Last week, I effectively made a business case for adopting digital, automated supply risk management (SRM) tools, along with supplier information management (SIM) and supplier performance management (SPM) tools in 2019. This week, I’m taking us towards an intelligent supply risk management paradigm — a new way to think about and approach risk management for procurement and supply chain in 2019.
As we will see in this article, this new paradigm is not one system or innovation, but an ecosystem of innovations and tools that, when integrated, can produce a whole that is greater than the sum of its parts. It takes Big Data, advanced analytics, and machine learning, distributed networks like Blockchain digital ledgers and cloud-based platforms, and “smart” innovations like chat bots and virtual assistants, and centralizes them all into intuitive, user-friendly dashboards to produce a futuristic and heuristic supply risk management ecosystem. Let’s start with analytics.
Analytics
Procurement teams are awash in structured and unstructured data and are challenged to analyze and interpret it in time to make informed decisions. They need data that is cleansed, categorized, and enriched with other forms and sources of data to the point where it can be analyzed. To do this, and to help them scale limited resources, they also need better analytic capabilities. Digital, automated spend analytics tools are great for combining and analyzing various pieces of spend data, but what about supplier and supply risk data? Analytics to the rescue!
- Advanced (Big Data) analytics, along with “artificial intelligence” (AI), Blockchain distributed digital ledgers, and connected devices (the “Internet of Things”) are all the rage these days. But essentially, they employ deterministic or search-based algorithms to very large data sets to uncover hidden patterns, like savings opportunities or inherent risks, and bring them to the surface.
- Machine Learning similarly employs algorithms to study user data and find patterns after just a few transactions. Systems embedded with machine learning can then apply those lessons learned to how users interface with the system and they begin to mold the user experience to the specific user. They too can study large data sets and quickly identify patterns hidden deep within the data and “surface” them.
- Predictive Analytics – again, based upon advanced algorithms — analyze historical data points for patterns and lessons learned, and then apply those lessons to current, real-world conditions to enable users to be able to make predictions, or educated guesses about potential business outcomes. Traders on Wall Street have been using variations of this technology for some time now, enabling them to buy commodities or securities based on the system’s analysis of historical data and current market conditions.
- Risk Modeling tools analyze historical trends and conditions to determine probabilities of future risk events, and enable sourcing, procurement, and risk management teams to construct detailed risk models and conduct what-if analyses based on various scenarios and inputs. But that’s not all….
Devices, Networks, and Platforms
Cloud-based platforms, social and business networks, and eCommerce and online banking tools are ubiquitous in the business world. They become more innovative, user-friendly, and intuitive every year, and they can enable procurement and supply chain users to enhance their agility and supply risk management. Let’s dig in:
- Connected Devices (the “Internet of Things”) include sensors in manufacturing machines, remote devices, or warehouses) automatically transmit data to and from each other or to a central data repository for analysis, creating enormous and indefinite streams of structured and unstructured data (i.e., “Big Data”). They can help procurement teams and other stakeholders better understand their operations and markets, streamline decision-making, avoid/mitigate risk, and ultimately, improve performance.
- Cloud Computing: Cloud-based, Software-as-a-Service (“SaaS”) solutions are typically hosted, maintained, enhanced, managed, and upgraded on the application and server side by the solution provider. They generally have faster time to deployment, lower initial investment, lower level of internal support required to maintain, and greater modularity for the integration of future applications. And because they are Internet-based, cloud networks and platforms are available at any time and anywhere there is an internet connection, providing a bedrock for real-time data transmission, supply chain visibility, and operational agility.
- Blockchain, originally a trading platform for digital currencies like Bitcoin, has come into its own as a standalone, distributed digital ledger. For every new transaction a new block is created and permanently attached to the chain — making Blockchain a redundant, self-replicating, permanent, immutable, and thus highly secure digital network. Blockchain can be integrated with other systems – like cloud-based solutions and connected devices resulting in a global network that tracks and traces goods as they move across various supply chains — from their point of origin all the way to the point of sale.
Augmented Intelligence
All these technologies are exciting in their own right; but when you add “intelligent” touches to them, they really start to come alive and add value. They are less “artificial” intelligence as they are augmented, or augmentative intelligence, because they all rely on algorithmic data analysis programmed by humans to serve humans transactionally. For example:
- Robotic Process Automation (RPA) is a somewhat fanciful term for good old fashion automation that is applied to specific tasks or process subsets that are repeatable and scalable and don’t require a ton of input from humans. Set it and forget it. Meanwhile…
- Natural Language Processing (NLP) is making it possible for humans to converse with virtual assistants in a touchless, voice-activated manner in which humans can ask questions, make requests, and receive answers from a digital “bot” or assistant. Speaking of which…
- Virtual Assistants give users the look and feel of an artificially intelligent “partner” working with us, or for us, in the execution and management of day-to-day tasks. They take commands by voice, execute upon them, and in return provide useful information by voice.
All Together Now
By now, it should be crystal clear that the concept of intelligent supply risk management is not dependent upon a single technology or innovation, but rather an ecosystem of interconnected and interdependent technologies and innovations whose whole is greater than the sum of its parts. But let’s review.
Integrated analytics, of the kinds previously laid out, enable procurement and supply chain operators to become more informed, predictive, proactive, agile, and ultimately resilient – because if you can see risks on the horizon, you can take steps now to avoid or mitigate their impact. Blockchain-based platforms build redundancy, track-and-traceability, and accountability into global B2B and B2C transactions and help to drive down risks in general. And with touch-less, intelligent features, like machine learning, NLP, centralized dashboards, and virtual assistants, procurement teams can enjoy an enhanced user interface and ultimately a superior user experience, which can help drive user adoption perhaps more than any other facet of intelligent supply risk management.
The results include: real-time intelligence, visibility, and transparency; enhanced situational awareness; predictive insights; proactive measures; systems redundancy; procurement/supply chain resiliency; and ultimately, enterprise value.
Happening Now!
Perhaps one of the most exciting things about all this is that this “new” intelligent supply risk management paradigm isn’t so new. Supply chain management solution providers, like riskmethods, Resilinc, Interos, DHL, and Resilience360 already have supply risk management solutions in the technology market that incorporate many or most of these innovative features. Except for Blockchain, which can be used to establish product provenance and track-and-trace their movements, all of these technologies are accessible to procurement and supply chain teams right now as bundled, intelligent supply risk management solutions. What a time to be alive and work in supply management!
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