Showing posts with label Ariba. Show all posts
Showing posts with label Ariba. Show all posts

Monday, May 14, 2018

Balancing Costs with Conscience--How New Tools and Methods Help Any Business Build Ethical and Sustainable Supply Chains

Transcript of a discussion on new ways that companies gain improved visibility, analytics, and predictive responses to better manage supply-chain risk and sustainability factors.

Listen to the podcast. Find it on iTunes. Get the mobile app. Download the transcript. Sponsor: SAP Ariba.

Dana Gardner: Hi, this is Dana Gardner, Principal Analyst at Interarbor Solutions, and you’re listening to BriefingsDirect. Our next digital business innovations discussion explores new ways that companies gain improved visibility, analytics, and predictive responses to better manage supply-chain risk-and-reward sustainability factors.

Gardner
We’ll examine new tools and methods that can be combined to ease the assessment and remediation of hundreds of supply-chain risks -- from use of illegal and unethical labor practices to hidden environmental malpractices

To learn more about the exploding sophistication in the ability to gain insights into supply-chain risks and provide rapid remediation, I’m pleased to welcome our panelists, Tony Harris, Global Vice President and General Manager of Supplier Management Solutions at SAP Ariba. Welcome, Tony. 

Tony Harris: Thanks, Dana. 

Gardner: We are also here with Erin McVeigh, Head of Products and Data Services at Verisk Maplecroft. Welcome, Erin. 

Erin McVeigh: Thank you, it’s a pleasure to be here. 

Gardner: And lastly, we’re here with Emily Rakowski, Chief Marketing Officer at EcoVadis. Welcome. 

Emily Rakowski: Thanks so much. It’s good to be here. 

Gardner: Tony, I heard somebody say recently there’s never been a better time to gather information and to assert governance across supply chains. Why is that the case? Why is this an opportune time to be attacking risk in supply chains?

The perfect supply-chain storm

Harris: Several factors have culminated in a very short time around the need for organizations to have better governance and insight into their supply chains.

Harris
First, there is legislation such as the UK’s Modern Slavery Act in 2015 and variations of this across the world. This is forcing companies to make declarations that they are working to eradicate forced labor from their supply chains. Of course, they can state that they are not taking any action, but if you can imagine the impacts that such a statement would have on the reputation of the company, it’s not going to be very good. 

Next, there has been a real step change in the way the public now considers and evaluates the companies whose goods and services they are buying. People inherently want to do good in the world, and they want to buy products and services from companies who can demonstrate, in full transparency, that they are also making a positivecontribution to society -- and not just generating dividends and capital growth for shareholders. 

Finally, there’s also been a step change by many innovative companies that have realized the real value of fully embracing an environmental, social, and governance (ESG) agenda. There’s clear evidence that now shows that companies with a solid ESG policy are more valuable. They sell more. The company’s valuation is higher. They attract and retain more top talent -- particularly Millennials and Generation Z -- and they are more likely to get better investment rates as well. 

Gardner: The impetus is clearly there for ethical examination of how you do business, and to let your costumers know that. But what about the technologies and methods that better accomplish this? Is there not, hand in hand, an opportunity to dig deeper and see deeper than you ever could before?

Better business decisions with AI

Harris: Yes, we have seen a big increase in the number of data and content companies that now provide insights into the different risk types that organizations face.

We have companies like EcoVadis that have built score cards on various corporate social responsibility (CSR) metrics, and Verisk Maplecroft’s indices across the whole range of ESG criteria. We have financial risk ratings, we have cyber risk ratings, and we have compliance risk ratings. 

These insights and these data providers are great. They really are the building blocks of risk management. However, what I think has been missing until recently was the capability to pull all of this together so that you can really get a single view of your entire supplier risk exposure across your business in one place.
What has been missing was the capability to pull all of this together so that you can really get a single view of your entire supplier risk exposure across your business.

Technologies such as artificial intelligence (AI), for example, and machine learning (ML) are supporting businesses at various stages of the procurement process in helping to make the right decisions. And that’s what we developed here at SAP Ariba. 

Gardner: It seems to me that 10 years ago when people talked about procurement and supply-chain integrity that they were really thinking about cost savings and process efficiency. Erin, what’s changed since then? And tell us also about Verisk Maplecroft and how you’re allowing a deeper set of variables to be examined when it comes to integrity across supply chains.

McVeigh: There’s been a lot of shift in the market in the last five to 10 years. I think that predominantly it really shifted with environmental regulatory compliance. Companies were being forced to look at issues that they never really had to dig underneath and understand -- not just their own footprint, but to understand their supply chain’s footprint. And then 10 years ago, of course, we had the California Transparency Act, and then from that we had the UK Modern Slavery Act, and we keep seeing more governance compliance requirements. 

McVeigh
But what’s really interesting is that companies are going beyond what’s mandated by regulations. The reason that they have to do that is because they don’t really know what’s coming next. With a global footprint, it changes that dynamic. So, they really need to think ahead of the game and make sure that they’re not reacting to new compliance initiatives. And they have to react to a different marketplace, as Tony explained; it’s a rapidly changing dynamic.

We were talking earlier today about the fact that companies are embracing sustainability, and they’re doing that because that’s what consumers are driving toward.

