The document discusses the evolution of procurement through cognitive technologies such as artificial intelligence and blockchain, emphasizing the need for organizations to embrace digital transformation. It highlights the challenges faced by Chief Procurement Officers (CPOs) in adapting to these changes and the importance of integrating advanced technologies with traditional procurement practices. The focus is on enhancing decision-making, workforce capabilities, and operational efficiency in procurement processes.

1. Transforming Procurement
Megan James
CIPS Event
October 2018

2. I think I could
be CPO

3. Main Messages
•Cognitive Procurement is here
•CPO Challenges
•Learning to surf

4. Cognitive Procurement is here

5. • Digital transformation is happening in real-
time in the UAE, as well as in advanced
societies all over the world
• Artificial intelligence, robotics, machine
learning, big data, quantum computing and
the Internet of Things will literally rewrite
the future of humankind in code and
revolutionise the roles of government,
business and human communications
Source: Khaleej Times
Digital Transformation has arrived

6. In 2017 – Google’s
AlphaZero mastered
all the chess
knowledge in history in
just 4 hours,
1997 IBM’s Deep
Blue plays chess
master Garry
Kasparov and wins
AlphaGo Zero was programmed with the basic rules of Go. Everything
else it learned from scratch. After three days of self-play, Zero was
strong enough to defeat the version of itself that beat 18-time world
champion Lee Se-dol, winning easily — 100 games to nil.
2011 IBM’s Watson
wins at game show
It arrived some time back…

7. The AI –Technology Realm
Source: CellStrat

8. Maersk to trialSea Machines AI based
situational awareness technology
Blockchain

11. The SingularityMore data created in 2017 > 5000 years of humanity

12. Artificial intelligence in Industry
In Finance, 70% of all financial transactions today are performed by algorithms, a kind of artificial
intelligence – what is the future for Procurement?
Source: IBM
Financial Services
• Risk Analytics
• Credit evaluation
• Customer segmentation
Travel & Hospitality
• Aircraft scheduling
• Dynamic pricing
• Traffic patterns and congestion
management
Retail
• Predictive Inventory Planning
• Recommendation Engines
• Market segmentation & targeting
Manufacturing
• Predictive maintenance
• Demand forecasting
• Telematics
• Process Optimisation
Healthcare & Life Sciences
• Real time alerts & diagnostics
• Patient triage optimisation
• Proactive health management
Energy & Utilities
• Power usage analysis
• Customer pricing
• Smart Grid Management

13. AI - Job Creator or Destroyer?
AI outpaces lawyers in reviewing legal documents, new study finds
• Five previously unseen NDAs with 153 paragraphs of technical
legal language
• Looking for a list of issues in each contract
• Lawyers exhibiting 85% average accuracy rate vs 94%
achieved by AI software
• AI only took 26 seconds to complete the task, the
lawyers an average of 92 minutes

14. Most procurement organisations are not
rising to the challenge of Procurement 4.0.
Supply Chain 4.0
Towards 0-length supply chains powered by:
• Smart warehousing
• Predictive shipping
• Drones
• Self-driving trucks
• Uberization
Industry 4.0
Batch-size 1 and mass customization made
possible because of:
• Smart manufacturing and robots
• Sensors and Internet of Things
• Augmented reality
• 3D printing
Fourth industrial revolution
1st 2nd 3rd 4th
Mechanization,
waterpower,
steampower
Mass
production,
assemblyline,
electricity
Computerand
automation
Cyber
Physical
Systems

15. Source: IBM SAP
Fourth industrial revolution
SCRIPTING
Rules based automation
REPLACING
Task Oriented
AUGMENTING
Engagement & Decision
MAN VS MACHINE MAN & MACHINE
(AUGMENTHUMANS)
FULL SPECTRUM OF ARTIFICIALINTELLIGENCE
FOCUSSCOPEEXAMPLEIMAPCT
SMALL/TACTICAL MEDIUM/DISRUPTIVE LARGE/TRANSFORMATIVE
Automated
Process
Workflows
Buying &
Contract
Help Bots
Cognitive
Buying
Assistant
Contract Analyzer
Buying & Sourcing
AutomatedForms
Watson Analytics
Sourcing Intelligence
Predictive Risk Insights
RULE
ENGINE
Basic ‘Arms & Legs’
RepetitiveActions
No Learning
RULE BASED
BOTS
Simple ‘Bots’
RepetitiveProcess
No Learning
AI DIGITAL
ASSISTANTS
Conversational Agents
Natural Language Dialog
Limited Learning
ROBOTICPROCESS
AUTOMATION
VirtualWorkers
Mimics Human Tasks
Limited Learning
COGNITIVE
COMPUTING
Cognitive ‘Digital Brains’
AugmentsDecisions
Learns continuously

16. 2017 was hype year of Big Data - this year it’s COGNITIVE PROCUREMENT
Procurement 4.0
Cognitive Procurement Explained
Cognitive Procurement is the application of self-
learning systems that use data mining, pattern
recognitionand natural language process (NLP)
to mimic the human brain around the processes
of acquiring, buying goods, services or works
from an external source.
What’s in
Cognitive
Procurement?

