Managing Supply Chain Complexities

How companies are transforming and driving value in procurement and supply chain with the help of emerging technologies.

My PoV is published originally in Connected World Magazine, December 2019

When considering the potential of IoT and AI technologies to positively impact procurement and supply chain, one of the most important questions is, where do I start? Here are four action steps and a reminder, compiled by Steve Tracey, executive director of the Center for Supply Chain Research at Penn State, and Kusumal Ruamsook, assistant research professor at Penn State:

1. Start with defining your problem/opportunity.
2. Assess whether IoT and AI are the right solutions, and, if so, gain a clear picture of what IoT and AI capabilities are important to your supply chain strategies.
3. Evaluate your company’s readiness to adopt these technologies. Address hurdles first to maximize your chances for success.
4. Commit to a small-scale project initially. This might be a specific problem area, then gradually expanding to other hot spots, learning-by-doing from each success and challenge in the processes. Or, following good change-management principles.
5. Remember, technology is an enabler, not a solution in and of itself. Think people, process, and technology, in that order of importance.

Nicholas Petruzzi, professor of supply-chain management at Penn State, follows this line of thinking: “To me, IoT basically means ‘connectivity,’ and connectivity means ‘visibility.’ Visibility, in turn, means ‘information.’ Thus, from my perspective, IoT fundamentally means information. So, in the extreme—in the ideal—IoT would give us total connectivity, where total connectivity would mean—in the ideal—perfect information. Perfect information is synonymous with ‘no uncertainty.’

Thus, the idealistic promise of IoT is that, metaphorically speaking, it’s like having a crystal ball—it’s omniscience. Imagine that. Imagine having a crystal ball for your manufacturing procurement process.”

A crystal ball for a manufacturing procurement process would mean no demand uncertainty, no process uncertainty, no yield uncertainty, and no lead time uncertainty.

Businesses would know exactly how much and when customers will order, exactly when a machine or personnel breakdown will occur within the manufacturing process, exactly how much of an order with a supplier will arrive in useable condition, and exactly when an order placed with a supplier will arrive.

AI in Procurement and Supply Chain

“(The) sensing capability of IoT is creating visibility through realtime communication within its ecosystem, whether it be the user or the connected physical machines, systems, and processes,” explains Penn State’s Tracey. “But, without thinking capabilities, the interpretation of these data still currently lies in procurement users who will garner insights, make decisions, and respond accordingly. In the future, as IoT technologies become more ‘intelligent’ with the help of AI, it will elevate the procurement process from being ‘smart’ to being ‘intelligent,’ able to take certain, but not all, actions for itself.”

AI is revolutionary. Wipro’s Sahu says these technologies have several applications in the procurement and supply chain, including extracting information, data analysis, supply and demand planning, and warehouse management, and pursuing these applications are worthwhile. “While the journey to becoming an AI-enabled procurement organization needs time and effort, it is well worth the investment,” Sahu says. “Once the data foundation is in place, there are many different avenues through which procurement can leverage it to deliver consistently higher value.”

This value includes reducing the complexities that are keeping CPOs and other procurement leaders up at night. With the help of the IoT and, increasingly, AI, enterprises are not only one step closer to managing supply chain complexities but also one step closer to transforming and driving value in procurement and the supply chain as a whole.

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