At Verisk Maplecroft, we came to business about 12 years ago, which was really interesting because it came out of a number of individuals who were getting their master’s degrees in supply-chain risk. They began to look at how to quantify risk issues that are so difficult and complex to understand and to make it simple, easy, and intuitive. 

They began with a subset of risk indices. I think probably initially we looked at 20 risks across the board. Now we’re up to more than 200 risk issues across four thematic issue categories. We begin at the highest pillar of thinking about risks -- like politics, economics, environmental, and social risks. But under each of those risk’s themes are specific issues that we look at. So, if we’re talking about social risk, we’re looking at diversity and labor, and then under each of those risk issues we go a step further, and it’s the indicators -- it’s all that data matrix that comes together that tell the actionable story. 

Some companies still just want to check a [compliance] box. Other companies want to dig deeper -- but the power is there for both kinds of companies. They have a very quick way to segment their supply chain, and for those that want to go to the next level to support their consumer demands, to support regulatory needs, they can have that data at their fingertips.

Global compliance

Gardner: Emily, in this global environment you can’t just comply in one market or area. You need to be global in nature and thinking about all of the various markets and sustainability across them. Tell us what EcoVadis does and how an organization can be compliant on a global scale.

Rakowski: EcoVadis conducts business sustainability ratings, and the way that we’re using the procurement context is primarily that very large multinational companies like Johnson and Johnson or NestlĂ© will come to us and say, “We would like to evaluate the sustainability factors of our key suppliers.”

Rakowski
They might decide to evaluate only the suppliers that represent a significant risk to the business, or they might decide that they actually want to review all suppliers of a certain scale that represent a certain amount of spend in their business. 

What EcoVadis provides is a 10-year-old methodology for assessing businesses based on evidence-backed criteria. We put out a questionnaire to the supplier, what we call a right-sized questionnaire, the supplier responds to material questions based on what kind of goods or services they provide, what geography they are in, and what size of business they are in. 

Of course, very small suppliers are not expected to have very mature and sophisticated capabilities around sustainability systems, but larger suppliers are. So, we evaluate them based on those criteria, and then we collect all kinds of evidence from the suppliers in terms of their policies, their actions, and their results against those policies, and we give them ultimately a 0 to 100 score. 

And that 0 to 100 score is a pretty good indicator to the buying companies of how well that company is doing in their sustainability systems, and that includes such criteria as environmental, labor and human rights, their business practices, and sustainable procurement practices. 

Gardner: More data and information are being gathered on these risks on a global scale. But in order to make that information actionable, there’s an aggregation process under way. You’re aggregating on your own -- and SAP Ariba is now aggregating the aggregators.

How then do we make this actionable? What are the challenges, Tony, for making the great work being done by your partners into something that companies can really use and benefit from?

Timely insights, best business decisions

Harris: Other than some of the technological challenges of aggregating this data across different providers is the need for linking it to the aspects of the procurement process in support of what our customers are trying to achieve. We must make sure that we can surface those insights at the right point in their process to help them make better decisions. 

The other aspect to this is how we’re looking at not just trying to support risk through that source-to-settlement process -- trying to surface those risk insights -- but also understanding that where there’s risk, there is opportunity.

So what we are looking at here is how can we help organizations to determine what value they can derive from turning a risk into an opportunity, and how they can then measure the value they’ve delivered in pursuit of that particular goal. These are a couple of the top challenges we’re working on right now.
We're looking at not just trying to support risk through that source-to-settlement process -- trying to surface those risk insights -- but also understanding that where there is risk there is opportunity.

Gardner: And what about the opportunity for compression of time? Not all challenges are something that are foreseeable. Is there something about this that allows companies to react very quickly? And how do you bring that into a procurement process?

Harris: If we look at some risk aspects such as natural disasters, you can’t react timelier than to a natural disaster. So, the way we can alert from our data sources on earthquakes, for example, we’re able to very quickly ascertain whom the suppliers are, where their distribution centers are, and where that supplier’s distribution centers and factories are.

When you can understand what the impacts are going to be very quickly, and how to respond to that, your mitigation plan is going to prevent the supply chain from coming to a complete halt. 

Gardner: We have to ask the obligatory question these days about AI and ML. What are the business implications for tapping into what’s now possible technically for better analyzing risks and even forecasting them?

AI risk assessment reaps rewards

Harris: If you look at AI, this is a great technology, and what we trying to do is really simplify that process for our customers to figure out how they can take action on the information we’re providing. So rather them having to be experts in risk analysis and doing all this analysis themselves, AI allows us to surface those risks through the technology -- through our procurement suite, for example -- to impact the decisions they’re making. 

For example, if I’m in the process of awarding a piece of sourcing business off of a request for proposal (RFP), the technology can surface the risk insights against the supplier I’m about to award business to right at that point in time. 

A determination can be made based upon the goods or the services I’m looking to award to the supplier or based on the part of the world they operate in, or where I’m looking to distribute these goods or services. If a particular supplier has a risk issue that we feel is too high, we can act upon that. Now that might mean we postpone the award decision before we do some further investigation, or it may mean we choose not to award that business. So, AI can really help in those kinds of areas. 

