While Robotic Process Automation (RPA) offers Procurement

many opportunities to improve process efficiency, it should

not be considered as AI. For simplicity, think of RPA as a
software robot that mimics human behaviour, while AI is a
simulation of human intelligence.

Spend Classification

Using machine learning algorithms to classify procurement

spend into categories and sub-categories. For example,
reviewing millions of invoices to automatically categorize
spend in different categories of cardboard packaging.

Vendor Matching

Using machine learning to connect supplier data contained

in invoices and purchase orders to a vendor hierarchy. For
example, connecting different local subsidiaries of a freight
and logistics company to one international supplier.
Capturing Supplier or Market Data

Use techniques such as natural language processing to look

for and capture data on suppliers or specific markets. For
example, tracking social media channels for signals about
suppliers risk positions.
Anomaly Detection

Using machine learning algorithms to automatically detect

and surface insights relevant to Procurement. For example,
unexpected changes in purchase prices for a commodity or
from a specific supplier.
Procurement AI
Software
According to Deloitte 45% of Chief Procurement Officers
have used or piloted Artificial Intelligence Software in 2018.
Here are 7 common areas where AI can be used across the
procurement cycle.

Supplier Risk Management

by announcing a partnership to develop AI-powered applications to help first responders reacting to

natural disasters. One of the first AI prototypes in development will employ computer vision to detect
and predict the frontiers of active wildfires and floods. The second application uses an AI tool that
should be in every risk manager’s toolbox: simulation. This simulator will aid teams in running mock
scenarios to better plan and prepare for the next big natural disaster.
Many companies were caught flat-footed by COVID-19, perhaps the largest disruption to global trade
in a hundred years. While they scramble to realign their supply chains to meet the reality of 2020 and
beyond, now is precisely the time for these organizations to consider AI-based risk management
tools, from cutting-edge predictive analytics techniques to the tried-and-true methods of simulation
and optimization.
Mathematical simulation and optimization form a powerful combo that helps create lean, cost-efficient
supply chains that are also resilient to disruption. The first step in integrating these technologies into
your organization’s operations involves digitizing the supply chain, often referred to as a digital twin.
This digital twin of your physical supply chain should detail contingency options of all kinds, such as
alternate suppliers, lead times, inventory levels, site-specific redundancies, bills of materials, and
even business continuity plan documents (BCPs). This step can be taken for granted and should be
collected before, not during a crisis.
Next, simulate full or partial outages: customer regions being flooded, fires disabling production lines,
etc. You can ascribe probabilities to these scenarios by obtaining relevant external data such as
hundred-year flood maps and county-level natural disaster records.
After using these scenarios to illuminate any vulnerabilities in the supply chain, the next step is to
ensure reasonable protections against the worst weaknesses. In one study, Ford found that it was
not necessarily the most costly vehicle components that presented the highest risk, but rather a small,
overlooked group of critical components like o-rings and valves. Strengthening these areas of
weakness might involve onboarding a new supplier or carrying more safety stock inventory.
As COVID-19 demonstrates, we cannot assume that disruptions are short-lived or that any resulting
changes will be temporary, even for supply chains that have been carefully designed and optimized to
balance cost and risk. When something inevitably goes awry, having a ready-made contingency
playbook can be a game-changer. And if the disruption takes a more permanent form, it’s a good
idea to re-optimize the supply chain to ensure that your operations are cost-effective, whether that
disruption has resulted in undersupply or oversupply.
There are many risks in this world that are truly unpredictable, especially in complex global supply
chains. Nonetheless, risk and supply chain managers would do well to intelligently incorporate
techniques from the ever-advancing field of predictive analytics into their toolboxes. For example,
part failure can be predicted on a manufacturing line, in a truck engine, or in equipment at a customer
site. Ryder Logistics and other fleet operators have deployed predictive maintenance software to
reduce asset downtime. What other risks can be predicted? The spread of natural disasters such as
hurricanes and flooding, poor crop yields, late delivery, capacity utilization, or even financial
performance of a supplier or customer. Furthermore, better predictive models make simulation and
optimization models even more useful. If a fleet operator improves a probabilistic predictive parts
failure model, he or she can optimize operations with more certainty or run simulations with more
realistic scenarios.
As we adjust to the new normal brought on by COVID-19, it’s worth taking a fresh look at how AI can
boost supply chain resiliency, whether that’s creating a digital twin, building predictive models, or
adding simulation tools to prepare for whatever may come your way.
New Supplier Identification
Buyers can benefit from using technology in highly saturated
vendor markets, freeing up time for negotiation and spend
management.
Companies looking to keep their finger on the pulse of every potential vendor in the
market face a challenge.

