What procurement knows about Gen AI
Hello, and welcome to this week’s edition of Straight Talk. Inside, we discuss:
Before we dive into today’s newsletter, I just wanted to mention one more time about the upcoming NextGen Supply Chain Conference. We are 8 days away from the opening night reception, which will be held at the Chicago Athletic Association hotel in downtown Chicago over three days. Keynote addresses will be given by Delynn Louth, senior director, global customer collaboration at Procter & Gamble; Luis Roman, vice president of MedTech Supply Chain at Johnson & Johnson; and Jennifer Springer, senior director of customer fulfillment at Whirlpool. In addition, executives from Walmart, Estée Lauder, Schneider Electric, UPS Healthcare, GXO Logistics, NewCold, Corning, Diageo and many more will be speaking.?You can register here: https://ngsc.regfox.com/nextgen-supply-chain-conference-2024 .
And, if you live in the Chicago area and are interested in attending, reach out to me directly for a special offer. I hope to see you in Chicago.
And now, on to this week’s Straight Talk.
Procurement embracing Gen AI
Last week in this space, I questioned what the long game was for the East and Gulf Coast dockworkers and their resistance to technology, specifically automation in the ports. If you missed it, you can read that opinion here .
My premise was simple: Automation is coming whether they want it or not. If they are successful in keeping automation out of the ports, volumes will likely decline over time and the job losses will still be there. So, why not embrace automation and negotiate it into the labor contract—at least then there is some level of control.
Obviously, the ports are not the only area that is being infiltrated by technology. Procurement is also seeing a transformation beginning to take place, and new research from spend management company Ivalua is showing just how much one type of technology—Generative AI—will have on the procurement profession.
Majority see change
Ivalua’s Future of Work in Procurement study found that procurement professionals are expecting Gen AI to alter their profession. Three-quarters of respondents said they have seen increased investment in Gen AI; 67% noted an increase in automation and 72% observed improved data analysis and insights.
And this is the data that seems to highlight the biggest differences between the dockworkers and procurement professionals: 60% of procurement leaders believe Gen AI will transform the job landscape through the creation of new roles and redefining existing ones. Nearly half (48%) view this as an opportunity while only 11% see it as a threat to their jobs.
Before people yell at me—yes, I know the jobs of dockworker and procurement are quite different, so we are not comparing apples to apples here. But, the high-level view is how one industry (procurement) is viewing technological change as inevitable and embracing it to enhance the viability of jobs moving forward, and one is looking at technology as the death knell.
What people are saying
In the press release iValua put out with the survey results, they quoted Amanda Christian , senior vice president of contracts and subcontracts at CACI. “AI is the next frontier for us in procurement. It's crucial that we stay ahead of technological advancements to enhance our efficiency and enable our people to focus on being business leaders rather than getting bogged down by mundane tasks,” she said. “As we’ve scaled to a $7 billion company, leveraging advanced technology … has been instrumental in supporting our growth and helping automate time-consuming audit processes—transforming our procurement operations and redefining roles within our organization.”
Alex Saric, CMO of iValua noted the benefits of automation to the profession. “With generative AI, procurement can redirect effort from transactional to strategic activities, accelerating its shift from a back-office position to a highly strategic powerhouse within organizations,” he said. “Greater automation of manual tasks and improved insights are enabling procurement to better manage risks, advance sustainability initiatives and optimize among competing priorities. But to unlock the promise of generative AI, organizations must address organizational hurdles, gain control of supplier data and improve interdepartmental communication.”?
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The hurdles
In a Talking Supply Chain episode in August, EY’s Matthew Burton, EMEIA supply chain and operations leader, talked about the slow start of Gen AI as companies have struggled with getting the right data. In an EY survey, 38% of respondents cited data quality as a top challenge, and another 33% said access to data was a challenge. Burton said that is not surprising, as data is often siloed in different departments and systems across organizations leading to “potentially incomplete data.” (You can listen to the entire conversation with Burton here )
Gartner, though, said that Gen AI is on the fast track , ranking it as a candidate to reach its “Plateau of Productivity” stage of its Hype Cycle. That stage is the highest stage and indicates mainstream adoption of a technology.
“GenAI can already enhance many different workflows in procurement and 73% of procurement leaders at the start of the year expected to adopt the technology by the end 2024,” said?Kaitlynn Sommers , senior director analyst with Gartner’s?Supply Chain Practice .
Gartner added that use cases, which include contract management , sourcing and supplier management now will expand rapidly in the next few years and will likely include supplier performance management, P2P and analytics.
Change is hard
If you are a dockworker, a procurement professional, or someone else that is expected to be impacted by technology in the years to come, the realization that change is coming can be difficult, especially if there is no clear future for your job. Lorraine Gavin, principal analyst at Gartner Supply Chain, wrote earlier this year that change doesn’t need to face the resistance it does. “Supply chain leaders need to transform multiple parts of their function and are being asked to introduce new technologies such as Gen AI to support the company’s growth objectives. These changes require cooperation and skills development across their workforce. Addressing change resistance cannot be overlooked to achieve success with their operational goals,” she noted.
Gavin added that change is often viewed as a singular point in time, but it is not. “For those required to modify their behaviors or ways of working, change is an emotional transition that happens over a period of time as employees process the change event and its impacts,” she wrote.
Gavin offers many more tips on how companies can handle and address change within their organization. You can read those here . The end result, though, is that change is inevitable, and some industries, such as procurement, are embracing it and creating new and exciting opportunities in the years to come.
Inside the Rust Belt
Rosemary Coates, who is executive director of the Reshoring Institute and host of the Frictionless Supply Chain Podcast hosted on Supply Chain Management Review’s website, had journalist and author Rebecca Fannin on her latest episode. Fannin has written four books, and the newest one, Silicon Heartland, talks about the resurgence of manufacturing in the American Rust Belt. “The timing is really good because we’ve seen a lot more money and a lot more energy going into rebuilding manufacturing in places like Youngstown and Pittsburgh and Flint and Cleveland and these places that were so impoverished when the jobs left,” Fannin said of the book release. It’s worth a listen to hear what is happening inside America’s Rust Belt. Listen here .
Port strike ends…for now
The port strike at U.S. East and Gulf Coast ports ended after just three days, but it’s impact will continue to be felt. For one, while a tentative agreement is in place, it doesn’t include the most contentious issue: automation. That is still to be determined. The parties have set a Jan. 15, 2025 deadline to conclude discussions. Given how far apart the parties were prior to the strike, there will remain some angst among shippers as to whether a final agreement can be reached. For the time being, dockworkers were able to secure one of their priorities: pay raises. According to reports, wages will increase 62% over the six years of the contract. We will see if the talks on automation and a few remaining issues will create a new angst in 2025. Read more here .
What I read this week
Supply chains are always on the lookout for cyberattacks. Here are the three types affecting global supply chains . … A panel at the recent CSCMP EDGE conference in Nashville tackled the big issues concerning the state of transportation and the continued freight slump. … The latest Port Tracker report from the National Retail Federation found that the recent port strike is unlikely to impact U.S. imports. … Amazon has officially launched a for-hire air cargo service , taking on UPS and FedEx directly for air freight market share. … The annual Third-Party Logistics Survey found that 82% of shippers see improved service with their 3PL partners. … Earlier peak season shipping is changing the warehouse space. ProGlove’s Charles Jackson explains what that means. … CommercialSearch has ranked the top U.S. distribution hubs , with some familiar names coming out on top.
Thank you for reading,
Brian