You Can’t See?

If your business is engaged in international commerce, you’re probably struggling to toe the line with supplier risk management. Automation, alerts, and third-party data are your best defense.

Managing supply chain risk is no walk in the park. Exogenous events like the recent terrorist attacks in Barcelona have drawn attention to the EU’s rules to combat terrorism financing through stricter anti-money laundering (AML) regulations. These rules impact many companies that are increasingly added to the law’s scope: possibly yours.

Meanwhile, modern slavery violations can surprise even the most astute contract or supply chain managers who may have unknowingly relied on invalid or falsified information. In the U.K., The Modern Slavery Act 2015 includes a Transparency in Supply Chains clause, which requires companies operating in the U.K. to address modern slavery in their supply chains. If you’re at a big company, you’re probably on the hook to comply.

Once you add in the more common types of risk, such as the financial or credit health of your suppliers, changing markets, and natural disasters, the sense of how challenging it is to manage them all—in the age of digital disruption with fast-paced change and volatility—can quickly become overwhelming.

Fortunately, there is technology and automation to help you maintain control, gain visibility into your supply chain, and mitigate much of these risks. The right technology can help you proactively steer your organization clear of minefields that can damage everything from reputation to sales. And it’s only getting better.

 Start with real-time monitoring and alerts

The first step is to identify the most likely disruptions to the supply chain, like a natural disaster or a work stoppage at a supplier’s supplier. One way to deal with this type of risk is with real-time monitoring. Real-time monitoring of your suppliers means that you can receive an alert whenever there is a potential for disruption. Such alerts can help you find an alternative source of supply, maintain production, and avoid missed deliveries or even a plant shutdown.

Real-time alerts should be an extension of an overall solution consisting of a platform and business network. This is the ideal foundation to set up, monitor, and manage a portfolio of suppliers to ensure that all essential documentation about labor practices, certifications, certificates of insurance, and so on, is in place before you start doing business.

Integrate third-party data sources

Documentation and data about your suppliers can come from many sources, not just what you gather during an onboarding, contracting, or surveying exercise. There are plenty of third-party sources that have standalone solutions and open APIs or integrations into supplier management platforms that let you address various dimensions of supplier risk and to set up corresponding alerts.

If your company is engaged in trade and has a 10,000-euro or more money transfer in any way, it will need to comply with the EU 4th AML Directive. In addition to digitally onboarding your supplier base, you may want to automate KYC / KYB (know-your-customer, /-business), AML (anti-money-laundering), and EDD (enhanced due diligence) requirements. These steps will help you comply with the directive

One provider that is using cutting edge technology like distributed ledgers is Austria-based Kompany. Their counterparty verification data allows users to streamline the supplier verification process at the point of onboarding (and continually) with up-to-the-minute alerts on any material changes to supplier vitals. Their information comes directly from the commercial registers. Kompany even includes PEP (politically exposed person) screening and sanction lists.

Who says you can’t manage what you can’t see?

Other popular sources of company and industry data include Moody’s (credit ratings), EcoVadis (sustainability scorecards and ratings), riskmethods (transparency into risk exposures in 1-n tier supply chains), and Made in a Free World (visibility into modern slavery), to name a few. These data sources can help you continuously monitor for risks and evaluate your risk portfolio during the sourcing process.

Through technology and regulatory technology systems like those described above, you can design an automated, customized, and intelligent risk management strategy. In turn, this can boost trust between you and your suppliers and you can plan more confidently in an environment full of uncertainty.

Procurement Needs People: How To Nurture Your Top Talent

As the global marketplace changes exponentially, the need for both personal and professional development becomes ever more crucial for procurement pros. Jim Baehr explains why  organisations need to invest in their people.

Category Management. Risk Management. Contract Management. Supplier Relationship Management. All are part of the Supply Management vernacular in 2017. They represent best practices. Those who have mastered these competencies are sought by companies wanting to take their Supply Management to the next level and beyond. Yet, step back and look at the big picture. How many Supply Management professionals have the time, the skill or the support to pursue these best practices?

Applying the 80/20 Rule In Procurement

Continuing to look at the big picture, let’s apply the 80/20 principle to this question. Considering all the spend of all companies – large, medium and small – it’s reasonable to believe that 20 per cent of the professionals in Supply Management are managing 80 per cent of spend. (This number may be even more acute based on benchmarking articles found elsewhere at My Purchasing Center.)