Gardner: Emily, when we think about the pressing need for insight, we think about both data and analysis capabilities. This isn’t something necessarily that the buyer or an individual company can do alone if they don’t have access to the data. Why is your approach better and how does AI assist that?

Rakowski: In our case, it’s all about allowing for scale. The way that we’re applying AI and ML at EcoVadis is we’re using it to do an evidence-based evaluation.

We collect a great amount of documentation from the suppliers we’re evaluating, and actually that AI is helping us scan through the documentation more quickly. That way we can find the relevant information that our analysts are looking for, compress the evaluation time from what used to be about a six or seven-hour evaluation time for each supplier down to three or four hours. So that’s essentially allowing us to double our workforce of analysts in a heartbeat.
AI is helping us scan through the documentation more quickly. That way we can find the relevant information that our analysts are looking for, allowing us to double our workforce of analysts.

The other thing it’s doing is helping scan through material news feeds, so we’re collecting more than 2,500 news sources from around all kinds of reports, from China Labor Watch or OSHA. These technologies help us scan through those reports from material information, and then puts that in front of our analysts. It helps them then to surface that real-time news that we’re for sure at that point is material. 

And that way we we’re combining AI with real human analysis and validation to make sure that what we we’re serving is accurate and relevant. 

Harris: And that’s a great point, Emily. On the SAP Ariba side, we also use ML in analyzing similarly vast amounts of content from across the Internet. We’re scanning more than 600,000 data sources on a daily basis for information on any number of risk types. We’re scanning that content for more than 200 different risk types.

We use ML in that context to find an issue, or an article, for example, or a piece of bad news, bad media. The software effectively reads that article electronically. It understands that this is actually the supplier we think it is, the supplier that we’ve tracked, and it understands the context of that article. 

By effectively reading that text electronically, a machine has concluded, “Hey, this is about a contracts reduction, it may be the company just lost a piece of business and they had to downsize, and so that presents a potential risk to our business because maybe this supplier is on their way out of business.”

And the software using ML figures all that stuff out by itself. It defines a risk rating, a score, and brings that information to the attention of the appropriate category manager and various users. So, it is very powerful technology that can number crunch and read all this content very quickly. 

Gardner: Erin, at Maplecroft, how are such technologies as AI and ML being brought to bear, and what are the business benefits to your clients and your ecosystem?

The AI-aggregation advantage

McVeigh: As an aggregator of data, it’s basically the bread and butter of what we do. We bring all of this information together and ML and AI allow us to do it faster, and more reliably

We look at many indices. We actually just revamped our social indices a couple of years ago.

Before that you had a human who was sitting there, maybe they were having a bad day and they just sort of checked the box. But now we have the capabilities to validate that data against true sources. 

Just as Emily mentioned, we were able to reduce our human-rights analyst team significantly and the number of individuals that it took to create an index and allow them to go out and begin to work on additional types of projects for our customers. This helped our customers to be able to utilize the data that’s being automated and generated for them. 

We also talked about what customers are expecting when they think about data these days. They’re thinking about the price of data coming down. They’re expecting it to be more dynamic, they’re expecting it to be more granular. And to be able to provide data at that level, it’s really the combination of technology with the intelligent data scientists, experts, and data engineers that bring that power together and allow companies to harness it. 

Gardner: Let’s get more concrete about how this goes to market. Tony, at the recent SAP Ariba Live conference, you announced the Ariba Supplier Risk improvements. Tell us about the productization of this, how people intercept with it. It sounds great in theory, but how does this actually work in practice?

Partnership prowess

Harris: What we announced at Ariba Live in March is the partnership between SAP Ariba, EcoVadis and Verisk Maplecroft to bring this combined set of ESG and CSR insights into SAP Ariba’s solution.

We do not yet have the solution generally available, so we are currently working on building out integration with our partners. We have a number of common customers that are working with us on what we call our design partners. There’s no better customer ultimately then a customer already using these solutions from our companies. We anticipate making this available in the Q3 2018 time frame. 

And with that, customers that have an active subscription to our combined solutions are then able to benefit from the integration, whereby we pull this data from Verisk Maplecroft, and we pull the CSR score cards, for example, from EcoVadis, and then we are able to present that within SAP Ariba’s supplier risk solution directly. 

What it means is that users can get that aggregated view, that high-level view across all of these different risk types and these metrics in one place. However, if, ultimately they are going to get to the nth degree of detail, they will have the ability to click through and naturally go into the solutions from our partners here as well, to drill right down to that level of detail. The aim here is to get them that high-level view to help them with their overall assessments of these suppliers. 

Gardner: Over time, is this something that organizations will be able to customize? They will have dials to tune in or out certain risks in order to make it more applicable to their particular situation?
Customers that have an active subscription to our combined solutions are then able to benefit from the integration and see all that data within SAP Ariba's supplier risk solutions directly.

Harris: Yes, and that’s a great question. We already addressed that in our solutions today. We cover risk across more than 200 types, and we categorized those into four primary risk categories. The way the risk exposure score works is that any of the feeding attributes that go into that calculation the customer gets to decide on how they want to weigh those. 

