Disruptive trends are impacting the procurement supply chain in a big way. One of those trends, the Industrial Internet of Things (IIoT) is picking up steam and is unleashing an exponential growth in corporate data. Why is this important in the context of procurement? The combination of affordable data gathering technologies, high level analytics of that data, machine learning and a new generation artificial intelligence, will allow procurement professionals and their suppliers to up the ante in terms of both collaboration, process efficiency and corporate revenue growth.
What might IIoT look like in a procurement context? This new procurement world will include, for example, rigorous process simulation. In addition, ongoing supply chain health checks will generate rapid recommendations for closing supply chain performance gaps. Data from across the supply chain cycle will stream into data “lakes” where modeling and analytics will spawn formulas for optimizing procurement performance.
But most procurement professionals are not anywhere near that world yet. MyPurchasingCenter.com recently interviewed David Khuat-Duy, CEO of Ivalua (www.ivalua.com), a provider of enterprise spend management platforms, from his office in the heart of Silicon Valley for his views regarding these emerging business and technology trends.
According to Khuat-Duy, when confronted with the fast-moving world of IIoT, many Chief Procurement Officers (CPOs) need to take some intermediary steps first, before they can maximize the future potential of IIoT. “There are systems available today that begin the process of providing a deeper intelligence into supply and demand,” he said.
Khuat-Duy believes it’s difficult for corporate executives to anticipate everything that will happen in their particular environment. “One of the few areas of certainty that you can control is internal procurement. In the future, procurement will be more and more digitalized and will emerge as a key area of investment for the company. In fact, procurement will be critical to securing the company’s financial sustainability. The significance of procurement will grow and have an increasing impact on the business bottom line,” he added.
“We have seen Enterprise Resource Planning systems (ERP) emerge to better support accounting functions, Material Requirements Planning (MRP) systems that aid in the direct procurement of parts and Customer Resource Management systems (CRM) that have advanced the process of industrializing sales. Now, the next logical phase of this movement is an enterprise spending management platform that supports the procurement function in an integrated fashion,” he said.
Khuat-Duy emphasizes that current spending management platforms are a prerequisite step to launching full blown IIoT benefits in procurement. “Spending management platforms address procurement needs from a single, centralized spending management perspective. A fully integrated platform allows purchase order/purchase requisition management information, invoice management information, supplier data, sourcing data and transaction data to get integrated. The single platform allows you to aggregate all of the data and then move on to more advanced technologies (like the emerging data analytics and artificial intelligence tools) for driving faster and more profitable decisions.”
The spend management platforms help to address risk management and compliance issues within the supply chain. “Companies want to gather more data not only surrounding the supplier but also from third party providers (like 3rd party logistics organizations) for the purpose of evaluating suppliers, and for identifying the level of risk that buyers are exposed to when committing to particular suppliers,” he added. “Solid analytics tools and new artificial intelligence technologies, can help buyers acquire more accurate supplier information in a timely fashion,” he said.
According to Khuat-Duy, the centralized spending management platform can allow a company to collaborate much more with suppliers and can bring benefits that extend beyond cost savings. “Procurement can help reduce cycle time to deliver a new product to market, it can create collaborative innovation with the suppliers, it can manage supply chain risk (through supplier evaluation), and can provide advanced insight on contract analysis. All of these tools will enable procurement staff to bring much more value to the companies they work for, beyond just cost reduction,” he concluded.
Ivalua (www.ivalua.com) is a market-leading Spend Management software as a service (SaaS) provider, headquartered in Redwood City, California and Paris, France. Ivalua has recently raised $70M in growth equity minority funding from KKR, a leading global investor. Ivalua's Source-to-Pay (S2P) platform supports over 250 blue chip customers globally, including Honeywell, the City of New York, Veolia, Thales, Orange, Michelin, and Deutsche Telekom.