Tag Archives: robotics

The Rise of the Procurement Robots

Yes, robots may be on the cusp of usurping the roles of many procurement professionals, but are the tasks being automated those that we really want? 

In 1991’s “Terminator 2: Judgement Day,” the Terminator character, played by a certain Austrian bodybuilder/actor/governor/reality star, revealed how Skynet computers became self-aware and began waging war against the humans.

Is that the future of procurement? Will The Machines, not content with the procurement duties they’ve already taken over, rise up to enslave us? Will they take away our coffee?

If that seems far-fetched and silly, that’s because it is. The future is not set, but procurement professionals should feel confident about their place in it. The importance of human beings in procurement roles will only increase, not diminish, in the years to come.

For evidence supporting that prediction, we need only look at the trajectory of the procurement function over history. Like most important developments in civilisation, it all started with the Egyptians.

The Pharaoh’s Supply Chain

One of history’s greatest capital improvements was the construction of the Great Pyramids. From a procurement standpoint, there was a lot to coordinate. Materials like limestone and alabaster had to be brought in. Hieroglyphics had to be planned. Thousands of slaves had to be managed.

While the Egyptians didn’t follow today’s strategic procurement processes, they did in fact task scribes with recording material and labour on papyrus. And the procurement business was born.

Over the millennia that followed, the role of procurement evolved from recording supplier information to influencing business decisions. The annals of procurement history are cloudy on where and when strategic procurement began, but it seems likely it happened during the 15th century in France.

That’s when French military engineer Marquis de Vauban began qualifying suppliers of buildings and fortifications in his efforts to strengthen France’s defences. About 200 years later, during the Industrial Revolution, businesses recognised procurement as central to their operations.

The first 5,000 years of procurement history yielded only a few milestones. It’s only been very recently that the real change has taken place.

In More Recent History

In the last few decades alone, products and services have become dramatically more complex. As consumers demand more innovative and personalised products, they have become more intricate and varied. At the same time, the demand for business-oriented products and services has followed suit.

This has led to a broader range of materials, components, services and suppliers. Companies have more to consider when sourcing the right products and materials to support their missions. There are also more external factors to consider. Sustainability and corporate social responsibility are becoming more important in how companies are perceived.

On top of that, organisations have more constrained resources than ever before. With increased competition from emerging markets, and volatile changes in the marketplace, companies need to be smarter and more strategic with their sourcing.

All of these trends are being driven and facilitated by the use of computers, the internet, the cloud, and other technologies. Information technology and globalisation have spurred the biggest change to procurement in decades.

People Can Do Stuff

Without a doubt, automation will continue to take over most of the fundamental functions of procurement, displacing humans. We know this because it’s happening in industries like journalism, where computer programs are writing stories.

This is not a cause for concern, but instead a cause for celebration. We have to ask, are the procurement tasks automation is taking over the tasks we really want? In the automated journalism example, computers are writing mundane stories that reporters would sooner “poke their eyes out with sharp objects” than write themselves. They much prefer to write in-depth stories that make use of their intuition and analytical skills.

We have to ask, are the procurement tasks automation is taking over the tasks we really want?

In the same way, automation enables procurement to spend more time developing strategy, building relationships, and evangelising the function. You know, stuff that people can do.

Specifically, there are five areas where procurement will have a significant impact on business in the very near future:

Five Ways Procurement Will Impact Business

  1. Predictive Analytics/Cognitive Procurement – When companies can gain a detailed understanding of the dynamics that impact material pricing, they can see changes earlier, manage around negative events, and gain a competitive advantage.
  2. Agile Procurement – Negative market events can also present an opportunity for flexible procurement teams with the ability to respond and capitalise on them.
  3. Advanced Sourcing – Today, many companies are optimising their supply chains, but only one section at a time. Through advanced sourcing, companies will be able to optimise their entire supply chains simultaneously.
  4. Supply Base-Driven Innovation – Where procurement in the past has been responsible for cost reduction, in the future it will impact the top lines of companies, as well. Managed by procurement, the supply base can provide ways to change the selling channels or even offer innovation to create new products or categories.
  5. Supplier Relationship Management – For companies with many suppliers, managing them – communicating with them, managing risk, segmenting, evaluating performance – is a daunting, but important task.

