Artificial intelligence at the service of the supply chain and sourcing

Sourcing and sourcing has seen a real shake-up over the past two years, primarily due to the impact of the pandemic.

Businesses today face many challenges, including inflation and supply chain disruptions.

Whether it’s the raw materials, production and logistics capacities or manpower, the global resources needed to operate the supply chain are increasingly limited. In the past, a business had to deal with one problem at a time. Today, she finds herself having to manage them simultaneously.

Supplier management is also one of the major challenges for companies. In the past, they had a wide choice allowing them to select their preferred suppliers. This is no longer the case. The roles have been reversed and it is now the suppliers who designate their preferred customers. Therefore, sourcing, frictionless purchasing, meeting payment deadlines, and supply chain finance (SCF) offerings must be a priority.

Dependence on a single source: a real danger for companies

Multi-level supply chains often rely on a single source. However, the shortage of a single part can cause an entire production line to stop – as was the case with the shortage of chips in the automotive industry or when the FDA halted production at a factory in the United States. United States, causing a severe shortage of infant formula. Although these are extreme examples, dependence on a single source of supply makes companies vulnerable and low cost should no longer be the sole criterion of choice. Sourcing and supplier teams should embed optionality in supply chains.

ESG is another important reason for companies to diversify their suppliers. Over the past year, many more companies have addressed this topic – five times more than the previous five years combined. New laws such as the Supply Chain Act in Germany and the SEC’s proposal to push publicly listed companies to disclose their progress in reducing their carbon footprint, put ESG front and centre. Since ESG also concerns the indirect emissions of companies, companies should inform themselves about the carbon footprint of their suppliers in order to obtain a global view of their emissions. Similarly, a supplier’s diversity goals or governance practices should be considered in sourcing.

Lack of visibility and optimization impacts business and teams

Especially in a time of hyperinflation, spend visibility and management is more important than ever. However, many companies still lack visibility into all of their spend, which is often fragmented across multiple systems and needs to be brought together in order to get a cohesive view. An often manual and very time-consuming exercise that does not leave enough room for rapid and effective optimization.

Labor shortages persist, so automation efforts need to be accelerated. We can already see the benefits of automation andartificial intelligence (AI) in warehouses (with robots), in transport (with autonomous trucks), but also with company executives.

Many companies today use these technologies to make smarter decisions. A major food manufacturer, for example, invested in a “war room” tool, powered by a digital twin through which he can plan a series of scenarios and choose the best solution in terms of sources of supply.

Without visibility, and without the digital tools to make the right decisions at the right time, employees are under enormous pressure.

AI has become essential for procurement and sourcing

Thanks to automation and AI, companies of all sizes have complete visibility to increase performance, results, sustainability, maintain their competitiveness as well as their quality of service. No matter the industry, automation is needed today to ensure business continuity, while providing critical operational insights.

Companies can use AI in several ways: for example, with a supplier risk and performance management tool, they can analyze several internal and external data and assess supplier risks. However, flagging a supplier as at risk is not enough. Once these risks have been identified (using, among other possibilities, a digital twin), companies can set up different scenarios, compare risk scores with other key indicators, and eliminate risks from the supply chain. chain.

From supplier sourcing to contract management and procurement, AI continuously measures supplier risk and performance. Thus, the same data does not need to be copied over and over to multiple databases – often resulting in inconsistencies and frustrations for users. A cloud-based platform provides a better experience, allowing companies to not only gain complete visibility into spend, but also benefit from the right tools to optimize it at the time of decision-making. Ultimately, the goal of any business is to maximize the value of every expense.

Today, resilience and sustainability are major issues. With the war in Ukraine and hyperinflation adding to existing supply chain challenges. The least we can say is that those responsible for procurement and suppliers have their work cut out for them. And they must be able to count on finance to integrate optionality into their supplier base. They must also be aware of supply chain challenges and ensure business continuity by proactively seeking out and equipping themselves with the tools needed to keep business operations running smoothly. But this cannot be done without bridging digital divides. This is why technologies play an essential role.

The acceleration of AI and software that scales into broader ecosystems and brings together data, algorithmic tools, and other capabilities to solve specific challenges, represents the future of supply chain and sourcing.

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Artificial intelligence at the service of the supply chain and sourcing

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