Exponential technologies are no longer just buzzwords, they can now play a key part in the next stage of procurement and supply chain’s evolution. Digital transformation has already started to affect a multitude of industries and in order to not be left behind, procurement and supply chain needs to universally embrace it. In this article, we’ll take a look at Blockchain and Artificial Intelligence (AI) which are two technologies that can have a real impact on existing procurement processes.
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Blockchain can be best described as a digital database that logs transactions, although in reality, it’s a little more complex than that. In a sense it’s not what it is, it’s what it can do which identifies blockchain as an exponential piece of tech.
With blockchain, a group of computers will verify and store every transaction and every transaction will be linked to the previous one. The huge benefit of this is that it can enable us to trace transactional histories which will provide valuable data. Blockchain is also decentralised (peer-to-peer), making it harder to tamper with. More on this later.
Most people have their own idea of what artificial intelligence (AI) is, but generally speaking it is machine learning, the creation of a ‘computer mind.’ It’s a part of computer science that has the aim of creating intelligent machines and is generally broken down into these main areas:
- Speech recognition;
- planning; and
We have many examples in society of AI already, from Apple’s Siri, Amazon’s Alexa and self-driving cars, so it’s no surprise that there has been much debate about AI frequently in the media due to its impact on jobs.
Malcolm Dare, Chief Procurement Officer, Thales UK said: “[AI] will help us analyse the supplier base far better and compare across them to see who is most efficiently affected.” AI programmed in the right way will be able to manage a set of processes and Malcolm adds: “It’s going to help us manage our invoice flows better, it’s going to help us manage risk better, do better forecasting and enable us to learn from the dataset about who our best suppliers are, and what it is about them that we might be missing that makes them a superior supplier to someone else.”
Blockchain and AI as part of the procurement process
How can both of these exponential technologies improve the current procurement process? One example of how AI can be used is to automate procurement’s spend management process. However, companies will need to have the right set up in place for spend and contract analytics before introducing AI on this level. It’s a set up that has to include the implementation of e-sourcing, configured procure-to-pay solutions, and have all contracts stored in a contract repository.
One of the main things that a blockchain process can help secure transactions against is fraud in procurement invoice management. With blockchain, the data in its information stream is incorruptible. From the start to the end of the process, invoices would have to be verified by suppliers and buyers at every step. If someone wanted to commit fraudulent acts, they’d be unable to and cyber-attacks would be fruitless. This is because a blockchain process enables a decentralised flow of information. The decentralised approach means that cyber-attacks would have no impact as the invoices are not stored in any one place but spread throughout a network of computers. It’s a key selling point in the process and allows businesses to be protected from revision, tampering, and accidental or purposeful deletion.
To take advantage of these technologies, it’s clear that procurement and supply chain is better placed not at the perimeter, but at the heart of the decision-making process, and the foundation for this phase can be put in place by refining their existing IT infrastructure.
Both of these technologies present opportunities for an organisation to re-evaluate the existing processes and blockchain merged with AI, means that procurement and supply chain can implement key ‘thinking points’ within an organisational structure, and look forward to a more streamlined, automated way of working.
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