17. • A new type of co-operationbetween people and machines
(artificial intelligence)
• Designed to perform complex tasks that were previously
impossible, such as developing new knowledge and
insights, performing predictive and prescriptive analytics
and creating conversational interfaces.
• With the help of cognitive procurement systems, human
workers will simply approve or modify transaction
documents that are entirely generated by virtual
machines.
Procurement 4.0

18. In operationalprocurementrobots and automated
solutions such as touchless purchase order approvals
are changing the landscape, with an expected 30%
workforce reduction in the medium term.
VIRTUAL PERSONAL
ASSISTANTS
Ada offers an “instant response to
any requests related to
transactions, procurement,
spend, payments etc.”
Procurement 4.0

19. Procurement 4.0
Source: IBM SAP
AI and Blockchain can enable enterprise
across many industries to:
Free up
capital flows
Lower transaction
cost
Speed up
processes
Provide security
and trust
The Five Forces of Change
The Digital
Imperative
Intensifying
Competition
The Insight
Imperative
Customer
as King
Disruptive
Innovation
Cognitive Procurement
Fragmented Process
& Systems
Single Cloud Platform
Source to Pay Process
Orchestration
Supplier Collaboration

20. Innovations
Blockchain Internetof Things
and
You?
Payment
Invoice
Request
Approval
Order
Status
Receipt
Analyse
Plan
Contract
RFx
Quality& Risk
Qualification
Discover
Visual/AugmentedRealityChatbotsMachine Learning

21. 3.30 – 5.25

22. Source: Forrester
Procurement 4.0
Classification
Place Items into
specific Categories
Reducehumancost
Performclassificationthat
wouldbe verydifficultto
achievewithoutAI
• Categorizespend
• Tag clausesand obligations
• ContractReview
• Identifyrisk
Recommendation
Give users best
options to choose
Speedupprocess
Taskautomation
Optimisedecisions
Shareknowledge
• Userexperience
• Recommendproducts
• Recommendsuppliers
• Recommendbestcontract
type
Prediction
Driveoperational
decisions
Anticipate
Makebetterdecisions
Increasesavings
Improvevisibility
Lowerrisk
• Spendprediction
• Priceprediction
• Riskprediction
• Paymentdelays
• Goodsreceiving
Conversation
Interact in plain
“English”
Naturalconversation
(chatbots)
Increaseuseradoption
Buildknowledgebases
• Supportusers
• Digitalassistants
• BusinessIntelligence
• Contractanalysis

23. Source: SAP IBM
We have a real opportunity need to transform our
Procurement with Artificial Intelligence
Deeperengagement
& adoption
Betterdecisionmaking
Improve business
outcomes
• Increase end-user
productivity (ease of use, less
training required)
• Bring the application to users
in their environment of choice
• Have access to richer and
broader set of data
• Uncover and discover hidden
insights
• Automate repetitive tasks
• Improve approvals and
accuracy
• Improve efficiency by
delivering personalized and
context-specific information

24. What can Augmented Artificial Intelligence do?
Source: SAP IBM
UNDERSTAND
• They derive meaning from all forms of multi-structured data and user interactions
INTERPRET
• They represent the meaning in a deterministic and probabilistic knowledge graph based on declared,
observed, and inferred entities, events and relationships
REASON
• They reason over the domain-optimized interpretation in business and user context to come up with
personalized advice with supporting evidence
LEARN
• They learn continuously based on real-time and historical data, user and system interactions
ASSURE
• They use AI and Blockchain technology to ensure ongoing compliance and governance for responsible
and risk-managed use of cognitive services in the enterprise

25. ConversationalSystems and Apps
Procurement 4.0
Hi, I’d like to create a purchase
request
Okay sure,tell me what item you want
to add
I’d like to buy a Grundfospump ref
59896775
Sure, this item is in the catalog and has
been added.
Do you want it to be shipped to your
usual location, Al Mamoura Building B?
This is perfect,please send me a
text when confirmed

26. Procurement 4.0
CognitiveBuyingAssistant(CBA)
Source: SAP IBM
Personalised mobile app that scales across multiple buying
channels and systems
Recommends the optimum compliant product while being
transparent to the end user
Delivers recommendations from preferred vendor catalogues
based on users needs, Profile-of-one and peer feedback
Enables users to interact in Natural language for optimized user
experience and speed

27. Procurement 4.0
Source: APRW
Exhibit 1: 2016 Procurementapplications market shares
Split by top 10 procurementvendors and others, %
Major playersare betting that large enterprises will
pursue cognitive procurement as the logical next step in
their overall digital transformation.

