Three major trends are reshaping the industry: a major rethinking of outsourcing vs. moving in-house, advanced handwriting recognition becoming mainstream and the increased need and reliance upon data science. This article explores these trends, as well as what they mean to enterprises and their service providers.
Rethinking the Benefits of Outsourcing
Just recently, HFS research published an article on the acceleration of insourcing operations that service providers currently provide. Why is this? One of the primary reasons is the renewed interest in automation. Also, it is the perspective that with automation, reliance upon manual labor is reduced, the outsourced version of which is still the primary business model of many service providers both large and small.
Historically, if an organization wanted to rid itself of low-value, but necessary tasks or processes, the best option was always to outsource these functions to a service provider that could provide the same capability at less cost through economies of scale. With automation, there is the promise of handing over the work to “bots” that can be deployed anywhere and whose costs are not sensitive to typical wage arbitration. A bot costs the same whether it is deployed onshore or in low-cost regions. HFS calls this “going straight to digital.”
Greg Council, Vice President of Marketing and Product Management
When the future you expect never arrives and business predictions fall short of their mark, the culprit is—more often than not—bad or missing data. Procurement staff must ensure their data is accurate from start to finish so that their forecasts have the desired outcomes.
Idioms abound about how to tackle future challenges such as “past results do not guarantee future performance” or conversely, “those who do not learn history are doomed to repeat it.” We have all seen or heard these intuitive phrases. On the surface, they would seem to be at odds. In reality, they address two different concepts associated with using the past (data) to understand, predict and influence the future.
Similarly, when it comes to projects that involve the need for data, whether it is to predict sales to manage inventories or to train a system to automate a process, success hinges on having the right set of data to use as input to the decision making process. Today, where machines are often making decisions, the notion of “right set of data” becomes a lot harder to understand. This is because machines learn in a different way and the rationale for the output they produce is difficult to reconstruct.
Machines do not have the intuition or the critical reasoning that can help to elevate or discount one data point over another. Input data must be accurate, representative, and free from bias so here are some key guidelines about your data to help ensure successful projects:
1. Accurate Data. Having accurate data is essential because a machine can learn on both accurate and inaccurate data, but only accurate data provides the desired results: a machine that provides output, which is reliable.
Greg Council, Vice President of Product Management, Parascript
When it comes to Robotic Process Automation (RPA) within a digital transformation project, the clear objective is to move all processes into a controllable, fully-automated workflow. This is achievable when processes need to use structured data. However, the most expensive and business-critical processes involve human workflows using complex, document-based information. Achieving the same levels of automation realized from structured RPA-enabled processes becomes much more challenging because the needed information isn’t always easy for a system to locate—much less successfully extract—from a document. Without a precise solution for getting access to document-based data, automation is adversely affected.
Finding the Right Solution
The answer is to approach cognitive RPA projects by understanding the level of “maturity” required with respect to the level of document automation your project requires and compare that with your peer’s experience within your industry.
This includes getting a solid foundation in what are current best practices regarding automation and understanding the various options for injecting document automation into RPA projects. Not all vendors approach a solution in the same way and not all capabilities are equal.
Greg Council, Vice President of Marketing and Product Management
Nearly five years ago I wrote a blog about Big Data and how it could be relevant for sourcing and supply chain professionals. Needless to say, a LOT has happened since then. In a Gartner survey performed in October 2016, 48% of companies indicated that they have a Big Data initiative currently underway, with another 25% who stated they had plans on the horizon. So it is no longer a question of whether or not companies are using Big Data…that is a given. Now the question is how companies are using it and how they are incorporating Robotic Process Automation (RPA) and Artificial Intelligence (AI) into the equation.
The information being collected from Big Data initiatives is powerful and can provide predictive analytics and insightful information. For example, a shipping company being able to change delivery routes based on current traffic patterns increases productivity (not to mention customer frustration). A large company using it to detect anomalies in behavior by third party vendors and mitigate the risk associated with that information could protect them from millions in cyber security damages.