If I have more bias toward that kind of financial risk aspects, or if I have more of the bias toward ESG metrics, for example, then I can weigh that part of the score, the algorithm, appropriately.

Gardner: Before we close out, let’s examine the paybacks or penalties when you either do this well -- or not so well.

Erin, when an organization can fully avail themselves of the data, the insight, the analysis, make it actionable, make it low-latency -- how can that materially impact the company? Is this a nice-to-have, or how does it affect the bottom line? How do we make business value from this?

Nice-to-have ROI

Rakowski: One of the things that we’re still working on is quantifying the return on investment (ROI) for companies that are able to mitigate risk, because the event didn’t happen.

How do you put a tangible dollar value to something that didn’t occur? What we can look at is taking data that was acquired over the past few years and understand that as we begin to see our risk reduction over time, we begin to source for more suppliers, add diversity to our supply chain, or even minimize our supply chain depending on the way you want to move forward in your risk landscape and your supply diversification program. It’s giving them that power to really make those decisions faster and more actionable. 

And so, while many companies still think about data and tools around ethical sourcing or sustainable procurement as a nice-to-have, those leaders in the industry today are saying, “It’s no longer a nice-to-have, we’re actually changing the way we have done business for generations.”

And, it’s how other companies are beginning to see that it’s not being pushed down on them anymore from these large retailers, these large organizations. It’s a choice they have to make to do better business. They are also realizing that there’s a big ROI from putting in that upfront infrastructure and having dedicated resources that understand and utilize the data. They still need to internally create a strategy and make decisions about business process. 

We can automate through technology, we can provide data, and we can help to create technology that embeds their business process into it -- but ultimately it requires a company to embrace a culture, and a cultural shift to where they really believe that data is the foundation, and that technology will help them move in this direction.

Gardner: Emily, for companies that don’t have that culture, that don’t think seriously about what’s going on with their suppliers, what are some of the pitfalls? When you don’t take this seriously, are bad things going to happen?

Pay attention, be prepared

Rakowski: There are dozens and dozens of stories out there about companies that have not paid attention to critical ESG aspects and suffered the consequences of a horrible brand hit or a fine from a regulatory situation. And any of those things easily cost that company on the order of a hundred times what it would cost to actually put in place a program and some supporting services and technologies to try to avoid that. 

From an ROI standpoint, there’s a lot of evidence out there in terms of these stories. For companies that are not really as sophisticated or ready to embrace sustainable procurement, it is a challenge. Hopefully there are some positive mavericks out there in the businesses that are willing to stake their reputation on trying to move in this direction, understanding that the power they have in the procurement function is great. 

They can use their company’s resources to bet on supply-chain actors that are doing the right thing, that are paying living wages, that are not overworking their employees, that are not dumping toxic chemicals in our rivers and these are all things that, I think, everybody is coming to realize are really a must, regardless of regulations. 

And so, it’s really those individuals that are willing to stand up, take a stand and think about how they are going to put in place a program that will really drive this culture into the business, and educate the business. Even if you’re starting from a very little group that’s dedicated to it, you can find a way to make it grow within a culture. I think it’s critical.

Gardner: Tony, for organizations interested in taking advantage of these technologies and capabilities, what should they be doing to prepare to best use them? What should companies be thinking about as they get ready for such great tools that are coming their way?

Synergistic risk management

Harris: Organizationally, there tend to be a couple of different teams inside of business that manage risks. So, on the one hand there can be the kind of governance risk and compliance team. On the other hand, they can be the corporate social responsibility team. 

I think first of all, bringing those two teams together in some capacity makes complete sense because there are synergies across those teams. They are both ultimately trying to achieve the same outcome for the business, right? Safeguard the business against unforeseen risks, but also ensure that the business is doing the right thing in the first place, which can help safeguard the business from unforeseen risks.

I think getting the organizational model right, and also thinking about how they can best begin to map out their supply chains are key. One of the big challenges here, which we haven’t quite solved yet, is figuring out who are the players or supply-chain actors in that supply chain? It’s pretty easy to determine now who are the tier-one suppliers, but who are the suppliers to the suppliers -- and who are the suppliers to the suppliers to the suppliers?
Once you get the mapping done, our software and our partners' software surfaces those kinds of risks across the entire supply chain.

We’ve yet to actually build a better technology that can figure that out easily. We’re working on it; stay posted. But I think trying to compile that information upfront is great because once you can get that mapping done, our software and our partner software with EcoVadis and Verisk Maplecroft is here to surfaces those kinds of risks inside and across that entire supply chain.

Gardner: I’m afraid we will have to leave it there. You’ve been listening to a sponsored BriefingsDirect discussion on new ways that companies are gaining improved visibility, analytics, and predictive responses to better manage supply-chain risks. 

And we’ve learned how new tools and methods can be combined for easy assessment and remediation of hundreds of supply-chain risks. So, a big thank you to our guests, Tony Harris, Global Vice President and General Manager of Supplier Management Solutions at SAP Ariba; Erin McVeigh, Head of Products and Data Services at Verisk Maplecroft, and Emily Rakowski, Chief Marketing Officer at EcoVadis. Thank you, all.

I’m Dana Gardner, Principal Analyst at Interarbor Solutions, your host throughout this series at SAP Ariba-sponsored BriefingsDirect discussions. Thanks again for listening and do come back next time.