28. Source: SAP
Procurement 4.0
SourcingIntelligence
Sourcing Event Life Cycle
Environmental
Monitoring
Monitor News,
Twitter,
Weatherfor
commodity-
relevanttrends
News-based
commodity
dashboard
Uncover pricing
pressures and
demandtrends
for selected
products
Recommend
sourcing event
initiation based
on trends
Digital Assistant for Easy, Conversational Interface
SourcingEvent
Initiation
Populate
sourcing event
data using
unstructured
data
Guide selection
of sourcing
templatebased
on unstructured
data
Recommend
number of
suppliers to
engagebased on
commodity,history
and for optimal
results
Recommend
duration of
sourcing event
for optimal
results
Recommend
RFI/RFP/RFQ
event type based
on commodity
type, region and
history
Cognitive Value Add
SourcingExecution
Assess results
against
benchmark prices
Initial Release
Future Release

29. Procurement 4.0
Contract Creation
Scans contract &
converts to
contract sections
& clauses
Digital Assistant for Easy, Conversational Interface
Contract Authoring
Cognitive Value Add
Initial Release
FutureRelease
Contract Intelligence
Shows % match
to previous
contracts
(completeness
check)
Shows % match
to previous
contracts
(correctness
check)
Recommends the
optimal team
membersto
engage
Monitor News,
Twitter,Weather
for commodity-
relevanttrends &
regulation changes
News-based
commodity
dashboard
Sourcing Intelligenceprovides buyerswith the right knowledge to executethe right eventat the right time,with the right suppliers, for the right duration.
Predetermines
clauses based on
commodity,
region/legal
regulatoryneeds
Suggestsmissing
sections, clauses,
subclauses
Automatically
recommends
critical clauses
based on
contracting history
Analyzes
frequently
modified clauses,
suggests library
additions
Contract Negotiation/Award Contract Compliance
Minimizes risk of
exposureby
ongoing checks
of document
compliance
Assess terms
and pricing
against
benchmarks
Automatesthe link
from contract terms
and items to
Compliance,
simplifying tracking

30. Procurement 4.0
Source & Contract
Sample use cases acrossSource to Pay lifecycle
• Demand Insights
• SupplierIntelligence
• Category Management
• Commodity Insights
• Sourcing Strategy
recommendation
• Contract creation
• Contract execution
• Other
Plan Source Contract
SupplierManagement
Request & Buy
Request Approve Order
• Identify and procure part
• Buying recommendations
• Proactive alerts
• Picture based buying
• Catalog enrichment
• Smart search
• Support
• Other
Invoice & Payment
• Invoice creation and reconciliation
• Fraud detection
• Optimizedpayment schedulesand
discounts
• Optimizedsupplyinventory
• Auto pay trusted suppliers
• Help Desk / Support
• Smart Logistics
• Other
Receive Manage Pay

31. Procurement 4.0
Provide customers with the knowledgeand insights to create, negotiate, structure and execute a comprehensive contract
InitialProductAreas withAI Capabilities
Contract Intelligence
Provide buyerswith the knowledgeand insights to structure & execute the right sourcing event at the right time with the
right suppliers,for the right duration
SourcingIntelligence
Expand existing solution to include additional knowledgesources and natural disaster events, and establish resolution
rooms to find alternatives to resolverisk
SupplierRisk
Improve quality and coverage of invoice classification and enhance deliverytime for quarterly refreshes
SpendAnalysis(invoiceclassification)
Content/attribute normalization for better search resultsand richer content. Exploring additional areas such as item
normalization (for recommendations), visual recognition, etc.
Catalog

32. Source: Forrester
Procurement 4.0
01
02
03
04
Better Accuracy
Faster
Augment Human
Capabilities
New savings
• Consistent analysis
• Cover 100% of data
• Continuous improvement using massive amount of data
• Very detailed results
• Data ingestion part of the platform
• “Real-time” processing
• Can feed Robotic Process Automation
• Empower businessusers
• Assist occasional users
• Learn / Share expertise
• Can processyears of data
• Predictive models
• Optimizations and recommendations

33. CPOs Challenges

34. Customer
Experience
Increased expectations
automation,service and
timeliness – Alexa and Siri,
Amazon and Ebay
Bigger Data
More economical storage and better
analytics
Digitization
Transformation
Blockchain
Shared Ledger Decentralized,smart
contracts,traceability& authentication
Investment Software
Technology speech & image
recognition
Cyber security
Immersive Technology
Virtual& AugmentedReality - leveraging
product visualization or site layout &
planning.
Chat Bots
3D Printing
Robotic process
automation (RPA)Convergence
Virtual &
Augmented
Reality
Knowledge &
organisational
readiness Gap
Procurement
Director
CSR
Artificial
Intelligence
AdvancedTechnology
Machine/Deep
learning

35. The Challenge – Wait and See approach
Procurement
Director
• The data shows that most procurement organisationsare either
unpreparedor have taken a ‘wait and see’ approach to digital
technologies.
• They are not proactive.
• Those organisationsthat have started, often are adopting
technologies in a piecemeal,haphazard and uncoordinated way.
• By 2020, 85% of CIOs (not CPOs) will be piloting AI programs
through a combination of buy, build and outsource efforts.