The word “revolution” gets thrown about a fair bit at present (not least by me…) when discussing the new wave of automation technologies which are transforming the way organizations do business. But are we talking about “revolution” or “evolution” – sudden and dramatic, or gradual change? Well, it’s a bit of both: the technology itself is evolving. We can trace, for example, the evolution of IBM Watson back to the Deep Blue chess computer which beat Gary Kasparov back in the mid ‘90s...which can in turn be seen to have evolved from its predecessor Deep Thought...which itself was a successor to ChipTest (developed in the 1980s at Carnegie Mellon University)...and so on, back to Turing and beyond. While there have been revolutionary moments along this path – the transistor, the integrated circuit etc. – it’s clear that this is an evolutionary sequence, at a pace which may seem very far from “gradual” to those who’ve been alive to observe it but which, nevertheless, consists of successive advances built upon what’s gone before.
Amazon. The name alone makes you think of something big. So it makes sense that they might have something grandiose on the horizon.
With that in mind, I want to start a conversation about whether Amazon might be the next Ariba or Coupa. I heard a rumor that 10 or so Ariba people have gone to Amazon with the intention of making it the next and biggest B2B network in the world. Think about it, we all know how to use Amazon, they have a network that is massive, they have distribution and delivery capabilities, so why couldn't they host additional suppliers and be the purchasing platform for businesses? Amazon has the money, they know how to fill demand, they are nimble, they are constantly innovating...what is to stop them?! They could fairly easily add a feature that limits our searching to approved items with our company's contracted pricing (that it knows to show when we log on with our company credentials) and then check us out with a credit card or even link directly to our accounts payable systems.
Amazon is wildly successful, has a surplus of cash and has set the standard for online purchasing and customer service...so why not go a step further and move from the B2C to the B2B world? I was in the San Francisco Bay Area recently to speak at Coupa Inspire. I love being in the Bay Area surrounded by brilliant people with amazing thoughts and aspirations. After living there for 30 years, I should not be surprised by the number of new companies, ideas and appetite for innovation, however I always am. While there, I spent an evening with my oldest son and his girlfriend, both typical millennials working in Silicon Valley. We started "what iffing" and (since my son has grown up with me as a mom talking supply chain and sourcing and spent time working for Coupa) we convinced ourselves that this is distinctly possible. So was it the wine...or are you drinking the Kool-Aid and see the possibilities here too??
One-on-One is a new Q&A series with leaders in the SIG community. Cost savings. Process efficiencies. They're synonymous with procurement and among the terms most used to describe its role within the enterprise. And with good reason. Over the last decade, procurement has transformed itself from a back-room function to a strategic capability by delivering them. But a new term has entered the lexicon: innovation. There's no doubt that procurement today is a different game. It's more connected, informed and some might even say "social" than ever. Just as consumers tap into personal networks to learn, share and shop better, procurement is beginning to tap into business networks. To learn more on how these digital communities are transforming the function, SIG sat down with Dr. Chakib Bouhdary, President of Business Networks for SAP.
SIG: Social tools much like those used to manage our personal lives have infiltrated the enterprise. How is this changing procurement?
Bouhdary: There are officially more mobile devices than people in the world. More than a billion of us participate in social networks. Over 15 billion web-enabled devices connect us to the people and information we need to manage our daily lives. And data is exploding—doubling about every 18 months. So we are mobile, and apps on our phones and tablets give us new ways to discover and collaborate with our peers and trading partners. Just as consumers tap into social networks to keep tabs on their relatives and friends, procurement is now leveraging business networks to manage trading relationships and commerce activities.
SIG: There seems to be a complete shift in the way trading partners communicate, transact and collaborate. How are business networks driving this?