Bigger companies have more spend and are more likely to have invested in their organisation as led by a Chief Procurement Officer. The professionals in these organisations are expected to be proficient in these higher-end responsibilities – the Managements (Category, Contract, Risk, Sourcing, Supplier Relationship, etc.). These professionals can practice and hone their competencies daily. This is a good thing. This means that in many ways the profession has taken the lead set by the Peter Kraljic “Purchasing Must Become Supply Management” article found in the September 1983 issue of the Harvard Business Review.

Flipping the principle would make it logical to believe that 80 per cent of Supply Management professionals are handling 20 per cent of the spend. Here’s the challenging part: It is likely that these are the same professionals who are handling 80 per cent of the purchasing churn – dealing with requisitions, purchase orders out the door, tracking delivery, invoice reconciliation, etc.  The result is they don’t have the same opportunity to apply best practices like their counterparts in bigger companies. Not because they don’t want to. They simply don’t have the time. Or, more frustratingly, the ability. But, seeing the articles and blogs – all the attention given to “the Managements” they want to do the same.

Purchasing Vs Procurement

While the terms Purchasing and Procurement tend to be used interchangeably, there is a big difference; moreover, the responsibilities of a Purchasing and Procurement professional are not the same.

Purchasing is operational, process driven,  ordering, receiving and paying for goods or services. Procurement is more tactical, more purposeful. Procurement calls for establishing requirements, performing market research, evaluating/selecting suppliers, and negotiating contracts or purchase orders. (Yes, POs can be negotiated.)

For the purpose of the remainder of this article Purchasing is used as the title for the group that handles  buying, procurement and, in some cases, sourcing.

It’s understood that technology is automating many of these routine functions. It’s agreed that that the developers of these systems are doing their best to “democratise” the technology – making it available, applicable and affordable to all companies – regardless of size. While the technologies are making inroads, there’s still a long way to go. And, when we get there one of two things will happen – positions will be eliminated or, companies will direct their Purchasing professionals to become more Procurement-like. Hopefully, it will be the latter.

Do we need to wait until technologies and automation address operational needs to free up the time for (paraphrasing Kraljic) Purchasing to become Procurement? The answer is “no.” Good Procurement, efficient and effective,  for the foreseeable future, is a people matter.

Is Purchasing Only About Getting The Lowest Price?

Before offering any recommendations, we first must recognise the realities. Purchasing, in many cases, is still viewed as “getting the lowest price”. This perception impacts relationships internally with business units and externally with suppliers. It creates a misunderstanding of purpose. The Purchasing professional is relegated to coordination of buying activities instead of having the opportunity to collaborate with internal clients, and suppliers, to produce value.

If we go back to the 80/20 rule the negative perceptions of Purchasing are conceivably based on the interaction of internal business groups and suppliers with the 80 per cent group. They are the majority population and they drive a perception that Purchasing “gets in the way” rather than adds value. Again, flipping the numbers, 80 per cent of the expectations for Purchasing come from what senior leadership reads or hears about the state-of-the-art techniques that the (upper) 20 per cent apply to the “Managements.” The result is that many businesses think their Purchasing group is not effective.

Research shows that staff and talent constraints inhibit Purchasing professionals from being all they can be and, more importantly, all they want to be. The abilities of these professionals are, and may continue to be, underdeveloped. But, there is an opportunity to build on what they already know and have experienced. We can reinforce what they know and make them comfortable with the basics and then introduce them to the “Managements.”

Personal and Professional Development Is Crucial- So What’s The Solution?

As Purchasing becomes more sophisticated, as business becomes more demanding and as the global marketplace changes exponentially, the need for both personal and professional development becomes proportionately as important. Let’s accept that not all the next generation of Purchasing professionals will come with MBAs from universities with Supply Management programs.-

So, now that the problem has been stated, what’s the solution? Keeping it simple – consider the following:

  • Recognize that the 80 per cent is underdeveloped but able and wants to do more.
  • Accept that this same 80 per cent  is under-appreciated and underserved.
  • Acknowledge that talent management requires talent development.
  • Commit. Business leadership, as well as professional associations, must step up and do more for the 80 per cent.
  • Invest in developing the 80 per cent as the cost pales, in comparison, to the potential return in value.

