Technology is an exciting space for the international business community that includes trends from artificial intelligence (AI), to smart-phones, blockchain, self-driving technologies, the ongoing to trend to software-as-a-service (SaaS), the Internet of Things (IoT), streaming services, and more. It’s an area full of opportunity, but also some risk. Joonas Jantunen, CEO, Cloudia Middle East & Africa, puts stakeholders through the paces and examines prospects, challenges and pitfalls we need to be mindful of along the digital odyssey
There is a lot of hype centred around artificial intelligence and emerging technologies that can leave many observers addle-headed. All the verbosity, technical explanations, the benefits and warnings about the threats, may leave you feeling confused.
As emerging technologies continue to evolve, it is certain that the field of procurement will also continue to undergo a transformation. Therefore, it is essential to keep pace with constant technological changes and to fully benefit from this development. However, you don’t have to know everything or how to do it yourself.
Identify the impacts of technologies:
For procurement organisations, it is important to identify those emerging technologies that are impacting or will impact their performance. When looking into emerging technologies, you should also take into account the suppliers, customers and other stakeholders of your organisation.
However, while there is no need to transform yourself into a technical expert, your organisation should still understand and digest all the opportunities and threats that emerging technologies may offer you and your field of operation.
Prepare and plan for utilisation:
It is crucial to plan, prepare and implement any new measures with which you can minimise threats arising from emerging technologies and fully benefit from technological development.
It doesn’t make sense to try and do everything yourself, and nor do you need to. It is recommended that procurement organisations search for the most suitable partners by understanding which benefits arising from emerging technologies can be best concretised, and as cost-efficiently and as realistically as possible.
Which emerging technologies will impact procurement and when will this happen?
Robotic Process Automation automates routine procurement processes.
Robotic process automation (RPA) is already impacting some parts of procurement, and it is predicted to be one of the fastest growing emerging technologies in the field of procurement.
RPA is a new technology that automates routine processes in knowledge work. At its simplest, RPA performs predetermined work assignments on behalf of a human in accordance with set rules.
RPA is already widely used in procurement—particularly in automating purchasing and invoicing processes. In the future, RPA will be used more frequently, for instance, in processing procurement needs, approval processes, creating calls for tenders and other procurement documents, handling questions, automating comparisons, checking up, updating and enriching data, and also in informing. Robotic Process Automation automates routine procurement processes
Artificial Intelligence helps procurement predictions and decisions
Artificial intelligence (AI) is an activity performed by a machine that would be considered as intelligent if performed by a human. AI’s features may include, for instance, reasoning, learning, anticipation, decision-making, vision and hearing.
In procurement, AI is currently most widely used in cost management and reporting processes. In the future, AI is predicted to bring a lot of added value to procurement with virtual assistants, communicating interfaces, analyses predicting human behavior and market performance, automated risk management and independent decision-making, for example.
Machine Learning develops better practices for procurement
In machine learning, no predetermined way of acting in each individual situation has been set; instead, the machine independently learns from the data provided to it.
Deep learning is an advanced form of machine learning that utilises neural networks in order to learn more complex solutions.
In procurement, machine learning is currently most widely used in cost management processes. In the future, machine learning will bring efficiency and intelligence to almost every application of new technologies.
The benefits related to procurement are concretised, for instance, through analyses and decision models predicting the market performance of buyers, suppliers, the supply chain and market, as well as in connection with virtual assistants.
Blockchain enhances reliability and transparency
Globally, blockchains enable a very effective and trustworthy database that is also decentralised and transparent. Applications are being developed and, in the future, blockchains will be a strong driver of change in, for instance, contract (Smart Contracts) and supply chain management. The Internet of Things (IoT), which is already used in supply chains, may strengthen the monitoring of logistics processes.
Natural language processing facilitates communications
In procurement, chatbots using natural language processing (NLP) have already been tested.
In the future, NLP may make communications needs, searches, intelligent user interfaces and virtual assistants related to procurement more efficient.
What opportunities and threats will emerging technologies bring to procurement?
Emerging technologies will help us humans to better perceive matters that are relevant to the success of an organisation and data concerning those things that might not otherwise exist.
Machines will perform routine work and ensure that existing data is utilised in decision-making. Decision-making will be significantly more effective as problem-solving elements are automated and, in support of which, up-to-date, processed data is generated.
Routine work a thing of the past
One of the most concrete opportunities is the significantly reduced number of repetitive routine tasks and the cost savings derived from this, to which RPA applications in particular will create added value.