36. The Challenge - Disconnect
CPOs mustbalance two equallyimportant imperatives:
they needto adoptdigitalprocurementtechnologieseven
as they sustaintraditionalprocurementpolicies,
proceduresandERP systems.
Many organisationsin the UAE:
• Relyingon Finance & IT to lead & approve change
• Manually pull data from Excel for reporting
• Insist on original invoices
• Use cheques & faxes
• Are saddledwith legacy systems and poor data quality
and integrationacross the enterprise
• Use paper-basedforms and manual processes

37. The Challenge – In Summary
Main barriers to the effective application of digital are
data, systems and people

38. • 61% - 77% of those who integrate data do it manually by using Excel
or downloading/ uploading files into systems (pull).
• Only 17% have automated Integrationof data (push)
• 22% no integrationat all
• 65% of procurementleaders report limited or no visibility into their
entire supplychain
• Massive hurdles due to legacy enterprise IT systems and data silos
The Challenge – data, skills and legacy systems

39. • “Analytics is now a mainstream idea, but not a
mainstream practice”
• The sheer number of available technologies that
must be evaluated for their usefulness and then
implemented has prevented procurement
organisationsfrom building an effective path
forward
• Not knowing where to go has left procurement
teams in the positionof not being able to move
forward
The Challenge – it’s overwhelming

40. Learning to surf
You can’t stop the
waves, but you can
learn how to surf

41. • Talk to Strategy, IT and Finance and other key
stakeholders to discuss and plan your organisation’s
Digital Transformationtogether
• Adapt your combined structures and processes to suit
digitalisation
• Take a leadershipposition with respect to digital
technologies rather than receive mandates from
others
• Completea Business Casefor a DigitalProcurement
Strategy– get helpif you need it
Learning to Surf – Get buy in and support

42. • The line between accounting/finance and
procurement is likely to become less distinct -
think about closing the gap between the two
departments by teaching procurement agents
key financial skills – visa versa.
• The benefit of such crossover training is that
they’ll be able to play a bigger role in the
monitoringof internal and external costs.
Learning to Surf – break down silos

43. Learning to Surf – getting your house in order
• Stop using paperforms and files
• Optimise the use of existing ERP tools, clean,categoriseand
assimilate data from departmentalsilos - to prepare for AI
integrationand training
• Educate yourself YouTube, articles, podcasts
• Invitesuppliers to deliver presentationsto Executive staff
including IT, Finance, Procurementand other key stakeholders
• Remember incomplete and inaccurate data may produce
unintendedconsequences.

44. • Make e-sourcingmandatory,and allocate responsibility
for consistent use
• Validatespendanalytics data with category managers
• Ensure that all contracts are stored in a contract
repository
• Ensure that procure-to-pay solutions are properly
configured
• Get dedicated procurement analysts for spend,contracts
and SRM
Learning to Surf – getting your house in order

45. Once the right platform and skills are in place, experiment with pilot
programs in areas where there are existing cases for machine
learning and automation. E.g.:
• spend analytics
• contract analytics
• risk management
Be cautious about sales hype and adopting piecemeal, disparate
initiatives which fail to ‘join the dots’ and future-proof your
organisation.
Aim for a comprehensive, staged implementation plan
Engage with your tech-savvy Millennials
Millennials – this is your opportunity to lead & add value
Learning to Surf – Test the water

46. Learning to Surf – empower Millennials
Startnow employingdifferenttypes of staff into procurement – anddevelopvastlydifferentjob
descriptions
Only 3% of procurement leaders believe
their teams possess the skills required
to maximize digital capabilities
Only 16% are focused on enhancing these
skills.
Creating a digitally enabled workforce
• Helping Millennials, the first generation of digital natives, draw
from a familiar set of technology tools to work anywhere,
anytime
• Self-provisioning of IT assets (i.e. phones, laptops, tablets) to
increase productivity, job satisfaction
• Modernizing training to include broader experience through job
rotations, industry recognized certifications and new ways of
learning – e,g. ‘massively open online courses’ (MOOC)

47. Where to now?