Editor’s Note: Okay, I am a year early as the song talks about partying like it’s 1999, but when it comes to AI and procurement, 1998 is more applicable. In today’s post, I will tell you why in the following reprint of a post I wrote in 2010.
As an introduction or lead-in to that old post, I want to share the following excerpt from an article written in June 2023 responding to the question – What is AI in supply chain in 2023?
“AI assesses supplier performance data, quality records, and market intelligence to revamp supplier selection and management. Also, AI can locate potential risks in the supply chain, such as disruptions due to weather events or geopolitical factors.” – Source: AI for Supply Chain Management in 2023 – It’s All About How You Use It – QA Madness Software testing company“
The 1998 AI Party
Posted on September 16, 2010
I can remember the first time we attempted to use the geographic polling capability of what was, at the time, referred to as the Interactive Parts Ordering System or “IPOS” in a production environment.
The concept was simple, although advanced for the time, whereby a buyer would plug in the required MRO part number and the corresponding zip code with delivery requirement into the system.
Within seconds, the IPOS advanced algorithms would consider the attributes (I never liked the word synthesize) and then automatically post the order to the Strategic Stocking Location “SSL” that was best situated to deliver the product within the required time.
If, for whatever reason, the inventory was not available at that location, then, within seconds, mind you, recalculate a secondary and then, if required, tertiary selection of SSL locations to fulfill the order.
Once the SSL site with the required part was identified, IPOS would automatically create and electronically dispatch the order with the applicable purchase order number and other essential data in PDF format. (Note: later versions of IPOS, which was re-branded under the name RAM, would, through a collaboration with courier companies such as UPS, automatically generate a waybill number at the time the order was produced and then forward a dispatch notification to the courier company scheduling a pick-up.)
Now, if, for whatever reason, the part was not available through the top three optimum SSL sites, the system would then send a notice back to the originating buyer and simultaneously send out a sourcing request to registered suppliers first within the geographic hot zone for same-day delivery, and then to domestic suppliers for next day or overnight delivery.
The suppliers would then respond within the appointed time with their bid.
At that point, the system’s algorithms would then consider weighted factors relative to the bidding supplier’s price, historical quality and delivery performance, terms offered, etc. and select the best value source at that time.
It was all pretty heady “stuff” in 1998 – 2000. It ultimately led to my company’s acquisition by a larger publicly traded entity for $12 million – primarily stocks and bonds with a bit of cash. Ah, those were the fun days of the dot.com craziness.
However, looking through the always crystal clear lens of hindsight, designing the application and heading its development to a production environment has given me a unique perspective on today’s SaaS-based platforms.
Results Speak
Okay, the technology sounds cool – so what! What was the end result?
The answer is encapsulated in the following excerpt from a 2007 post – Dangerous Supply Chain Myths:
Throughout the research period (which was partly funded by the Government of Canada’s Scientific Research and Experimental Development – SR&ED program), we consistently looked for ways in which a buyer could reliably procure commodities on a real-time basis outside of the confines of a centrally negotiated contract. To do this effectively, the buyer must simultaneously engage critical stakeholders such as suppliers, courier companies and customs brokers, e.g., the Metaprise.
Given that off-contract procurement was at epidemic levels (which negatively impacted the buying organization and an increasingly skeptical supply base), it was essential to lessen rather than increase the purchasing cycle time. This cycle compression was a critical component in that we wanted to eliminate the compliance issues that had plagued so many initiatives (as it still does today).
In August 2003, the new technology successfully went live in a production environment for the DND. In this test case, the public sector organization realized a year-over-year 23% cost of goods savings for seven consecutive years while simultaneously reducing the number of buyers required to manage the contract to 3 from an original 23. Delivery performance and product quality also improved dramatically.
A Personal Invite to a great webinar . . .
SIG WEBINAR: Join us on September 21 as we talk with our panel of experts about the power of AI for supply continuity. Their discussion will include the grounds necessary to utilize generative AI to its full potential, what to look out for, as well as use cases for supply continuity. – Secure your spot🔗: https://lnkd.in/ggCyKSEA
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Procurement Insights 
Posted on September 15, 2023
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