We live in a networked economy. As consumers, we tap into personal networks to learn, share and shop better. And with increasing frequency, companies are harnessing the insights and intelligence of business networks to break down the barriers to collaboration and drive innovation and competitive advantage. Like social networks, business networks are an efficient, effective way to connect with a global network of partners and transact business. And they have fast become the defacto standard for a number of key processes, such as sourcing. But the real power of business networks lies in what goes on inside them – all the interactions, transactions and commentary, and the massive amounts of insights and data that they generate. And innovative companies are leveraging this information to move beyond simply transacting and engaging with partners in new ways that give them a leg up on the competition. Take MSC Industrial Supply Co., a leading distributor of Metalworking and Maintenance, Repair and Operations ("MRO") solutions, services and supplies to North American manufacturers. More than a decade ago, MSC joined a network to provide its customers with a fast and efficient way to find and purchase the products they needed. Today, the company is taking things to the next level, mining the insights, intelligence and transaction data that reside on the network to help its customers run their businesses with greater efficiency and effectiveness. When MSC learned that employees at one of its customers' locations had to walk a mile to get to a centralized storeroom where supply replacements were housed, it suggested they install vending machines to put inventory closer to where the work was being done. In doing so, MSC enabled its customer to save time and money, making it a more strategic and valuable partner. In their initial phase, networks were all about connecting companies so that they could buy and sell more efficiently.
Dr. Chakib Bouhdary, President, Business Networks, SAP
Spend Visibility at the most granular level identifies what is being purchased and from whom it is being purchased. Taking spend analytics a step further - to see who is buying, how they are buying and why, and also comparing what an organization is spending as compared to the industry overall, will help leading organizations uncover previously untapped savings opportunities by looking at spending behaviors and identifying new and better ways to proactively influence demand. Today procurement organizations are swimming in data, in fact Capgemini Consulting forecasts that over the next 5 years, the growth of data – both structured and unstructured – is expected to grow at over 650%. So the procurement data is plenty "Big" – the problem is having real analytical visibility to do something with it. As Capgemini points out, most analytics provide aggregate visibility which is not actionable: "Aggregates in isolation provide very little actionable information. Analytics, on the other hand, can tell you what's happening in the business and how well you are servicing it." So to make sense of "Big" Data, first think "Small" by being able to interpret purchasing patterns through transactional level insights, something world-class procurement organizations are much more likely to be able to do than their counterparts. According to Hackett Group benchmarks, 23% more world class procurement organizations had a "significant amount" of spend visibility company-wide than the peer group in 2012, and the gap is getting bigger, more than doubling in 2013 to 47%, when 89% of world-class organizations achieved this mark overall. Procurement organizations will be putting their money where the mouth is by upgrading their investment in analytics during 2014.
Richard Waugh, Vice President, Corporate Development, Zycus Inc.
Who's watching you? What do they know about you? Are you worried your record in the Big Data database is wrong? Would you correct it if you could? What if you had a tool to manage your big data like you manage your spend? Around SIG, we've been talking a lot about Big Data, as you can tell from Sarah's two posts (which you can access here and here) and my earlier post on the topic. This morning I started a firestorm of emails when I blasted the team with a note about a new tool I just discovered. Although in beta, Acxiom, a company that supplies marketing data to organizations, has published an online tool that allows you to access your personal "Big Data" record. I decided to try it. For a few moments, I stared at the screen, convincing myself to input the necessary information required to produce my report. Naturally suspicious when prompted to enter any kind of sensitive information (from weight to address to social security number), I hesitated to experiment with the tool. I decided I wasn't giving up any personal information that wasn't already public, and for the sake of this blog, I'd try it. After a very quick login, the tool presented me with several categories of information, including data on my characteristics, home, vehicle, economic, shopping, and household interests. Once I click on these categories, I can view the data that this company has about me, and I can actually edit it. For example, I can change my gender, and then configure my data record so that my gender characteristic will be excluded.
Mary Zampino, Senior Director of Global Sourcing Intelligence, SIG