Here’s the good news: There are companies that already recognise this need. They are making the commitment to invest in their people. But, there must be more – many more. Quoting Eleanor Roosevelt – “Nothing has been achieved by the person who says, ‘It can’t be done.’”

Jim Baehr is the Lead for the Sourcing Strategies Group LLC (SSG).  Currently he is the President of the ISM – Pittsburgh Affiliate, a member of the Board of Governors of the Joint Chemical Group of Pittsburgh and a member of the Visionary Council of Coupa Software Incorporated based in San Mateo, Calif. This article was first published on My Purchasing Center

The Three Laws of Robotics Aren’t. So What Now?

The Three Laws of Robotics, as created by Asimov, don’t exist. But, as we move to a more automated world, should robots and AI fall under greater oversight?

Automation Robotics

Download the latest GEP white paper on the drive to an automated world here

In my previous post on the subject of the coming era of robotic process automation, I mentioned Asimov’s seminal sci-fi work The Caves of Steel. In it Asimov wrote of The City as the dominant force in human lives of the future:

“The City was the acme of efficiency, but it made demands of its inhabitants. It asked them to live in a tight routine and order their lives under a strict and scientific control.”

Asimov’s suggestion that there is a cost to progress might be seen as prophetic, but I think he was just one of a long line of writers who have warned that the future might be a bit ropey if we just pursue change in the name of progress, for its own sake.

But for all his attempts to conjure a dystopian image, Asimov was fundamentally a “technoptimist” with a repeating theme in his stories that progress would ultimately always be positive. In fact, his philosophy of robotics – and his “three laws” – have been so tightly woven into modern culture that it seems we hardly give a thought to the potential threats to our way of life, and perhaps to our lives from the advent of a totally automated future.

An Automated Future

Without labouring the point too much, the Three Laws of Robotics essentially mean that, in Asimov’s world, robots are inherently safe, trustworthy and beneficial. In fact, it is simply impossible to build a robot that does not comply with the three laws, the very architecture of the robotic AI being hard-wired around them.

It is purest fiction, of course, although to speak to some enthusiasts for the subject, Asimov’s Laws really do exist.  But they really don’t, and that could spell trouble.

Life imitating art is all very well, but there is nothing whatsoever to dictate that an automated future can be assured as a “good thing.”

On the same day as I’m writing this piece, there are two news stories on the BBC website. In one, it is announced that robots will be working in two Belgian hospitals as receptionists, guiding visitors to the correct locations.

In the other, we’re told, a researcher at a university in the USA has built a robot that autonomously decides whether to inflict pain and bodily harm on a live human subject.

That the microcode for the two systems could be somehow swapped, or cross-fertilised, is the stuff of real dystopian sci-fi and, whilst highly implausible, it does raise questions about whether some progress is happening without sufficient oversight.

Robotics & Automation in Procurement

There is disquiet in many circles about the use of drones in warfare, and the step from human-operated to robotic drone is really only a matter of systems integration.

There are no Three Laws to guarantee that AI, robots and automation will be to our benefit.  Yet they may very well be.

There are grounds to be hugely optimistic about what technology can do for us, from carbon capture and storage, to non-polluting safe transportation, to dramatically improved health and longevity in the poorest parts of the world.

Even in our little corner of the world we call Procurement, the sky’s the limit if we want to pursue automation. The potential to dramatically transform how we operate is very great indeed, and only a matter of investment and a few person-years of effort out of our reach.

But in all of this, it seems to me, it is we who should direct and dictate how that progress is delivered and what it actually does.   Instead of being passive consumers and falling in line with the next developments, which may substantially change our working lives, the procurement industry has an opportunity to map out what the future could and should look like, and how we want the machines to work. For us.

GEP Banner

Robotics are the future, and the sky’s the limit for automation in Procurement, say GEP. For more on this, download the latest white paper research.

For more information on high-performing procurement software, visit the Smart by GEP website.

Resistance is Futile…Or is it?

Is resistance to automation of procurement processes futile? Or are we missing the benefits that automation will ultimately bring to the profession?

AI Resistance

You can download the latest GEP white paper on the drive to an automated world, and why resistance is unnecessary, here.