Let’s see a robot try to advise the CEO on how to adapt to market changes or select suppliers that can help the company innovate!

Transforming Procurement

And that’s just the beginning. New ideas, solutions and technologies have the potential to transform the procurement function in untold ways. What that will be one can only guess, but the result will certainly be greater convenience, efficiency and transparency into the supply chain.

Procurement will play an increasingly vital role in modern business operations, now and in the future. In the coming years, procurement will have a seat at the table when it comes to setting companies’ strategic direction, help them adapt to market changes, and innovate to take advantage of opportunities.

Procurement has come a long way in 5,000 years. While the future is uncertain, it seems likely that the importance of the procurement function – and the people who perform it – will only increase.

Skynet will have to look elsewhere in its quest to enslave the human race. Perhaps the marketing department…

Christopher Thiede is a staff writer at Jaggaer

Do CEOs Dream Of Robotic Sheep?

…Or are they kept awake at night worrying about how to adapt their business to a robotic-centred future? KPMG Australia Chairman Peter Nash reveals two concerns playing havoc with the sleep patterns of business leaders.

How can I adapt my business to a robotic future?

The thing about technological disruption – and machine intelligence in particular – is that people tend to regard it as a challenge to deal with at some point in the future. The key to understanding the scope of the challenge is to break it down into two categories – disruption that we’re already dealing with, and disruption that is yet to emerge.

Robotic process automation (RPA), for example, has been around for decades, with disembodied robot arms a common sight on production lines. Typically, they automate a series of existing processes that were once carried out by humans. We’re just starting to realise the full potential of RPA, with the emergence of bots that sit inside software to automate administrative labour becoming more common.

From his viewpoint into many of KPMG’s client organisations, Peter Nash has seen what an RPA bot is capable of. “If you go into any call centre, you’ll observe staff doing a series of processes as they engage with customers – typically around data capture and data entry. Through observation, you can create “process flows”, and then build software that can be inserted into the call centre and automate the data capture. That’s a classic example of robotic process automation, and it’s happening at pace.”

Interestingly, RPA is resulting in the reshoring of capability from overseas. Nash comments: “You can track the life cycle of offshoring and reshoring. 10 years ago you may have had 100 people doing a job in Australia for the cost of $5 million. Those 100 jobs were offshored to India, resulting in costs being reduced to $1 million. Today, with robotic help, you can have only 10 people doing the same work that 100 used to do – at a cost of $0.5 million. Yes, 90 jobs have disappeared, but there’s the exciting potential for completely new jobs to be created with each technological leap.”

“Artificial (or Cognitive) Intelligence, for example, is only just beginning to emerge. People are very excited about AI’s enormous potential, but at present it’s essentially a solution looking for a problem.”

How do I effectively harness innovation?

Nash comments that there are several models that have emerged in the ways corporations seek to harness innovation. “Many CPOs look for innovation to emerge from down the line, and encourage people, whether they’re in-house employees or suppliers, to bring ideas forward. Other organisations set up innovation capability ‘hubs’ or ‘accelerators’. Another approach is to acquire, or partner with, innovation capability outside of your organisation. Some business are doing a mix of all three.”

“What’s encouraging is that most businesses understand that today, it’s innovate or perish. A culture of innovation, partnered with a culture of flexibility where people have the ability to react and respond to disruptive technology, will ensure businesses are able to take advantage of anything that comes their way.”

KPMG Australia Chairman Peter Nash will deliver a keynote speech at PIVOT: The Faculty’s 10th Annual Asia Pacific CPO Forum.