Leading and exceeding your supplier relationships using AI
An exclusive interview with Amenallah Reghimi, Vice President of Product Management at JAGGAER
There’s a lot of talk these days about the application of artificial intelligence to optimize supplier relationships. How can technology take us beyond the automation of routine tasks to deliver true added value in managing suppliers?
We spoke to Amenallah Reghimi, a true bridge-builder between business leaders, procurement professionals and technologists to get an insight into what we can expect in future.
Amen is responsible for defining and executing JAGGAER’s innovation strategy, “taking abstract ideas and turning them into reality, with the twin aims of driving business value and making procurement a great place to work.
Amen, let’s start with a very general question. How would you describe the art of supplier management?
Reghimi: To get the best possible value from suppliers, you must have a 360 degree view of them. This view contains all relevant aspects that any stakeholder might need: the requestors from within the functional departments, such as research & development, manufacturing and marketers, the buyers, supplier managers, category managers and upper management. This involves managing a whole host of very different companies, with each of them making their own contribution, either individually and uniquely or within a group of fairly similar suppliers. Collectively, they all contribute to the success of your organization.
For these reasons I think the best analogy for supplier management is orchestration.
Just as the leader of a great orchestra such as the Berlin Philharmonic or London Symphony Orchestra has to bring the orchestra into harmony, with the help of the leaders of the string, brass, woodwind and percussion sections etc., so a supply manager must create harmony between suppliers within the various key categories.
There are other similarities. You have to find the best players; you have to plan for unseen eventualities. Most importantly, you need to put documented processes. An orchestra has sheet music. Likewise standardized internal workflows help to ensure that everyone in your organization follows the right process, as well as your suppliers.
What are the main components of supplier management?
Reghimi: There are four main components. First, information management. You need to keep your supplier data clean and current. Second, relationship management, which includes a deeper level of vendor data about personal contacts, internal customer organization, specific products and services, claims management etc. It also includes operational links such as which sourcing events are you doing with that supplier. Third, performance and risk management, which you achieve by using scorecards providing insights over time. And finally, lifecycle management, covering workflow functions such as onboarding and development, segmentation and category qualification.
Much of this was ignored or taken for granted by senior management in the past. Then the pandemic hit, and many organizations appreciated the value of supplier management and the need to get proactive. A Gartner survey of procurement leaders found that 62% of them say their company has developed, or is in the process of developing, functional continuity strategies for the next major disruption.
Certainly, there is growing awareness of the various types of supplier risk: financial, ESG, compliance, supply chain, and cybersecurity risks, to name the main ones. There are multiple points of weaknesses. Some of them are foreseeable, with the right information management. Others are less foreseeable, but you need to have backup strategies in place.
On the positive side of the equation, supplier performance, organizations need to capture supplier data to keep track of metrics such as operational excellence, meaning quality, on time delivery and so on, innovation and future growth, cultural alignment, that is to say, how invested is this supplier in our success, and financials, that is to say, to what extent is this supplier helping us to contain or drive down costs.
OK, so people have a greater appreciation of the value of supplier management. But there are many dimensions to be considered. Are expectations realistic?
Reghimi: In fact, the 2020 Gartner Hype Cycle for Procurement and Sourcing put supplier risk management at the “peak of expectations” due to the increasing relevance of this innovation profile to the current uncertainties in the business environment.
But there are good grounds for optimism.
With increasing maturity of the market and enabling technologies, supplier risk management applications are now able to extract and enrich data using machine learning. These applications will more and more be able to convert information to actionable insights and embed such insights into broader procurement suites, thereby increasing adoption.
Application leaders responsible for procurement initiatives should now evaluate the relevance and criticality of each information source to supply chain processes and create a dependency matrix, autonomously converting relevant events to corrective or mitigating actions that impact specific processes. Data quality and trustworthiness for each monitoring source should be evaluated on an annual basis. Some data sources provide less than optimal data — an issue that may not be obvious from the start.
So you seem to be suggesting that technology can deliver stronger supplier relationships. Is that your view?
Reghimi: Yes and no. The successful implementation of a platform for the autonomous supplier management will depend on technology, but that’s not enough. Rather, it must be a balance of people, process, and technology. Any conversation about digital transformation or innovation has to start and end with this “golden triangle”, or as some people call it, the triple constraint, with three pieces needing to move in harmony. Otherwise the whole thing is thrown off balance. What I think is often missing from the conversation with procurement professionals, however, is awareness of the data at the center of the triangle.
In reality, the ability to read, write, and communicate data in context, including an understanding of data sources and constructs, is critical to the success of digital transformation. The end goal is to make data more accessible and actionable for everyone as opposed to needing a data scientist with years of training.
This will be the foundation of autonomous procurement in the future, where we will go to a model with algorithms at the center. This embedded intelligence will grow in importance as procurement technology evolves from being software tools, to becoming a procurement strategy engine.
Now many procurement organizations are on a journey toward what experts are calling autonomous procurement. The intention of autonomous procurement is to eliminate many of the monotonous tasks in the industry, opening the door for procurement professionals to become a true strategic and value-adding business partner. - Amenallah Reghimi
Let me stop you there, because we hear this buzzword, autonomous procurement, quite a lot. What is it and how does it relate to supplier management?
Reghimi: We are not there yet but we have already traveled a considerable distance on this journey. In the first stage, solutions focused on automating tasks – streamlining and automating processes across different spend categories and activities, providing data transparency and usability for automating repetitive tasks.
More recently, we have progressed through the second stage, which we call augmented procurement. This introduces new capabilities learned from human interactions to provide better insights and feedback over time, which in turn support recommendations on the actions that you should take.
Today, we are focused on Intelligent procurement, using cognitive intelligence, whereby the system learns from users and data not only to make predictions and recommendations, but changes behavior based on real-world situations and the decisions made by users. Solutions accumulate knowledge from the situations encountered, and the actions taken by the procurement team. Examples from JAGGAER include our Contract Risk Analysis solution, Intelligent Award Navigation for complex sourcing decisions, our smart recommendation engine, and a conversational UI for analytics.
This is laying the groundwork for the future, the fourth stage, which we call autonomous procurement, whereby the system learns and adapts to new situations and new tasks, becoming a strategic advisor and helping to identify new models and opportunities for business improvement. As an analogy, it is like the progress from a satellite navigation system, which tells you how to get to your destination, to autonomous vehicles that can also take over some of the driving.
So to wrap up, what does this new artificial intelligence-based technology bring to supplier management?
Reghimi: In terms of supplier management this means the system goes beyond predictions on risk and performance to suggest, for example, new suppliers and products that may offer better performance and less risk, even if they are not in your current catalogs or have not been negotiated. Moreover, rather than simply making a recommendation, it will provide the rationale behind it. By providing this level of support, we can achieve three main objectives. It enables procurement to better serve the needs of the business; it provides a factual and logical basis for achieving better relationships with the best suppliers; and last but not least, it makes procurement a great place to work, one that will attract young talents who have high expectations of working in a technology-driven environment.
We drive customer value for buyers and sellers through our global connected network served by offices located in the Americas, APAC, Asia and EMEA. JAGGAER develops and provides comprehensive source-to-settle SaaS-based solutions, including advanced Spend Analytics, Category Management, Supplier Management, Sourcing, Contracts, eProcurement, Invoicing, Supply Chain Management and Inventory Management. These all reside on a single platform, JAGGAER ONE. JAGGAER has pioneered spend management solutions for more than 25 years and continues to lead the innovation curve by listening to customers and stakeholders in all industry sectors, public services and academia.