Listen to the podcast. Find it on iTunes. Get the mobile app. Download the transcript. Sponsor: SAP Ariba.

Transcript of a discussion on new ways that companies gain improved visibility, analytics, and predictive responses to better manage supply-chain risk and sustainability factors. Copyright Interarbor Solutions, LLC, 2005-2018. All rights reserved.

You may also be interested in:

Thursday, April 05, 2018

Procurement in 2025: The Future Looks Bright

Transcript of a discussion on how rapidly evolving technologies impact the future of procurement and the professionals who will drive it to a new plane of greater influence and impact.

Listen to the podcast. Find it on iTunes. Get the mobile app. Download the transcript. Sponsor. SAP Ariba.

Dana Gardner: Hi, this is Dana Gardner, Principal Analyst at Interarbor Solutions, and you’re listening to BriefingsDirect. Our next business digital transformation panel discussion explores the ways that rapidly evolving technology impacts the future of procurement.

Gardner
The advent of increased automation, data-driven decisions, powerful business networks, and the firepower of artificial intelligence (AI) and blockchain are combining to elevate procurement -- and the professionals who drive it -- to a new plane of greater influence and impact.

To learn more about how procurement is reaching an increasingly strategic position in businesses, I’m pleased to introduce our panelists, Julie Gerdeman, Vice President of the Digital Transformation Organization at SAP Ariba. Welcome, Julie.

Julie Gerdeman: Thanks, Dana.

Gardner: We’re also here with Shivani Govil, Vice President of Artificial Intelligence and Cognitive Products at SAP Ariba. Welcome, Shivani.

Shivani Govil: Thanks, Dana. Delighted to be here.

Gardner: And we are here with Matt Volker, Vice President of Supply Chain at NatureSweet, based in San Antonio, Texas. Welcome, Matt.

Matt Volker: Thanks, Dana. My pleasure.

Gardner: Julie, SAP Ariba recently published a point-of-view on what procurement will look like in 2025, and it shows procurement as far different from how we know it today. Paint a picture, if you could, of what we should expect from procurement over the next several years?

Hyperconnected super networks 

Gerdeman: We are on the brink of more change than ever before in procurement. We think procurement organizations are going to rethink everything -- from technology to resource allocation to talent and skill-sets. This all can entirely remake the function.

Gerdeman
And how they will do that means a few things. First, they are going to leverage new and emerging technologies to automate the mundane tasks to refocus on more strategic-level work, and that will allow them to become key drivers of corporate goals and business innovation.

How are they going to do that? It will be through use of intelligent systems that are self-learning and that provide a consumer-like, highly personalized user experience that makes purchasing easy.

We also believe that procurement strategists will become ambassadors of the brand for their companies. Unlike in the past, all companies want to do well financially, but we believe procurement can help them also do good, and we are going to see more-and-more of that in the future. Procurement will become the stewards of the corporate reputation and brand perception by ensuring a sustainable supply chain.

In the future, procurement will become even more collaborative -- to achieve cost-savings goals. And that means companies will be connected like never before through leveraged networks. They are going to take the lead in driving collaboration and using networks to connect buyers, partners, and suppliers globally for efficiency. On the tech side we believe super networks may emerge that create value. These super networks will network with other networks, and this hyper-connected ecosystem will become the standard.

Finally, data is the new currency and buyers and sellers are going to leverage things that I believe Shivani will be talking about, like predictive analytics, real-time insights, AI, blockchain, and using all of that to move the business forward. We are really excited about the future of procurement.

Gardner: The adoption and the pace at which people can change in order to acknowledge these technical changes -- and to also put in place the organizational shifts -- takes time, it’s a journey. What can companies be doing now to think about how to be a leader -- rather than a laggard -- when it comes to this procurement overhaul?

Gerdeman: That’s such a great question. Adoption has to be the key focus, and every company will begin at a different place, and probably move at a different pace -- and that’s okay.
Adoption [of modern procurement] has to be the focus, and every company will begin at at different pace, and probably move at a different pace -- and that's okay.

What we see first is a focus on business outcomes. This is the difference for having successful adoption. So that’s focus -- on outcomes. Next comes supporting that through organizational design, resource allocation, and developing the talent that’s needed. Finally, you must leverage the right technology to help drive that adoption at the pace that’s desired. This is key. Those are some of the core components for improved adoption.

Gardner: Matt at NatureSweet, you are well on your way to making procurement a strategic element for your company. Tell us about your transformation, what your company does, and how procurement has become more of a kingpin to how you succeed.

Greenhouse growth with IT

Volker: We have more than 9,000 associates across our operations and we consider them our competitive advantage. That’s because people create the expertise at the greenhouse -- for the best growing and harvesting techniques.

With that said, our intention is to bring more innovation to the table, to allow them to work smarter versus harder -- and that entails technology. As an example, we currently have five different initiatives that are linked to automation and systems solutions. And SAP Ariba Snap happens to be one of those initiatives. We are creating a lot of change management improvements around processes. As a result, our people’s accountability shifts from a transactional solution in procurement to a strategic sourcing play.

