TL;DR:
- Global corporations like Walmart, Tyson Foods, Koch Industries, Maersk, Siemens, and Unilever are leveraging advanced AI technologies to safeguard their supply chains.
- AI tools enhance visibility, enable quicker responses to disruptions, and foster supplier diversification.
- Unilever and Siemens use Scoutbee to find alternative suppliers rapidly, even during patent-protected product shortages.
- Koch Industries employs Arkestro’s AI to optimize existing supplier networks, reducing the need for lengthy procurement processes.
- Maersk and Walmart streamline negotiations with Pactum AI, benefiting both buyers and suppliers.
- Key considerations for AI adoption include testing technologies through pilot programs, knowing when not to use AI, and building a portfolio of AI tools.
Main AI News:
In the wake of the disruptions inflicted by the COVID-19 pandemic, corporate boards and CEOs have exerted substantial pressure on their procurement leaders to fortify supply chains against potential upheavals. Recent research conducted at industry giants such as Walmart, Tyson Foods, Koch Industries, Maersk, Siemens, and Unilever unveils a strategic adoption of advanced AI technologies as a proactive measure to anticipate and mitigate supply chain disruptions.
The multifaceted applications of these AI tools empower large corporations with heightened visibility into their supply chains, enabling swift responses to disruptions, fostering stronger relationships with existing suppliers through diversification, facilitating the discovery and vetting of new suppliers preemptively, and even automating negotiation processes.
For those enterprises that swiftly embrace these AI solutions, a competitive edge emerges. As Maggie Brommer, Head of Procurement for Unilever’s Prestige Products, aptly puts it, “In times of supply-chain crisis, the race to secure alternative suppliers becomes paramount. Speed becomes the key to competitiveness, as everyone strives to achieve the same objective.“
Here, we delve into the methods employed by global corporations in our study to leverage AI for procurement excellence.
Finding Alternative Suppliers: Unilever’s AI-powered Quest
Unilever has harnessed the capabilities of an AI application from German-based startup Scoutbee to identify alternative supply sources on short notice. This innovative software scours websites for comprehensive data on suppliers, encompassing financials, customer ratings, sustainability records, diversity metrics, intellectual property details, customs documents, and real-time alerts from social media and news outlets. Armed with this data, the software generates a list of potential new suppliers, at which point the process becomes manual, with corporate buyers directing Scoutbee’s staff to seek more information from specific candidates.
Unilever’s commitment to procuring €2 billion annually from diverse businesses worldwide by 2025 aligns seamlessly with the technology’s use in identifying such suppliers, even within the United States. Lullit Jezequel, Unilever’s Procurement Manager for Sustainability and Partnerships, underscores that many diverse suppliers pinpointed by the AI tool are small or medium-sized enterprises (SMEs). She notes, “Sometimes, our requirements defy simple keywords. This tool delves deep, uncovering pitch decks and clientele profiles, providing a nuanced understanding of their capabilities. Enhancing supplier diversity bolsters supply-base diversification and introduces agile suppliers ready to step in during disruptions.”
Siemens, too, relies on Scoutbee to swiftly pinpoint alternative supply sources, as demonstrated during a Surlyn shortage crisis. Despite Surlyn’s status as a patented product with no alternative manufacturers, Scoutbee’s data mining prowess unearthed 150 Surlyn distributors within days. Siemens corporate buyers streamlined their choices, and Scoutbee’s team subsequently located distributors with available Surlyn inventory for purchase.
Michael Klinger, Siemens’s Senior Director of Supply Chain Excellence, underscores the role of technology, stating, “Technology doesn’t provide foolproof prevention of supply disruptions, but it equips us with information that accelerates responses to supply-chain disruptions, surpassing the capabilities of human buyers.”
Uncovering Hidden Capabilities Within Existing Suppliers
Rolls-Royce exemplifies the challenge of time-intensive onboarding for new suppliers, which can take a year or more to qualify, test, certify, and integrate into operations. A contrasting approach involves AI’s scrutiny of whether existing suppliers can expand their offerings.
