The future is becoming a more exciting place. We are currently in the middle of multiple revolutions as much of our physical world is now being digitized.
Our money is moving to the blockchain, our interfaces are becoming digital voice, and what used to require manpower is now being done auto-magically through the cloud.
Any forward looking business must look at these trends and attempt to anticipate both how they will shape their future industry, and how they can use them to participate in that future.
As I explore these issues over the next few months, I hope to share much of my ideas and learning here on the Procurem site with you.
Let me first state that I am NOT an expert in any of these fields. I am a mildly successful business owner (my family eats every day now :) as well as a tech enthusiast. I see a lot of potential for the technologies mentioned in the heading to transform the somewhat stale supply chain industry over the next generation. I just hope to learn a few things about it.
Chatbots? Why is that listed with Artificial Intelligence and Blockchain?
I am referring to this as a proxy for the revolution in User Interface we are just beginning. All digital interaction until a few years ago required a physical and visual component. From screens in your car, to computers, to watches and phones, we have always interacted with data and information via visual interaction.
However, starting with Siri, we have seen a transition towards “other” methods. I would include here:
There are even companies currently working on other senses such as smell, and even direct communication with the brain.
As our interfaces change, companies have an opportunity to not only include design components for these new interfaces, but design for these new interfaces.
…chatbots are beginning to become applicable for customer service and information acquisition. — Kodiak
I see supply chain being a fantastic place for these changes to occur. Much of supply chain data interaction is what I refer to as “call & respond”. We ask or request and then get a response. This is ideal for voice interaction through Siri or Alexa.
In Q4 2016, roughly 79% of businesses were not engaging with chatbots, according to a report by eft. Yet by Q2 2017, 51% have embraced the technology. PYMNTS
For example, at Procurem, we have written a simple Alexa script that allows us to move use some of the following commands
- “What parts are we currently low on?”
- “When is the next refill for [customer]?”
- What is our inventory on [part number]?”
- What is the phone number for [supplier]?”
We can use these prompts as Chatbots or voice prompts to create conversations like the below (still in beta at Procurem)
- Buyer: “What parts are we low on across all VMIs”
- Voice: “Currently we are low on the following parts…”
- Voice: “Would you like to order these parts?”
- Buyer: “Maybe.”
- Voice: “Would you like me to generate a suggested PO for your review”
- Buyer: “Yes.”
- Voice: “Ok, I have generated POs for each vendor for all low parts. It has been emailed to you. Let me know when I am authorized to send them for you.”
I think the ability to leverage these new interfaces poses an extraordinary benefit for the supply chain and procurement industry. Given the large amount of task and transaction work that can be offloaded through these workflows, the average worker would be able to free up hours per week while increasing accuracy.
Beyond this, companies would be able to better leverage knowledge workers for what they are best at - creating, innovating, improving, and building. Freeing up the workforce to move companies forward rather than react to shallow tasks would yield an explosive change in the future of many firms.
For actions that require no decisions, the above automated systems will work great, but how about minor decisions and even insights?
This is where Artificial Intelligence will really assist the supply chain industry.
There are hundreds of minor decisions that must be made at any point during the day. Some examples of these decisions include:
- What price to quote customer
- Which supplier to give a part to
- What quantity to use on an upcoming purchase order
- The best supply chain to set a part on
- The drop date or lead time that should be shared with a customer
When it comes to these minor strategies, AI has a massive potential to revolutionize.
By feeding existing data on macro sources, past events, current metrics, and other misc data, systems can begin to make many of the same decisions we do - or even better.
Artificial Intelligence in Quoting
One of the scenarios we have been working on looks something like the following.
A manufacturer produces precision machined parts and pairs them with other purchased hardware for an assembly. When quoting customers, they generally understand their overhead and price correctly.
However, they have been losing money on the assembly due to unforeseen circumstances which include:
- changes in raw material price
- vendor’s being late on deliveries
- vendor’s delivery poor quality
Moving forward, they will use AI to better quote parts.
The new system will use the following
- Macro sources
- raw material prices and changes
- supply chain macro events
- port traffic history
- Internal sources
- past pricing on similar parts
- past profit margins both anticipated and actual
- actual time from order to delivery
- locations of suppliers
- supplier dynamic on-time records
- secondary operation supplier lead time
- supplier dynamic rejection rates
- target profit margin
- seasonality adjusted production capacity
By watching a number of influencing factors, the new system can tell when lead-times need to be lengthened for a quote, or price can be lowered or raised.
Much of the factory stress occurs from the sales channel and back. Sales promises a date which puts pressure on procurement and then production and then logistics. Every department works to meet tight dates that may be unachievable.
A system paired with AI could assist in understanding the various components and could more properly quote on prices and times.
This is of course one of many possible applications of AI in procurement and supply chain.
The last, and most exciting yet complex areas of possibility for supply chain disruption that I will be pursuing is the blockchain . The blockchain itself is a technology behind the popular Bitcoin and Etherum. It is essentially a running tab of all previous transactions that is hard to fake.
The key aspects of the blockchain are:
- It solves trust issues where 3rd parties are often required
- It is an unalterable tally of previous transactions
- It is decentralized
- It is encrypted
The blockchain almost looks like a supply chain in digital form. What better way to collect and store information about previous parts and their transformation from raw material to final product!
…potential efficiency improvements, enabled by hitherto unavailable information, suggest blockchain technology could deliver vast savings for companies everywhere. — Michael Casey
A public blockchain could really change how real-time data interchange is conducted through such mechanisms as automated execution. — Haley Garner
Imagine being able to instantly see the entire history of a part via a blockchain application, unalterable, and trustworthy with no single company owning/creating the data.
I will be getting into much more on the possibilities in future posts on Blockchain in supply chain in the near future!
As trends develop and technologies are created, these are the major trends that I am watching and staying involved in for supply chain specific applications. I see a lot of promise in these areas, and am excited to experiment and build useful tools to help current knowledge workers and their processes.
From supplier relationships to product traceability, the future of this industry is going to look very different - and I am excited to take a small part as it occurs!