Gardner: Tell us more about NatureSweet. You are an innovative grower of vegetables and other organic produce?

Volker: Yes, we grow fresh-produced products, predominantly in tomatoes, cucumbers, and peppers; both conventional and organic. We service North America -- so Canada, Mexico, and the US -- with a brand of products across a spectrum of small and large tomatoes, varieties of peppers, and varieties of cucumbers.

Gardner: Now that you’ve put strategic procurement into place, what are the demonstrable benefits?

Volker: Being in the mid-market, we were in a position where the sky was the limit. In a transactional sense, we still had basic processes that were not fully in-place -- down to identifying item numbers and stock items across a broad range of purchases across 8,000 different commodity items.

Volker
That led us to do the due diligence to be able to identify what those items were, which then drove us to category management, siloing specific purchases into categories, and then applying our resources against those categories.

The net result was that we moved from transactional to strategic sourcing. We didn’t know what we didn’t know. But once we brought SAP Ariba Snap internally into our operations, we gained access to three million-plus vendors. It provided us the visibility into worldwide opportunities across each of those purchase categories. It was a benefit -- both on spend as well as services and products available.

Gardner: Just to be clear, SAP Ariba Snap is a new, packaged solution to help small and medium-sized businesses (SMBs) become purveyors of the top-line technology, processes, and networks when it comes to procurement. In this case size really doesn’t matter.

Shivani, SMB companies like NatureSweet want to be thinking about the top-line capabilities of AI and machine learning, but perhaps they don’t want to take that on as a core competency. It’s really outside of their wheelhouse. How can an organization like SAP Ariba tackle the complexities of these technologies, get the deep data, and then help companies like NatureSweet better accomplish their goals?

Govil
Govil: At SAP Ariba, we are enabling transactions across more than three million buyers and suppliers, and for more than $1.6 trillion in value across the network. If you think about that statistic, and you think about how much data resides across our network and in our systems, what we are looking at is applying AI- and machine learning-type technologies to unlock the value of that data and deliver actionable insights to companies, such as NatureSweet, so that they can perform and do their functions better.

Our focus is really looking at the technology and how can we apply those technologies to be able to deliver value to the end-user. Our goal is to bring together better connections between the people, the processes, the systems, the data, and the context or intent of the user in order to enable them to do their jobs better.

Gardner: And looking to this initiative about predicting through 2025 how procurement will change, tell us how you see technology supporting that. What is it about these new technologies that you think will accelerate change in procurement?

The future is now 

Govil: I see the technology as being a key enabler to help make the transformation happen. In fact, a lot of it is happening around us today already. I think some of us can point to watching science fiction movies or looking at cartoons like The Jetsons where they talk about a future age of flying cars, robot maids, and moving roadways. If you look around us, that’s all happening today. We have self-driving cars, we have companies working on flying cars, and we have the robot vacuums.
Our goal is to bring together better connections between the people, the processes, the systems, the data, and the context or intent of the user in order to enable them to do their jobs better.

Technology has already become the enabler to allow people to think, act, and behave in very, very different ways than before. That’s what we’re seeing happening around us.

Gardner: For end-users who are not data scientists, or are even interested in becoming data scientists, the way mainstream folks now experience AI, bots, and machine learning is often through voice-recognition technologies like Siri and Alexa.

What is it about those technologies that allow us to educate people on AI? How can your average line-of-business person appreciate the power of what AI and a cloud business network can do?

The conversational AI advantage 

Gerdeman: Alexa and Siri have become household names, and everyone is familiar with those types of technologies. Those are the conversational interfaces that enable us to have interactions with our applications in a seamless manner, as if we are talking to a friend or trying to get something done.

When we think about this whole space of technology, AI, and machine learning, we actually span multiple different types of technologies. The natural language processing, the speech-to-text, and text-to-speech -- those are the types of technologies that are used in the conversational interactions. You also have things like machine learning, deep learning, and neural networks, etc., that provide the insights that span across large amounts of data and deliver insights and uncover hidden patterns to enable better business outcomes.

Let me give you an example. We think about Siri and Alexa in our everyday life. But imagine an intelligent assistant on the business sourcing solution, one that is guiding a category owner throughout the processes of running a sourcing event. This can really help the category owner better understand and get intelligent recommendations as to what should they be doing -- all through conversational type of interactions.
We are applying techniques such as deep learning and convolutional neural networks ... We see that it saves people from what used to take days to less than 11 minutes to do the same task.

Now, you can take that even further, to where I talk about some of the other types of technologies. Think about the fact that companies get thousands of invoices today. How do you actually go through those invoices and then classify them so that you can understand what your spend categories are? How do you do analysis around it to get a better handle on your spend?

We are now applying techniques like deep learning and convolutional neural networks (CNNs) to be able to automatically start classifying those invoices into the right spend categories. By doing so, we have seen that it saves people from what used to take days to less than 11 minutes to do the same task.

Gardner: Matt, now that you have heard about some of these AI capabilities, does this resonate with you? Are you excited about it, and do you prefer to see a company like SAP Ariba tackle this first and foremost?