Koch Industries’ subsidiaries, part of one of America’s largest conglomerates, employ an AI tool designed by Arkestro to optimize their supplier base. In contrast to conventional procurement methods, which categorize suppliers based on high-level purchasing criteria and aggregate spending, this AI tool dives into granular data, down to the stock-keeping unit (SKU) level. It generates supply options, often drawing from existing suppliers, thereby minimizing the need for protracted requests for quotes (RFQs).
This AI marvel accomplishes such precision by ingesting comprehensive datasets, including supplier information, purchase orders, invoices, and even past procurement cycle’s unsuccessful quotes. The outcome is a nuanced evaluation of qualified suppliers, enabling companies to identify backup suppliers across various categories.
The AI algorithm harnesses historical data to auto-populate new RFQs with essential parameters like lead times, geographic locations, quantities, service-level agreements, and material costs. Subsequently, it dispatches the RFQ to the respective supplier for review. If the supplier concurs with the AI-generated quote, a simple click submits the bid. In case of any modifications by the supplier, the algorithm adapts and refines its predictive capabilities. This symbiotic approach not only saves suppliers between 60% and 90% of the time expended on completing an RFQ but also benefits Koch by identifying additional sourcing options within its existing supplier network.
Streamlining Negotiations Through AI
Maersk and Walmart have embraced Pactum AI, a software product engineered for automated negotiations. Maersk utilizes its chatbot to swiftly ascertain transportation rates within existing agreements or secure quotes automatically in their absence. Walmart, with a supplier network exceeding 100,000, deploys this technology for negotiations with “tail-end” suppliers, responsible for approximately 20% of Walmart’s expenditures on lower-value items. Michael DeWitt, Vice President of Strategic Sourcing at Walmart International, elucidates, “This technology empowers us to engage suppliers that we wouldn’t have the bandwidth for without AI.”
Guiding Your AI Adoption Strategy
In charting your AI adoption strategy, consider these essential guidelines:
- Test the Technologies: Pilot programs are invaluable for evaluating AI solutions. While tools like Pactum, Scoutbee, and Arkestro delivered on their promises in our study, other AI-based tools fell short. Tyson Foods, for instance, encountered a significant hiccup when one AI application erroneously categorized a reliable supplier as “high risk.” As Russ Stewart, Senior Vice President of Procurement at Tyson, underscores, “Many AI tools excel at assessing financial risks among publicly traded companies but falter in evaluating the financial stability of private firms or identifying geopolitical risks. Numerous technology companies are pitching emerging solutions, aiming to bridge these gaps.”
- Know When Not to Use AI: AI is not a universal remedy. Its value diminishes in stable supplier markets with well-established alternatives and minimal uncertainty. Moreover, AI tools offer limited benefits when robust relationships already yield comprehensive information.
- Build a Portfolio of AI Tools: Given the current landscape of AI solutions, companies must adopt multiple tools tailored to specific tasks and risk levels. Arkestro and Scoutbee excel in identifying potential alternative suppliers, generating multiple options without significant risk. For negotiating rates and contracts, preapproval of AI-generated outputs is crucial, ensuring full legal compliance. A one-size-fits-all AI tool for all supply chain needs remains a distant goal, at least for now.
By adhering to these guidelines and harnessing AI strategically, corporations can fortify their supply chains and emerge resilient in an ever-changing global business landscape.
Conclusion:
The strategic adoption of AI by global corporations for supply chain management represents a significant shift in ensuring resilience and agility in the face of disruptions. This trend highlights the growing importance of AI-driven solutions in enhancing supply chain visibility, diversifying supplier networks, and optimizing procurement processes, ultimately giving these companies a competitive edge in the market. Businesses that fail to embrace these technologies may find themselves at a disadvantage in an increasingly dynamic and unpredictable business environment.