RPA robots will reduce the number of errors and, in many routine tasks and processes, replace human work effort altogether, especially when combined with AI and machine learning.
One practical example of this is automated tendering management, including receiving, handling, assessing and comparing tenders as well as selecting the winning tender. A similar example is automated procurement agreement creation based on data gathered through a competitive tendering process.
Data will take management to a new level
Efficiency and opportunities arising from utilising data are stepping up to an entirely new level. With the help of new technologies, data can be searched for, found, interpreted and combined in such a way that it can be utilised in more diverse and versatile ways than before—for instance, in analysing, anticipating and monitoring issues and events. This will make risk management and achieving cost-savings more effective and may also generate new potential returns.
Concrete added value is provided, for instance, to planning procurement when buyers’ needs and price development in the market can be tracked and predicted.
Furthermore, supplier management is a great example of how predictive analytics make both supplier risk management and supplier collaboration development more effective.
This means procurement experts will have more time and resources for strategic planning of procurements and for contributing to leadership, development of stakeholder relations and creating new savings and return opportunities.
From potential threats to the development of procurements
One of the most frequently mentioned potential threats when talking about new technologies is the concern over whether in the future machines will replace humans in the workplace. It is very unlikely to happen in the field of procurement. Instead, the main focus of work will transform from routine work to planning, developing and managing.
However, transferring far too much decision-making power to machines, together with the bad or erroneous decisions that will arise from that, may occasionally become a reality. These potential threats are best controlled by using planned, step-by-step projects concerning new technologies that are carried out in cooperation with professionals.
How will new technologies be best utilised and what should be avoided?
The sooner new technologies are adopted, the sooner results and benefits will be realised. However, the implementation of new technologies should be started with project planning.
Data availability is at the core of AI
First, the organisation must take care of basic issues, such as enabling and ensuring that there is enough procurement data. Even the best learning and predicting AI application is useless if it does not have enough correct data.
Digitalisation of the procurement process paves the way for emerging technologies
The digitalisation of organisations’ procurement processes as well as the use of adequate procurement applications are prerequisites for gathering sufficient and appropriate data. In addition, applications have to be used for a sufficient amount of time in order to benefit from the new technology as efficiently as possible. Manual gathering of data into an Excel file or some other document is not a solution.
In the procurement planning phase, data on procurement needs and on on-going and planned procurement projects is collected with the help of applications. During the tendering process, data on designations to be purchased as well as on prices, properties and suppliers of the offered products and services is collected.
Throughout the contract period, data is collected from agreed contractual terms and from delivering those. Orders provide information on costs and, with the help of supplier management, data on supplier risks and efficiency is stored.
In order to speed up data gathering, it is recommended to start using procurement applications at the earliest stage possible. It is important to remember that, in order to ensure the integrity and correctness of the data gathered, applications must be used in all procurement processes.
Solving real needs and problems
When the fundamentals of the procurement organisation are in place—i.e. the procurement process has been digitalised and enough data has been gathered—more detailed identification and planning of how to benefit from emerging technologies may be initiated.
The current procurement process is reviewed, and every stage is documented together with experiences gathered during the process. What are the start and end points of these processes?
Who is in charge of these and how? What kinds of decisions are made and at which stages?
What data is needed and from where is it obtained? The more data concerning circumstances of decisions is obtained, the better.
The best results are achieved with deliberate, step-by-step progress
Next, those challenges and needs that we are trying to address with emerging technologies are observed and identified. It is important to do this step by step and to start with the most obvious challenges. When the problem has been clearly defined and understood, faster and better results can also be expected from emerging technologies. It is recommended that the first applications are quantitative.
Later, it is possible to start gradually identifying and creating solutions for more complex and qualitative challenges.
BOX OUT
Joonas Jantunen, CEO, Cloudia Middle East & Africa
Joonas Jantunen is a highly experienced global Procurement Executive with more than 17 years of expertise in heading global and regional indirect procurement functions. He serves as the CEO for Cloudia Middle East and Africa operations.
As a leader in multicultural professional environments, he holds extensive knowledge of general management and global strategic sourcing as well as supplier development in different cultures, in both emerging and mature regions.
Joonas Jantunen has a passion for improving procurement operation efficiencies, delivering optimised end-to-end solutions for sourcing processes while empowering procurement teams to deliver extraordinary results and profitable growth.
