Key Technologies for Agile Procurement

Written by Andrew Chan Yick Leng, SDDP

by Andrew Chan Yick Leng, SDDP

Agile Procurement is to purchase a solution according to the needs and wants of the customer (made changes throughout the process) instead of following on a product specification being established in the beginning of a project. 

The Values of Agile Procurement

In this new era, if you say “You are not ready to practice Agile Procurement” is not acceptable. You should practice agility in procurement to gain competitive advantage position. Below are some strategic areas to embrace procurement agility.

  • Supplier Relationship Management, Processes and Tools

Processes and Tools can be managed by technologies like  such as Machine Learning and Robotic Process Automation. You should concentrate on harnessing and improving the supplier relationship by interacting with them to  understand their needs and wants.

  • Working Software over Comprehensive documentation

To practice Agile Procurement is not to eliminate any procurement processes or documentation. The focus here is to streamline and simplify the processes so that they are easy to be understood and followed by different stakeholders.

  • Customer Collaboration

Traditionally, procurement only involve internal customers during the beginning and at the end of the processes with detailed discussions. Such traditional approach is no longer effective in today’s fast changing world, as a lot of time and efforts will be wasted to repeat the end to end processes again to manage the frequent changes in customer’s requirements.By practicing Agile Procurement, internal customers will be involved in every phase of the processes and be allowed to contribute ideas and changes. In such agile approach, we can better understanding the needs and wants from customer and made changes accordingly to meet their expectations without delay.

  • Strategic Procurement Plan at the Beginning of a Process

Traditionally, procurement typically follows plans which have been laid out at the beginning of the processes and most people follow the plans to gets things done accordingly. Such non-agile working practice sometimes do not encourage people to  look for alternative ways which can get things done better than the original plan. To practice Agile Procurement, the leaders shall empower people to make some decisions to improve the solution plan along the way when necessary.

Adoption of Digital Technologies

In order to practice Agile in Procurement, digitization of the procurement processes is a MUST. To digitize the procurement processes, we need to look at the key technologies that are required to transform from Traditional Procurement to Agile Procurement. The key technologies that form the backbone and structure of Agile Procurement are: (1) Machine Learning; (2) Natural Language Processing; (3) Robotic Process Automation; (4) Big Data Analytics; and (5) Cloud Computing.

Machine Learning

An artificial intelligence (AI) technology come with the ability to learn automatically and improve from past experiences without any programming effort. Machine Learning can analyze the transactions records such as stock in transit and goods receiving.  Machine Learning is also able to forecast potential delays in the procurement processes which may happen and sending alert in advance for people to plan preventive measures ahead of time.  Machine Learning can also provide useful insights that help us to perform better in purchasing negotiation, by comparing historical data pricing and level of pricing based negotiations from the past purchases.

There are four types of Machine Learning:

  • Supervised Machine Learning

Tell the machine what kind of output is require and what kind of results are we looking for.  Basically we teach the machine to learn from past data and identify the patterns and to calculate the future outcome.

  • Unsupervised Machine Learning

Not telling the machine what type of output is required and what type of results we are looking for.  Basically, we do not control the machine and do not define the results.

  • Semi-Supervised Machine Learning

By giving enough known data to the machine so that it can learn by itself and produce new set of results.

  • Reinforcement Machine Learning

To allow the machine to train by itself through trial and error.  The machine learn from past experience to capture the best results to made business decision.

Natural Language Processing

An artificial intelligence (AI) technology that helps the computer to understand the human language by reading, understanding and making sense in a manner that is valuable. It acts as a Digital Assistant in procurement which can learn from previous transactions and able to retrieve the required information.  It can also help to retrieve a particular piece of information by analyzing all the relevant documents.  (Example: Payment Terms from the vendors of the past transactions).

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NLP is a form of AI that can read text, analyze and decipher the meaning of the text for the users.  In Agile Procurement, we talk about speed and accuracy that NLP can support in terms of shorten the time to read bulk of contracts, which has a time-consuming activity in the past. NLP can help to analyze and find out the differences in terms of wordings used in the contracts.  NLP can also detect invoices which are unusual compared to a standard invoice.  Last but not least, NLP can also detect fraud when come to handling of financial issues with suppliers.

Robotic Process Automation

Robotic Process Automation is a software tool that automate human activities that are manual, rule-based, and repetitive such as data entry, standard transactions and customer service queries. In procurement processes, Robotic Process Automation can be used to optimize the contract planning processes, by improving the visibility on renewal of contracts. It can also  send an alert notification when the expiry date of the contract is near, so that we have enough time to negotiate the renewal of the contract.To practice Agile Procurement, we should implement RPA which can automate and speed up the P2P process to bring benefits such as improve accuracy & efficiency, reduce human error, reduce admin work and reduce cost. RPA is also able to speed up the execution, for example it can help to detect and fix bad procurement process design, in order not to slow down the process during execution.

