A Sustainable & Evolutionary Digital Procurement Practice

Shehan Thambimuttu, Group Capital Expenditure and E & O at Orora

Shehan Thambimuttu, Group Capital Expenditure and E & O at Orora

Humans have a “sixth sense”. Our genetics have a mysterious capability to make sense of our environment and millions of other facts when making decisions.

For example, scientists have been using an online portal for the general public to participate in trying to find protein folding patterns (for example to find COVID-19 antivirals). Computers have to carry out millions of trial-error computations, to find potential solutions for how a protein chain may fold. Humans on the other hand may deduce the folding pattern in a few simple tries backed by our amazing human intelligence.

Given this, humans are an invaluable and irreplaceable resource in a decision making process in any organization.

But we have flaws.

We are not as fast as computers in computing millions of transactions per second. We become complacent and overlook risks. It may be too daunting (or impossible) to review millions of archived records to find patterns or statistics that would unearth new insight. Humans and computers work best in an augmented environment. Where we use our sixth sense while being kept in check using computing and artificial intelligence. Procurement process is one of the most complex functions within an organisation. It serves as the backbone in a manufacturing organisation and It is paramount that the forming units of the procurement workflow interconnect well to provide a transparent and clear view to the entire organisation.

Biology solves the problem of inter-connection extremely well more than anything else in the universe. Each unit in a biological context has a unique function to perform. The individual unit uses a multitude of sensors as input to perform its duties and evolve into the best form possible to perform its function.

Looking at this analogy, we can observe how we fail to apply these natural principles in our day to day operational units.

We don’t apply the same rigour that nature showcases when setting up our business units or functions or inter unit communications and information flows.

We don’t use the invaluable archives of organisational, environmental and sensory data when making decisions like nature does.

We don’t involve the same level of sophistication for risk detection, aversion and suppression with the same preparedness as our biology does.

We don’t evolve like nature has been for millions of years to optimise our functional units, thereby becoming more efficient and productive.

But technological innovations have given us a plethora of tools to mimic nature in becoming efficient and analytical in decision making.

In order to digitally transform our procurement unit and its workflows to work in synergy, like a biological unit, we should adopt and embed some key foundational technologies in our organisation.

For example organizational data is the key to unlocking new potentials and understanding failures of the past. We generate a large volume of data that is impossible for humans to digest and correlate to elicit findings in a reasonable timeframe. In this scenario a Big Data Framework can be used to catalogue each and every piece of information. The ecosystem of tools should also support exploration and inquiry of this data readily to identify patterns and trends. Machine Learning (ML) and Artificial Intelligence (AI) should be embedded beside this to provide augmenting intelligence throughout the decision-making process.

This would help to predict the most likely scenarios for cost/price fluctuations, demand, supplier/country risks, and enable proactive decision making.

Even though risk assessment and management practices have evolved over the decades, we are more on the reactive end of the spectrum. Risk monitoring and reaction should be defined with Agile Business Process Management (BPM) tools. BPM allows for agile workflow definition and transparency. ML models and AI should be developed for risk monitoring and prediction. This would allow real-time tracking of online/physical activities and also provide proactive monitoring of supplier behaviour, performance, trend and predictions on supplier (or supply chain) risks.

Communication and Compliance Verification (validation) is another unit to transform. A large enterprise generates many channels of communication. It makes it hard if not impossible to visualise these information flows. Information security and confidentiality are added concerns that have to be dealt with in this maze.

By incorporating digital tools in communication and compliance validation channels, it is possible to use humans only in the most meaningful paths of communication and validation. Digital Assistant Bots and Robotic Process Automation (RPA) are key digital transformation techniques in these areas. They improve the quality, confidentiality and safety of communication.

RPA is extremely powerful, as it allows for automating processes and workflows connecting even legacy systems. Digital robots can release humans from mundane processes, but also speed up communication channels dramatically. RPA has been embraced by the industry as a serious ROI capable practice both in cost and quality.

Purchase order creation, invoice processing, work order management are few of the areas within procurement that can be directly benefited from RPA technologies. Storage of communication, decisions and contractual information in a non-repudiation form would eliminate lots of misunderstandings. Enterprise Blockchain is here just to provide that non-repudiation capability. This cryptologic data structure uses a trusted peer-to-peer network to create digital transaction ledgers which can verify and validate transactions in the P2P process (or any other supply chain process) and then be used to trigger automated payment (smart contracts).

In a natural process, all energy is released back to nature for a new beginning in the ultimate Recycling process. This makes nature sustainable and evolutionary. Fundamental change in an organizational process and attitude is required to make carbon cost calculated and attributed as a metric to every piece of procurement process.

This improvement in measurability could be coupled with AI to develop prediction and prevention models. New supplier routing, packaging changes, sourcing changes could be unearthed through these tools to improve a sustainable supply chain.

Consumers are becoming extremely observant and sensitive to environmental impact and sustainability of services and products. Organizations which do not treat sustainability as a core attribute in its processes will become an undesirable product or service in the market. This is a global trend which businesses need to aggressively adapt and transform to achieve.

AI could automatically profile and conduct intelligence gathering on supplier sustainability. These scorecards could provide information to potentially collaborate with the supplier to improve their sustainability profile, thereby making a larger impact. These playbooks should in turn be shared with the wider global community to develop socially and environmentally sustainable practices.

Real Time Analytics should be ever present to provide risk, tactical, strategic overview into business flows. The pulse of the operating units should be ever visible and transparent to key decision makers. Tooling should allow for deep dive and traceability. IOT could be part of the sensor network to feed into the real time organisational pulse. Coupled with GIS systems, the spatial analytics provides a geographical perspective to intelligence reporting.

In summary, procurement workflow can be modelled as a biological framework. Units of it like communication, risk management, information centre, contract and compliance data, real time data are vital pieces of the chain.

Digital transformation is essential to augment the human intelligence in these units to perform like nature would. Lack of meaningful digital transformation in the essential units would result in un-natural operations causing business to eventually fall into chaos.

An elixir tool, framework or solutions offering does not solve the problem of naturalisation. Because it does not take into consideration the biology of the organisation.

Digital transformation is improving the biology of the organisation by augmenting unparalleled human intelligence with key technologies in all business units. It should feel natural within the business, provide agility and help unlock a sustainable and environmentally responsible future.