The cannon of science fiction is full of tales of the battle between liberty, exemplified by human free will (including the freedom to screw everything up royally) and tyranny, portrayed as submission to an overwhelming force.

In many cases the “assimilation into the collective” or whatever, is not an unconditionally negative prospect. The promise of an end to suffering and provision of all human needs is often conveyed as the ‘upside’ of the deal to subjugate humanity to forces beyond our understanding.

Automation – The Dark Side?

From Childhood’s End to The Matrix, there’s a definite cost-benefit analysis to be carried out by the protagonists during their struggles to overcome the supposedly overwhelming power of the dark side of the story.

In fact, in the latter, the movie’s clichéd traitor – they even named the character “Cypher” – sells out the heroes on the promise of a return to the simulated ‘real’ world with the words, “Ignorance is bliss.”  And when asked by the agent of evil, “Then we have a deal?”, he replies, “I don’t wanna remember nothing.  Nothing! You understand?”

There is even a branch of anthropic philosophy than contends that our reality is likely to be a simulation run by an advanced post-human intelligence. As coherent and convincing as some of that reasoning appears to be, the fact remains that there is no possible way this hypothesis can be proved or disproved.

Like all matters of faith, this notion is utterly irrelevant when we attempt to construct a set of rules that will let us predict what will happen in (what certainly appears to be) the real world.

Rise of the Machines?

Recently it has been suggested at some of the procurement industry’s leading conferences that business is beginning to enter a phase that will be dominated by artificial intelligence and robotic process automation, and lead to the eventual replacement of the humans in the process.

Dissenting voices are heard to cry “nonsense,” or more colloquial versions of the same, but the arguments are nonetheless compelling. Only this time, they have a certain amount of evidence to back them up.

It is true. The technology exists today, in varying states of maturity, which – if synthesised into a single entity – could effectively do away with human involvement in the supply chain. From AI-run decision making, to automated manufacture and delivery, to fuzzy logic-based distribution of spend across a supply base, the characteristics of today’s procurement activity could, quite readily, be encoded and turned over to a software overlord.

Other sci-fi classics, the likes of the movie ‘Logan’s Run’, and the book ‘The Caves of Steel’, deal with the machine-run production of goods and services in equal measure to the imposing of external force on human freedom. And as life imitates art, there will naturally be greater degrees of this emerging.  Today’s 3D printer is surely tomorrow’s Star Trek Replicator.

The End for Procurement?

But, whatever the generations of the future will accept as everyday technology, the idea that we’re approaching a defining moment, beyond which procurement professionals will be irrelevant, must be viewed with a good degree of scepticism.

There’s no doubt automation works really, really well when it comes to replacing easily mapped and understood processes, from assembling a car from a standard kit of parts, to processing a contract-compliant purchase order through to invoice payment.

But the simple fact is we just don’t understand enough about the world, human behaviour, the markets, the climate, indeed any part of the future, to be able to encapsulate all our business rules into a single algorithm that the machine can follow to manage supply and demand for the rest of time.

The landscape in which our largest corporations operate is truly chaotic, in a mathematical sense, and deriving a simple set of rules to automate demand and supply across such organisations is, I think, beyond us today.

One of the very drivers of modern prosperity is the ability to “make a buck” and any kind of completely automated process necessarily eliminates margin at source. Negotiation between buyer and supplier AIs will not only be mind-bogglingly rapid, but likely to end in stalemate – and the same stalemate as the last time.

If we lose negotiation, then it seems to me that we will lose innovation, motivation and the result will be stagnation.

Resistance is Unnecessary

The future will be radically different to the present.  It always has been and always will be, and all predictions as to what it will look like are inevitably wrong. Including this one.

But with that uncertainty comes opportunity. Automation in procurement will certainly be a big thing in the future, but it will be complex, it will be messy and it will need human brains to make it work, and not just to write the code.

The human brains that work in procurement today are those that will guide the whole world of supply forward into a brave new world. Reports of procurement’s demise have been overstated, naturally, but we can still take control and make the machines work for us.

Resistance isn’t futile. It’s unnecessary.

GEP Banner

Automation doesn’t mean the end for procurement, and the benefits of automating processes vastly outweigh the drawbacks, say GEP. For more on this, download the latest white paper research.

For more information on high-performing procurement software, visit the Smart by GEP website.