Big Data Analytics

Big Data Analysis is a process to analyze large data sets that consists of different data types.  Big Data can identify hidden patterns such as market trends and customer preferences. In Agile procurement, Big Data is very important and it can bring value through Performance Analytics, Spend Analytics, Compliance Analytics and Category Analytics.Spend Analysis is one of the important analysis that procurement use to analyze the spend pattern in order to apply negotiation strategies on materials and services.  Big Data can help to analyze the spend pattern of the required items, by using past large data.  With Big Data analysis, it can speed up the analysis on the cost of required items and provide the cost range that procurement can be used to negotiate with suppliers.  This is again speed that the technology bring to Agile procurement.

There are four types of Big Data Analytics that can support the practice of Agile Procurement, as follows:

  1. Descriptive Analytics
  2. Diagnostic Analytics
  3. Predictive Analytics
  4. Prescriptive Analytics

Cloud Computing

Cloud Computing is the delivery of services via the internet that people can access from anywhere and anytime. As long as you can access to internet, you are able to access to cloud enabled services.  Cloud Computing allows us to keep files and data in a cloud-based storage instead of keeping in hard drives or local storage devices. For example, in Singapore public procurement, the procurement processes have been migrated to “Workday” which is a cloud base platform that is more cost effective and flexible accessibility.

There are three types of Cloud Deployment, as follows:

  1. Public Cloud is a cloud platform shared by all customers.  This type of cloud is controlled by the cloud provider, meaning we need to accept whatever terms and conditions specified by the cloud provider.
  2. Private Cloud as being called “Private”, is for private use only whereby the platform is behind a firewall and is used by a single organization.  The owner which is the organization, will own and control this private cloud with sufficient security features that will come with additional cost.
  3. Hybrid Cloud is a combination of both public and private cloud platforms.  This type of  platforms able to interact between the public cloud and private cloud segments and data can transfer from one to another.

Conclusion

In order for companies to stay in competitive advantage position in their industry, adoption of Agile procurement transformation using the existing and emerging technologies to digitalize the procurement processes is a MUST.  We have mentioned the different key technologies that can be implemented depending on the current procurement processes. Company also need a clear set of KPIs to understand what type of technologies can be used to implement Agile procurement to achieve the KPIs.


References

Bernardo Nicoletti. (2018).  “Agile Procurement, Volume 1: Adding Value with Lean Processes”. Palgrave Macmillan: Springer Nature.

Emma Cosgrove. (2019).  “4 Technologies for a more Agile Procurement Process”.  Retrieved from https://www.supplychaindive.com/news/4-technologies-agile-procurement-machine-learning-robotics-data/553979/, accessed 12/09/2020.

Fay Khoo Yock Fan, GDPM. (2018).  “Top Five Emerging Trends in Procurement”.  Retrieved from SIPMM: https://sipmm.edu.sg/top-five-emerging-trends-procurement/, accessed 08/09/2020.

Kalyar Thiri Maung, ADPSM. (2020).  “AI Technologies for Digital Procurement”.  Retrieved from SIPMM: https://sipmm.edu.sg/ai-technologies-digital-procurement/, accessed 12/09/2020.

Li Gui Li, ADPSM. (2020).  “Five Digital Technologies for Procurement Optimization”.  Retrieved from SIPMM: https://sipmm.edu.sg/five-digital-technologies-procurement-optimization/, accessed 12/09/2020.

Michael Eng, ADLSM. (2018).  “Intelligence for Effective Logistics”.  Retrieved from SIPMM: https://sipmm.edu.sg/data-analytics-artificial-intelligence-effective-logistics/, accessed 12/09/2020.

Sergii Dovgalenko (2020).  “The Technology Procurement Handbook – A Practical Guide To Digital Buying”, Jellyfish: Kogan Page Limited.

About the Author: Andrew Chan Yick Leng has extensive years of leadership experience in the specialised field of strategic sourcing and procurement, in both the Construction and Oil & Gas Industry. Andrew holds a Bachelor of Business Administration degree with a specialism in supply chain management from Southern Cross University, and an Advanced Diploma in Purchasing & Material Management (ADPMM) from SIPMM. He completed the Specialist Diploma in Digital Procurement (SDDP) on September 2020 at SIPMM Institute.

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