How high performing human and artificial intelligence can be harnessed to answer critical business questions
Prerna Dhawan, Chief Solutions Officer at The Smart Cube, boasts almost 16 years’ experience in the procurement and supply chain space. “I started my career as a research analyst,” she begins. “From there, I began managing accounts and working with our clients in the life sciences, consumer goods, and industrial sectors, helping them to see how they can use intelligence and analytics in their procurement function to drive value.
“Over the last ten years, I’ve been in London, working with many of our accounts in the UK and Europe. I work with our clients to identify their needs, how they are evolving, what their challenges are, and then accordingly, what types of intelligence they require, and how to embed that within their organization to enhance operations. I now head up this solutions function, and with my team, we focus on the solutions and embedded products we take to market.
“We look at both the evolution of propositions, and the partnerships needed to strengthen and take them to market. Therefore, it’s both that come under my remit,” Prerna continues.
“The most exciting element for me is being client facing and seeing how the procurement function has evolved. I enjoy workshopping with clients and looking at what could be done differently.” Indeed, in the time that Prerna has been working in procurement, the function has matured considerably.
“In the early days,” she explains, “we were often asked specific questions, surrounding alternative suppliers or sourcing locations and the focus was very much on driving savings, and on cost management. However, over the last five years or so, the kinds of discussions I’m hearing increasingly center on the earlier stages of operations, such as the research and development phase, and on more niche supply markets. For example, a recent client shared that their business was still deciding on what sort of protein to use in its plant-based food product. While soy is the common option, the organization’s procurement function was being asked whether a more sustainable and cost-effective alternative was available. In this way, we can see that procurement is increasingly being involved in earlier operational decision-making, new product development and R&D discussions.
Proactive risk assessment
“Another shift in thought is evident in the area of risk. While risk assessment is nothing new, and clients have always been concerned about the financial stability of suppliers and supply continuity, now they are increasingly interested in additional risks, such as anti-money-laundering practices or cybersecurity incidents. I think today procurement looks at risk in a much more varied way, and the approach to category management is far more strategic,” she affirms.
This shift seemed to become more pronounced because of the pandemic, and the geopolitical climate at the time. “From the Suez Canal blockage to sanctions and the situation in Ukraine, disruption has become the new norm. We are in a poly-crisis. While the procurement and supply chain function were able to manage those unprecedented conditions and emerge the other side, there is now a new baseline for expectations, and that involves procurement taking a much more strategic role,” Prerna continues.
“The most common theme that emerges is that procurement must become more insight driven. Data has been used in decision making for some time, but with advances in technology and greater amounts of data available, procurement has much more intelligence to harness. That said, the variety, volume and velocity of data we are dealing with and expected to make decisions from is mind-boggling. This is where human and artificial intelligence can be used in tandem to examine behavior and enable proactive risk assessment. Making sense of internal data enables intelligent procurement to play an even bigger part. The role of procurement is not changing in any big way; it remains the custodian of the third party spend. It still focuses on business resilience, risk management, cost savings, and cost avoidance, but the tools that are now available are changing the face of the function,” she enthuses.
Data and intelligence have a big part to play in risk assessment, and once established, those risks need to be mitigated. This is where The Smart Cube comes to the fore. “Our supplier risk intelligence platform provides procurement and third-party risk management teams with the visibility they need to become more proactive. Ultimately, it’s about visibility, because they are working with suppliers in many, many parts of the world. They don’t necessarily know to whom their suppliers are connected nor to what sorts of risks those suppliers may be exposed,” she continues.
Superior visibility
“Not having visibility is crippling in terms of being able to achieve resilience. What we do is look at multiple facets of risk, on a supplier-by-supplier basis, whether financial, operational, technological, human, environmental, legal, or ethical. One of our key differentiators is that we don’t just look at risks that are external to the business, we examine our clients’ own data. So, for example, say I’m working with a supplier and over the last six months, I’ve noticed an increasing number of late deliveries, and performance issues. We can use that in conjunction with external data to provide greater visibility of risk exposure.
Contextualizing data
“Of course, we don’t just deliver a one-size-fits-all solution, we also provide the human element: we are all about artificial and human intelligence. We contextualize data for each individual client. So, for example, client A and client B may both work with the same supplier, and therefore, will be exposed to the same risks. However, the impact of those risks may be very different for each client. Client A may have five other suppliers for the same item for example, whereas client B may not. Similarly, inventory level and scale of operations may not be the same. Therefore, the human element adds the layer of contextualization and insight. The promise we want to make to our clients is that if something happens, we will inform accordingly and help assess the ways in which it will affect their business specifically,” Prerna confirms.
“When I hear people talk about AI, while they enthuse about the volume and velocity of data available, they often complain about the level of complexity. Somebody working in procurement will not have the time to trawl through layers of data, which is where we come in. Our risk rating is dynamic. We curate and contextualize data, personalize it further, and then only pass on the relevant information that may require mitigating action,” she continues.
Looking at the supply chain in a wider context, Prerna highlights that many challenges are inherent due to the globalized and complex nature of today’s world. “There was a time when everybody was buying fairly locally,” she explains, “but then, the focus moved to sourcing from China and further afield. In recent years, that trend has reversed somewhat, but by and large, supply chains are still global. Consequently, they are exposed to all sorts of geopolitical issues, and operational agility is a necessity. As such, scenario planning is crucial for a robust supply chain.
Scenario planning
“Visibility is equally important. Not only are supply chains global, they are also complex with numerous tiers and interconnections. Being able to see through these different layers and understand the intricacies is increasingly important. Lastly, inflation and price pressures, in terms of the cost of raw materials as well as energy and labor markets, present an additional challenge. While some categories can still be leveraged for lower prices, in the main, supply chain costs are increasing, and I anticipate that this will continue to be the case for some time to come.”
Disruption is unlikely to disappear and for Prerna, organizations should concentrate on making their supply chains as agile as possible. “Scenario planning can ensure that you are not caught off guard when an event does happen. For example, a few years ago one of our clients, a global, alcoholic beverage company, came to us for help mapping its supply chain. While nothing particularly disruptive was occurring at the time, the organization wanted to look at its raw materials suppliers to see whether alternative sources were available as an exercise in proactive scenario planning. As one of the top ten alcoholic beverage companies in the world, it has a massive footprint with multiple suppliers, but with one ingredient produced in only two countries, we were able to identify a potential risk. Consequently, the team was able to start strategizing around that scenario,” she emphasizes. “This occurred at a time when disruption was not as prevalent as today, so it’s a good example of getting ahead of the game, gaining competitive advantage, and not firefighting.
“Progressive procurement teams are great at creating better relationships with their stakeholders and suppliers,” she concludes. “Procurement leaders are good at leveraging intelligence companies to empower their people to do their job well. While their team should have the right mindset to use data, they should not be expected to know how to develop an algorithm. Progressive organizations clarify what their teams should be doing and bring the tools and external support on board to empower their people.”