Automation and digitisation can bring enormous benefits and savings to a business, including headcount reduction. The benefits and power of Artificial intelligence (AI) tools have been further catapulted into the headlines with the adoption of ChatGPT, which has a current IQ of 155 (Einstein was at 160).
In my main specialism of procurement and supply chain, AI is really bearing fruit from analysing spend and market data to creating predictive reports for cost saving opportunities and supply chain risks. AI has the potential to transform supply chain management across all verticals from demand forecasting and inventory management to logistics optimisation, new product development cycle time improvement and supplier engagement.
The 2023 Ivalua survey showed a 49% adoption rate for generative AI in procurement and supply chain. In addition recent research by Boston Consulting Group shows that early adopters of AI in supply chain management are moving from traditional models based on predetermined rules, to generative models which learn and generate new ideas independently through observation. Inputs and outputs to these models can include text, images, sounds, animation and 3D models.
Walmart’s CEO, Doug McMillon, shared that Walmart is developing its own generative AI models to improve its supply chain efficiency and better connect with customers. It is ahead of the game by improving its customer demand forecasting by analysing Google searches and TikTok social feeds. Schneider Electric implemented “AI at Scale” in 2021, and the project in supply chain for optimised inventory demand has yielded $15 million in savings .
AI can solve complex tasks, be predictive in nature, identify trends and commercial opportunities far faster than a person can. This technology is an important aspect of virtually every business sector world-wide and can support market differentiation as well as profitability. The game is on for late adopters to catch up and keep up.
It is not surprising therefore that as AI uptake increases there will be more emphasis on strategic management and leadership skills to be able to integrate the insights AI can provide. Dr Chamorrow- Premuzic , a thought leader on AI and leadership, argues AI may decrease the value of human stored expertise and knowledge, but increases the need for emotional intelligence and the ability to connect with others. This is particularly important when guiding teams through the necessary changes required to adapt to working with AI and using it as a new tool in the business culture. There will be a need for staff to raise their game in communication and collaboration with the rapid, accurate insights that AI can provide.
AI in procurement and supply chain will impact Board expectations and decisions.
Case for change
AI will be a regular topic on the Board agenda. Chief procurement officers, of late adopter and more advanced businesses alike, will need to sharpen their cases for change to compete with other budgets and obtain the investments they need and deliver the costs within the Function. This is a great opportunity to showcase how procurement can help collaborate with the business to reduce costs, drive profitability and deliver competitive advantage. Staff reductions may be a necessary part of the discussion, as well as redirecting headcount to more strategic value-adding roles. This prospect of change may inject fear in the workplace and will therefore demand more authentic, effective leadership to navigate staff through the key messages and opportunities.
Succession planning and performance evaluation.
Staff attrition may increase due to the impact of constant fast paced change in a business and as such succession planning and staff development will be vital in attracting and retaining staff. Adopting advanced AI algorithms which have the ability to analyse staff performance, strengths, weaknesses, and training gaps to deliver bespoke development plans could save hours of leadership time.
AI will be adopted within different functions, potentially at different rates, and a such collaboration within and between functions will be necessary. It will require top-down leadership and sponsorship from the Board to do so. Each function may need to keep one goal in mind during AI integrations i.e. the customer, as often they can become too busy on their internal change and forget key business goals. Cross teamwork, involving key suppliers, to generate new ideas and adopt systems and technology between interfaces will speed up innovation too. This is how new product development cycles will improve drastically and thus deliver competitive advantage.
Data quality, governance and safety
AI systems are reliant on the quality and accuracy of input data and thus the need for clear leadership on effective deployment of policies, processes and practices is vital, including data security and ethics. Let’s not forget The EU AI Act 2023 and be aware of your new and existing AI projects’ objectives and limitations, based on the Act’s key guidelines:-
- The use of biometric identification systems by law enforcement;
- Bans on social scoring and AI used to manipulate or exploit user vulnerabilities;
- The right of consumers to launch complaints and receive meaningful explanations;
- Fines ranging from 7% to 1.5 % of global turnover.
To conclude – all leaders are now called to embrace AI or fall behind. Procurement and supply chain functions are now demonstrating their strategic importance at Board level due to current economic and geopolitical climates and competitive tensions across all markets . AI is on the Board agenda to stay and the key to success is to work with colleagues, lead boldly and embrace the benefits AI can bring.
About the Author – Kathleen Harmeston
Kathleen Harmeston has held senior procurement positions, C-suite advisory and Non- Executive roles. Ms Harmeston is a Fellow Member of The Chartered Institute of Purchasing and Supply (CIPS) and has overseen large scale business transformation projects for complex organisations across public and private sectors. Her career focus has been on supplier relationships and profit enhancing strategies for mutli million spend portfolios .
Kathleen Harmeston is currently an advisory board member at consultancy firm Breaking Barriers Innovations and works as a Non-Executive Director and in management consulting. Ms Harmeston also has expertise in business strategy and transformation, risk management, board governance and large-scale contract and programme management.