According to A.T. Kearney’s "The Management of Global Innovation: Business

Expectations for 2020," 57% of surveyed executives think identifying potential
partners globally is a challenge. In the same survey, though, A.T. Kearney also found
67% of executives expect partnerships with start-ups and small suppliers to grow by
2020.

"How do you keep up with what’s going on?"

That’s where machine learning and artificial intelligence (AI) come in and may help
companies identify those new potential suppliers.

"It really is a jungle out there in the sense that you’ve got an extremely
dynamic market."

Yves Thill
Partner, A.T. Kearney

"How do you keep up with what’s going on?"

That’s where machine learning and artificial intelligence (AI) come in and may help
companies identify those new potential suppliers.

Where technology can find vendors

The sheer size and scope of a constantly changing marketplace can be overwhelming,
especially for companies looking to do business with startups.

"It really is a jungle out there in the sense that you’ve got an extremely dynamic
market," Thill said. "If you really want to make sure that you know what these
companies are doing, you almost have to use technology and AI or some kind of
machine learning algorithm to track the space."

if you are trying to find new technology, to find new suppliers in a large community,"
Thill said, "technology may be a solution and may be helping you find the right
suppliers.” It can also help companies keep an eye on the marketplace to identify
trends and changes.
"It really is a jungle out there in the sense that you’ve got an extremely
dynamic market."

Using a third-party technology vendor is another potential solution, which has

been the case for NTT DATA, a consultant and technology provider.

Jeffrey R. Tramel, vice president of procurement at NTT DATA, told Supply Chain
Dive in an interview that his company uses SAP Ariba. "Think of it as another
Amazon-type opportunity, where it’s a consortium of suppliers in which you can
order and operate," he said. It’s a way to outsource finding vendors, which his
employees can then vet.

"The platform works with all systems and all types of goods and services, making it
an ideal procurement and supply chain enterprise application," said Tramel. "Our
goal in using the technology is to improve speed, accuracy and automate processes
for our team."

He added that they’re also looking to use SAP Ariba’s Spot Buy feature,
which he said allows them to find specific solutions for one-off and
emergency purchases. The Ariba system "definitely speeds up the global
view and reach for supplier," Tramel said.

Tramel said Spot Buy utilizes a volume price negotiated by SAP Ariba. In
turn, that speeds up the negotiation process in procurement and helps to
secure a lower price when buying commodities

Technology is the start, but not everything

While technology can help procurement professionals find vendors, they’re not the
be-all and end-all, said Thill.

"Technology will never replace screening vendors" he said. "Do these suppliers have
the right capabilities? Do they have the right service levels?"

While NTT Data uses technology to identify vendors, the company also finds vendors
in traditional ways: their own networks, recommendations, even contacts received
via Linkedin. The company also needs to research vendors, especially in international
markets.

"There’s no magic bullet," Tramel said.

Vetting vendors is especially crucial in countries like China and the Middle East,
where fake companies can pop up on vendor lists. "You have to be able to vet and
ensure that you have the right suppliers and that they’re really real suppliers.
Otherwise you could be getting yourself into trouble," Tramel said. That means not
just visiting vendors but also looking at government records to make sure the
company is legitimate. "Otherwise you can be on the surface, picking a supplier that
you think is valid and great and it could turn into an empty shell."

In the end, he said, he expects technology to not just identify vendors, but free up
time for the company’s high-level procurement professionals because they won’t be
spending it on the identification end. “I’ve got to be able to optimize my staff’s time
for things that are of value,” he said.

Technology lets less experienced employees use technology tools to identify vendors
and “high skilled and high-powered people do what they do best, which is negotiating
deals and driving down spend."

Identify fake companies and blacklisted companies

Identify the latest address of the company

Previous suppliers for same item and similar item

Ratings of the company from social media

New vendors or start ups in the field from internet

Identify defaulters from the vendor list

Selects transporters, allocates business proportionately

Decides the type of container as per weight , value and dimensions

Inventory management