Artificial intelligence and machine learning are enabling global supply chains to be more agile, efficient, and cost effective. Another plus is that supply chain value is increasingly found in innovations flowing to customer products. —By Debra Jenkins

The power of e-procurement has already been proven as an enabler of decentralized procurement processes for operational efficiency and centralization of strategic procurement processes. To date, the use of the internet in procurement has been largely limited across organizations to things like e-catalogues, communication between suppliers and organizational sourcing and buying professionals, combining purchase orders, and enhancing supplier collaboration for Supplier Relationship Management.

As next generation technologies continue to advance, new opportunities are emerging to transform e-procurement into an intelligent system that improves strategic planning and produces innovation. Bayer and General Electric are early adopters of artificial intelligence (AI) and machine learning (ML) in the global supply chain, paving the way for companies of all sizes to utilize AI and ML to make procurement an integral participant in activities like R&D and innovation production.

Stepping up Use of Next Gen Technologies
Jim Swanson, Senior Vice President/CIO and Head of Digital Transformation at Bayer Crop Science, recently described the utilization of AI in the global supply chain for the crop science division. Machine learning is now embedded in the division’s logistics and shipping functions, with the result of $14 million in annual savings and cost avoidance. The use of machine learning also contributed to increased environmental sustainability by reducing delivery miles by 300,000 and CO2 emissions by 350 metric tons. Machine learning has improved demand forecasting, enabled more efficient use of factories, and reduced the amount of waste products by boosting yields and reducing obsolescence.

The way supply chains are managed will dramatically change for many companies in the near future.

Bayer's Global Head for Digital Transformations Saskia Steinacker says machine learning and AI are used at Bayer to gain insights from data, and the insights are then used to help farmers make better decisions. More efficient farming and new crop types are innovations in the supply chain that can lead to new patient medicines. AI-driven logistics will improve medicine deliveries, too, enhancing customer services.

Bayer has been a proactive adopter of AI across its three divisions: Crop sciences, pharmaceuticals and consumer health. Bayer Pharmaceuticals has begun the process of incorporating AI throughout its entire pharmaceutical value chain from research to product supply. A data scientist in the supply chain does simulation modelling, develops AI and machine learning solutions in software systems, applies advanced analytics skills to convert data into a competitive advantage and help stakeholders make more informed data-driven business decisions, and works on Bayer's Global IT Supply Chain Competence Center.

Visibility Across the Enterprise
General Electric is another company embracing AI and other advanced technologies like blockchain to improve supply chain agility and performance. For several years, the company has been going through a major digital transformation at the same time it is transitioning from being an industrial products, consumer products, and financial services firm to a digital industry company selling billions in software.

One aspect of the digital transformation is the use of machine learning for supplier data integration. Using TAMR machine learning software to gain visibility of spend enterprise-wide, the company has saved hundreds of millions of dollars. Fragmented procurement systems is a common problem in growing businesses that add on transactional systems. GE now has visibility into spend across businesses and can identify cost-saving opportunities; this has transformed the strategic sourcing and procurement process to one that enables shifting spend between countries to reduce lead time and lower costs.

One of the interesting aspects of GE's transformation and adoption of next-generation technologies is that it led to using AI to improve operations, the supply chain, and its product lines. GE Predix is an industrial IoT platform that runs, scales, and extends digital industrial solutions for monitoring and event management. Predix offers cloud and edge-to-cloud processing.

It is a sophisticated industrial software that, among many other features, uses created and imported machine learning analytics for anomaly detection, predictive maintenance and prescriptive controls. The Predix Industrial data fabric is scalable technology so can grow with the analytics workloads.

Predix is helping other companies use the combination of IoT with AI to reduce asset downtime. Pitney Bowes uses Predix and has seen a 20 percent machine yield increase, a 15 percent parts replacement savings, and 10 percent reduction in the cost of tech support. The less machine downtime and the lower the production costs, the more supply chain efficiency and customer service quality achieved.

Looking at Supply Chains With a New Perspective
The idea that a supply chain is much more than a source of materials and products is a major change in perspective. Driven by next-generation technologies, the new technology-supported supply chain creates customer value as well as operational value. Bayer crop sciences creates customer value by applying technology to the first step in the supply chain – farmers. GE's Predix links supply chain, distribution, manufacturing, and engineering to create a single intelligent system.

These are just two examples of global giants leading the way toward intelligent supply chains. Each of these companies use AI, data analytics, edge and cloud computing, and other technologies to manage their supply chains while also creating new customer value. This is a far more advanced than procurement using AI automation.

One more point to keep in mind: AI technology does not work alone. It needs good data collection and machine learning capability. GE is adopting technologies like blockchain and smart contracts to improve its supply chain.

Companies that want to capture the full value of AI and other advanced technologies need to reimagine their structure, processes, talent development, IT function, and so on. A successful organization does not wake up one day and decide to purchase and install AI technology. Bayer and GE have been re-evaluating their entire businesses from top to bottom to ensure maximum value is gained from the digital supply chain.

Major Integrated Effort
One of the common questions concerns how a company determines the extensiveness of a digital transformation and the next generation technologies to use, including in procurement.

There is no single approach because a lot depends on the organization's culture, available tech talent, structure, and more. As the leaders have shown, a digital transformation is not a standalone effort.

The Hackett Group says procurement must focus on five areas as it looks to adopting new technologies: Improving analytical capabilities, aligning skills and talent capabilities with business needs, leveraging supplier relationship management to become more collaborative and innovative, improving procurement function agility, and becoming a partner for the businesses it supports.

E-procurement is taking a large leap into a digital future.