AI for excellence 

Volker: Our long-term strategy is to become a consumer package goods company and that places us in the same conversation as folks like Proctor and Gamble, Hershey, and PepsiCo. That strategy is ambitious because if you consider produce traditionally, it’s been a commodity market driven on temporary workforces that are migratory by nature. But that’s not who we are.

We are a branded company. Our claim to fame in the marketplace is that we have the best products in the market. They are always the best products on the market, always at the same price, always available, 100 percent vertically integrated and in a direct relationship with the consumer. Why I mentioned that is for us to continue to excel at our growth potential, the need of automation, AI, and digitizing processes are critical to our success.
We are building toward an end-to-end integrated supply chain, and we must have that link of a qualified tool in procurement to make that a successful transformation.

In my mind, from a supply chain perspective, we are building toward an end-to-end integrated supply chain, and we must have that link of a qualified tool in procurement to make that a successful transformation.

Gardner: Shivani, we’ve also heard that people are concerned that their jobs are going to get taken over by a robot. We don’t expect necessarily that 100 percent of buying is going to be done automatically, by some algorithm. There has to be a balance. You want to automate as much as you can, but you want to bring in people to do what they do best.

Is there anything about your view towards 2025 that addresses this idea of the right mix of people and machines to leverage each other to the mutual benefit of the business?

Human insights add value 

Govil: We don’t think technology is going to replace humans. In fact, what we think is happening is that technology is augmenting the abilities of the humans to be able to do their jobs better. The way we look at these technologies is asking are they really allowing the procurement professionals to be smarter, faster, and more efficient in terms of what they are doing? Let me give you an example.

We all know that digitization has happened. Paper invoices, for example, are a thing of the past. Now, imagine if you can, also adding in what’s stored in many digital records? You’d get the insights from all of that together. Let’s say there’s a drop in commodity prices, you’ll be able to intelligently give the contract negotiator the advice that it’s time for them to negotiate a contract, as well as provide benchmarks and insights into what kind of prices they should be looking for.

The way we’re approaching this is looking at the type of user, the type of task that they are performing and based on that, evaluating different ways that these types of technologies can help. For example, if you have a casual user and the task is very repetitive, like a customer support-type activity, where the questions are fairly generic, commonly asked questions, can you look at automating those tasks? In this case, we would look at automation-type functions.

On the other hand, if you have an expert user doing a very deep, complex task, which is highly variable, such as a contract negotiation, how can you then best help?  How do you then use these technologies to help that contract negotiator to amplify what they are doing and get even better results for the business?

Depending on the type of user, whether a casual or an expert user, and whether it's a repetitive task or a highly variable unique customized task, we can look at these types of technologies to enable in very different ways.
Depending on the type of user, whether they are casual or an expert user, and the type of task, whether it’s a repetitive task or a highly variable unique customized task, we can look at these types of technologies to enable in very different ways.

Gardner: Julie, for organizations to prepare themselves to make that right call between what machines can do well and what people do best at a strategic level requires a digital transformation of the organization, the people, process and the technology. Is there anything that you can offer from what you’ve seen in the Procurement 2025 vision that would help organizations get to a digital-first advantage?

Gerdeman: What we have seen in doing the research is that it’s at three structural levels. First, at the corporate procurement level, and addressing risk and security, and thinking about the experience of satisfaction. And then, at the business unit level, we’re seeing procurement get more embedded into the business unit, and actually work more closely in a line of business, in a production or manufacturing facility to be closer to the line of business, and that then helps a transformation.

And then finally, at the shared services level, a lot of what Shivani was referring to, some of those more mundane tasks being digitized. They become more arbiters of satisfaction to the end users -- really to be overseeing the digitization rather than performing the task themselves.
To get on that journey at the corporate level, then the business unit, and the line-of-business level, procurement gets more embedded.

To get on that journey at the corporate level, then the business unit, and then line-of-business level, procurement gets more embedded. Finally, shared services were viewed as things in the future as like complete lights-out facilities, which then would change the dynamic.

Gardner: It’s interesting to me that this can be quite easily customized. You could be a smaller organization, or a giant enterprise across different vertical industries with different geographies. You can enter this transformation on your own trajectory and begin to layer in more use of AI and automation. It can be done at your own pace.

But one of the things we have seen is the pace has been slower than we expected. Matt, from your organization’s experience, what can increase the pace of adoption when it comes to digital transformation, automation, and ultimately robots and AI and artificial intelligence benefits?

Increase the speed of adoption 

Volker: As an organization we pride ourselves on being transformational. In our world, there are 9,000 people for whom we want to improve the living standards, and from that it develops a strategy to say, “How do you go about doing that?” Well, it’s about transformation.

So, through automation and system solutions we intend to get there by December 31, 2019. It was referenced earlier by Shivani that you move folks away from transactional to strategic sourcing through categorizing your vendor community and allowing them to say, “Now I can move away from requisitions and purchase orders to really searching globally for partners that will allow us to accelerate our spend the right way, both from a cost, service and quality perspective.”

Gardner: Shivani, we have been looking at this in the future, but let’s just go short-term for a second. In my experience with software development and moving from traditional software to the cloud, it’s really important to demonstrate upfront the benefits that would then accelerate adoption.

While we are still looking several years out, what could be done around AI, machine learning, and data analysis now that would become a catalyst to the adoption and the benefits in the future?

