Which Technologies are Transforming Procurement?

This guest blog comes to us from Megan Ray Nichols of Schooled by Science.

Every type of company that trades or transports goods of any kind, whether private or public, from governance to hospitality, is looking for ways to trim waste, improve the speed of critical processes and eliminate errors. It's fair to say procurement and other supply chain activities are among the most demanding in industry today. That means they're prone to error — but also that they're uniquely situated to enjoy the benefits of a select group of technologies.

In a Deloitte survey, a majority of more than 500 procurement professionals from across the globe, representing $5.5 trillion in turnover per year, said they expect digitization to cause considerable disruption to this space in the next half-decade.

Let's look at machine learning and advanced analytics, additive manufacturing, cloud computing, blockchain, and generative design in more detail below. These are some of the most frequently named technologies when procurement leaders are asked what the future of their industry looks like.

More Data, Advanced Analytics, Machine Learning

The collection and analysis of customer, company, vendor, and market data, insofar as data privacy rules are taken into consideration, is driving disruption in a number of sectors. Procurement is no different — especially not in industries involved with the buying, selling and transportation of perishables like foods and beverages.

That's why the International Foodservice Manufacturers Association joined with supply chain management companies, industry consultancy groups and major food chains like Wendy's and Burger King: to collaborate on the use of data to the benefit of all.

The group's primary goals are to find ways to use advanced analytics to more accurately predict demand, so as to eliminate waste, and to continually look for ways to streamline the supply chain. At the same time, the industry group is looking at structured and unstructured data from internal research, customer surveys, social media, web traffic and more to restructure how their products are sourced, stored and distributed, in order to meet higher customer demands for variety, freshness, timely delivery (up to same-day) and maybe most importantly sustainability — including ethical and "farm to fork" options.

Customers today, especially millennials, show a statistically significant preference for fresh food and dairy products. According to some polls, millennials make a majority of all organic food purchases and eat 52% more vegetables than previous generations. Even among those who buy groceries online, fresh produce and dairy products are top sellers.

It's not hard to see why collecting, organizing and analyzing data on customers, the state of the market, transportation times, and equipment health will prove essential in Procurement's future. So what other technologies are bringing new functionality and new synergies to the supply chain?

Blockchain and the New Cloud

In procurement and supply chain management, blockchain stands to provide an entirely new level of visibility, accountability and accuracy in recordkeeping. Some refer to blockchain as "the new cloud," which is appropriate.

Blockchain is a likely solution for meeting the demands of the aforementioned modern consumer for ethically sourced, sustainably harvested products. It's also an ally in the trilllion-dollar struggle against counterfeit products making their 

way into critical industries' supply chains:

• Blockchain gives manufacturers and distributors a way to cryptographically tag products with identifiers and subsequent data gathered at each leg of that product's journey.
• This cryptographic "uniqueness" gives procurement leaders peace of mind that the merchandise they're procuring is genuine — and that its "origin story" hasn't been tampered with.

If blockchain is a "new cloud," it's because all of the information that makes this system work is safely and immutably stored in a decentralized ledger, which participants may view but not alter.

This pivot to blockchain isn't just good news for authenticity and visibility, either. It's also a way to speed the transfer of funds and goods across international borders. Blockchain-based payments don't require third-party vetting or lengthy waiting periods: both of which are common, costly and time-wasting pain points among supply chain manufacturers and procurement professionals.

Rapid Prototyping and Generative Design

We don't have to remind you that procurement is an often time-sensitive affair with tight deadlines. With that in mind, let's look at rapid prototyping through 3D printers and generative design through machine learning. Both of these technologies will dramatically improve manufacturers' ability to generate and test prototypes, help companies meet demanding procurement deadlines and ultimately move the manufacturing "plant" closer to the end-user.

One story of its implementation involves General Motors, Boeing and Citrine Informatics, but a scaled-down version could happen anywhere. Here's a summary:

• GM and Boeing needed a way to rapidly generate as many formulas as possible for a new alloy with specific performance requirements.
• Citrine used generative design through machine learning, which came up with (literally) millions of "recipes" which might plausibly solve the problem.
• Using 3D printers, the companies rapidly prototyped a number of candidates and then tested and microscopically examined each one for durability.

The point of this story is that companies that need to source products or parts with specific requirements, and still get to market on time, have a choice to make: companies that use generative design, machine learning and additive manufacturing in R&D, prototyping and testing and those who don't. The benefits of advanced product testing, especially of multiple prototypes, include satisfying regulatory requirements and actually decreasing, rather than adding to, the ultimate cost of bringing a product to market. Simply put, it's cheaper to test many permutations and product candidates beforehand than to deal with the fallout after a product failure or recall later on.

The implications of 3D printers and additive manufacturing could be especially critical for procurement leaders. Having 3D printers in the supply chain means keeping physical inventory levels to a minimum, lower storage and shipping costs, and the opportunity to engage in truly local manufacturing and sourcing instead of spending on wasteful air, sea or truck transportation.

In short, it's an exciting time to be in procurement or any other type of supply chain management position. And it'll be gratifying to watch these technologies continue to mature and deliver returns.