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Supplier Risk Management
Enterprises are actively reviewing their supply chain strategy according to the highest importance following the unprecedented disruption caused by the Covid 19 pandemic’s unprecedented disruption. The integration of AI in Supply Chain Management has become a critical focus, as it offers advanced risk assessment capabilities and operational insights.
From a risk management and vaccine distribution point of view, the supply chain will continue to be a CXO priority as we step into 2024. Factors like geographical risk, delivery delays, suppliers’ safe work environment, and the like have surfaced risk management as an enterprise’s immediate agenda. IoT is the current mainstream technology option for risk assessment.
The pandemic has revived interest in the digital transformation of the entire Source to Pay (S2P) process. For example, S2P solutions offer collaborative communication built into the solution itself, enabling real time communication and an audit trail between suppliers, buyers, and internal stakeholders.
This collaboration translates into efficiencies to measure in time savings of more than 15-20%. Contract management and e-procurement are other immediate areas of transformational interest for enterprises.
Check out our solution: End-to-End Supplier Risk Management Software Powered by GenAI
Why Contract Management?
In their supply chain digital transformation journey, enterprises discover that contracts reside in disparate systems and servers with no connectivity or reporting capabilities and no standardized contract language.
Many of them cannot easily report out on the expiry dates of contracts and end up facing financial penalties. There is renewed interest in purchasing under contract to eliminate rogue spending and deals off-contract. Research shows purchasing under contract returns 3-5% savings on average.
Check out our solution: GenAI-Powered Contract Management Software
Why E-Procurement?
E-Procurement establishes such “spend under contract” disciplines by providing users with online catalogs that have been negotiated and presented in an online purchasing environment. Supplier enablement begins with negotiating purchase agreements with an enterprise’s top 20 suppliers and connecting them through punch-out technology.
Punch-out (or uploaded static) catalogs validate online purchasing by exchanging authentication credentials digitally so that users can shop with these suppliers, guaranteeing contracted pricing. Users then search for the product, add it to the cart and return the cart to create a purchase requisition in whatever ERP or e-Procurement solution is in place.
Check out our solution: eProcurement Software
Real-World Application: Dow Enhances Procurement Efficiency with AI
In our ongoing exploration of artificial intelligence’s transformative impact, it’s essential to showcase how leading organizations are applying these technologies to streamline their operations. Dow, a global leader in materials science, implemented Zycus’ Merlin AI solution to enhance its procurement efficiency. Discover how Dow successfully leveraged Zycus’ advanced AI technology to transform its procurement operations and achieve significant efficiency gains. Watch the video below to learn more about their journey and the remarkable improvements they experienced.
Autonomous Procurement and AI
Enterprises are adopting a full spectrum of technologies such as AI that provide deep supply chain intelligence. There is a high demand for having as much information as possible. AI-enabled autonomous procurement offers humungous advantages over traditional procurement:
- AI can verify data for standardization in forms submitted across various industries, ensuring submission of clean data for automation.
- AI can reorder commodities according to inventory.
- AI can issue purchase request, purchase order, and track supplier’s response.
- AI can confirm Goods Receipt and generate invoices for payment.
- AI can monitor professional services, resources, contractors.
- AI can monitor standard contract forms.
The possibilities are endless. In contract management, the use of technology to improve supply chain processes can be transformative. For example, AI can read through existing contract language, search for obsolete phrases or keywords, and offer alternative phrases, clauses, Force Majeure, and other revisions.
Using that same logic, it can model new contracts to avoid language traps found in earlier contracts. AI can also be trained to notify contract managers of upcoming expirations and indicate where these contracts may have outdated clauses that could lead to exposure. The key is to centralize contract repositories, clauses, addendums, and attachments to form a complete contract.
An example of how AI benefits an enterprise is in the BFSI industry. Every institution is currently reviewing how to restructure contracts that reference the London Interbank Offered Rate (LIBOR). An AI designed to identify every reference to LIBOR and make intelligent revisions can equate to real-time savings.
Check out the webinar – Imperative of Digital Transformation for Supply Chain Impact Management – Part 2
AI Adoption for Procurement: Pre-requisites
AI is undoubtedly beginning to influence the procurement processes. However, there are a few considerations to be kept in mind while embarking on an AI-led supply chain digital transformation:
- Allow enough time and clean data to start your AI project. While learning how to accomplish a process or task, AI is like an infant taking its first steps. To do so, AI needs valid data, a disciplined approach, and a mentor to correct its thinking along the way.
- Autonomous procurement requires clean data and enough time to build a predictable pattern or model of behavior to enable AI to set algorithms effectively. That means that the data an enterprise is currently relying on could negatively affect the AI learning process if it is disorganized or not a disciplined approach everyone follows. This takes time.
- Begin with a small but very defined and strictly enforced process to teach AI and review how or where to improve the process. Attempting to automate a complex process can be daunting and disappointing, even frustrating.
- Take on a clearly defined yet simple process or task. During the learning process, make adjustments, correct incorrect behavior and review what is being automated. Then apply the learnings to the next cycle.
- Review the outcome and repeat as many times as needed to verify the AI
- Change management is key to AI adoption. Include all stakeholders and identify positive thinkers, communicators, and mentors for the successful institutionalization of AI.
The RoI of AI in Supply Chain Management
Historically, procurement process efficiencies have been challenging to assess. The use of technology to improve supply chain processes, particularly AI, is gaining ground as early adopters see advances in its design and application. However, many enterprises are still unsure about the extent of ROI that can be realized from AI. It all depends on seamlessly integrated processes and proper training.
AI will put forth a recommended strategy for a sourcing event based on criteria it has been trained to provide, such as templates based on commodity, a strategy based on the event’s geography, and standard questions based on established best practices.
For example, best practices gained from the pandemic can automatically replenish supply shortages based on search algorithms, inventory management, and supplier risk factors. AI can be trained to point these out and automatically issue a PR for approval.
Anecdotal data shows efficiency gains as much as 20% with increased confidence that accompanies standardization of process and eliminates human errors. To find out more about leveraging AI for procurement, book a demo with us.
Related Read:
- Blog – Can a Contract Management Software Drown your Business?
- Blog – Mastering Change Management in E-Procurement Software Implementation: Best Practices
- Blog – AI-Solutions every procurement team must own by 2025
- Blog – Maximizing ROI Through Composable Procurement: AppXtend Case Study
- White Paper – Ensuring Efficient Supplier Risk Management with Supply Chain Transparency
- Webinar: Imperative of Digital Transformation for Supply Chain Impact Management – Part 1
- Podcast- Navigating Unchartered Waters: Resilient Supply Chains in Uncertain Times of Corona Virus
- On-demand-webinar: 5 Ways Procurement Can Help Build Supply Chain Resilience
- Solution: Supplier Management Software
- Solution: Generative AI for Transforming Source-to-Pay