The value-add bucket list 

Govil: We are seeing the values of these technologies manifest in many different ways. I actually largely put them into four buckets. The first one is really around driving deeper engagement and user adoption. So, if you imagine having these types of conversational interactions, intelligent assistants that really drive the engagement and adoption by the end user of using the systems, that then means bringing more spend under your management, getting the better outcomes for the business that you are trying to deliver. So that’s number one.
If you imagine having these types of conversational interactions, intelligent assistants that really drive the engagement and adoption by end users, that then means bringing more spend under your management.

The second is in terms of being able to unlock the data and discover hidden patterns or insights that you don’t have access to otherwise. If you think about it, there’s so much data that exists today -- whether it’s in your structured enterprise systems or your unstructured systems out in the web, on social media, from different sources – that by being able to bring those data elements together and understanding the context and what the user is trying to achieve, you can actually help discover patterns or trends and enable the user to do their jobs even better.

I talked about the sourcing, contract negotiations, you can think about it in terms of ethical sourcing, too, and how to you find the right types of suppliers that are ethically appropriate for your business. So, that’s the second one, it’s around unlocking the data and discovering hidden patterns and insights.

The third one is around driving retention of talent and knowledge. A lot of companies are facing an ageing workforce where people are beginning to retire, and you don’t want the knowledge that they have to go with them; you want to retain that in your business and your applications.

These types of technologies enable that to happen. Also, being data-driven allows you to track new talent because everyone wants to work with the latest and greatest technologies, and so this becomes a way for new talent to get attracted to your business.

And the fourth, and the most important, is around driving better business outcomes. This can be in the form of efficiency, it can be in the form of automating repetitive tasks, or it can be in the form of driving increased accuracy. Together these all allow you to create strategic value for procurement as a function and become a value creator for the business.

Gardner: Julie, you had some other thoughts on accelerating adoption?

Support at the top

Gerdeman: Because so much of what we are about is amazing technology, it can only be successful through effective change management at the organization level. So, it’s in that process and the people side that if you embrace the technology, that’s fabulous. But structuring the organization and supporting and enabling folks -- whether they are users, category managers, sourcing managers -- to then adapt to the change and lead through that change -- and gain the support at the highest levels – that’s what we have seen be really effective in driving successful digital transformation. It’s through that high level of change management.

Gardner: We’ve often seen patterns where it takes longer for change to happen than we thought, but the impact is even greater than we anticipated.

So, looking out several years for an understanding of what that greater impact might be, my final question to you all is, what’s it going to be like in 10 years? What will astonish us in 10 years?

Outstanding People and processes

Volker: In our world of produce, it’s about the investment. As land and resources become more scarce, we need to be much more productive from the standpoint of being able to deliver a highly perishable mix of products with speed to market. Part of the solution is automation, AI, and digitizing processes, because it’s going to allow us the opportunity to consistently reinvent ourselves, just like any other organization. This will allow us to maintain our competitive advantage in the marketplace.

We are extremely well-suited to pull the consumer and customer along with us in an emerging economy where speed to market and flexibility are mandatory.
Organizations will look completely different, and people in them will be data scientists and strategic consultants.

Gerdeman: I actually think it’s about the people, and I’m most passionate about this. Organizations will look completely different, and the people in them will be data scientists, strategic consultants, and people that we never had the opportunity to use well before because we were so focused on executing tasks associated with procurement. But how the new organizations and the people and the talent are organized will be completely astonishing to us.

Gardner: A workforce of force multipliers, right?

Gerdeman: Absolutely.

Gardner: Shivani, same question, what’s going to astound us 10 years out?

Govil: I agree with Julie on the people’s side of it. I also think that the technologies are going to enable new things to happen in ways that we can’t even imagine today. If you begin thinking about we talked a lot about -- AI and machine learning, blockchain and the possibilities that opens, you think about 3D printing, drones -- you can imagine sometime in the near future rather than sourcing parts and materials, you might be sourcing designs and then printing them locally. You might have a drone that’s delivering goods from a local 3D printer to your facility in an as-needed manner, with no advanced ordering required.

I think that it’s just going to be amazing to see where this combination of technology and skills will take the procurement function.

Gardner: I’m afraid we will have to leave it there. You’ve been listening to a sponsored BriefingsDirect discussion on how procurement is advancing to become a strategic force-multiplier for corporations as they seek a digitization of their overall businesses. And, in examining the Procurement 2025 initiative, we’ve learned how modern procurement is emerging as a key component to overall digital business transformation.

So please join me in thanking our guests, Julie Gerdeman, Vice President of the Digital Transformation Organization at SAP Ariba; Shivani Govil, Vice President of Artificial Intelligence and Cognitive Products at SAP Ariba, and Matt Volker, Vice President of Supply Chain at NatureSweet in San Antonio, Texas. Thank you all.

And, a big thank you as well to our audience for joining this series of SAP Ariba-sponsored BriefingsDirect discussions. I’m Dana Gardner, Principal Analyst at Interarbor Solutions, your host. Thanks again for listening, and do come back next time.

Listen to the podcast. Find it on iTunes. Get the mobile app. Download the transcript. Sponsor. SAP Ariba.