Reducing Supplier Sourcing Times by 40% Using AI + Smart Technology

Guest post by Mike McGrath, Co-Founder and CEO of Kwayga.com

Recently at Kwayga.com we hosted our final supermarket buying webinar of 2023 under the theme of “Reducing Supplier Sourcing Times by 40% Using AI + Smart Technology”, and we were delighted to gather an audience from 17 European countries to learn about this intriguing topic. We have had lots of enquiries in the past 6 months from pioneering supermarket buyers to understand how next-generation technologies can offer competitive advantages to their stores, so we collated best practices from the industry to share with this avid audience.

From the outset, it is important to note that Artificial Intelligence (aka AI) has many supporters and optimists but some pessimists have their concerns too. I am in the AI fan club and I personally believe that if half of the AI claims and promises are true, then AI will transform every aspect of our lives over the next decade. Jeff Bezos has described AI as a renaissance, outlining that “we are at the beginning of a golden age. We’re now solving problems with machine learning and artificial intelligence that were in the realm of science fiction in the past and we’re only scratching the surface of what’s possible”. More profoundly, Sundar Pichai at Google has said that “artificial intelligence could be the most profound technology in human history, more profound than fire and electricity”.

When we speak of AI, we often focus on the future but it is important to remember that AI has been around for 40 years. In the eighties, computers were able to translate languages and speak with humans. In 1997, the first PR stunt from an AI perspective was from IBM’s deep blue computer when it beat the world chess champion, Garry Kasparov. That was technology at its best at the time, but AI has enhanced significantly since then. AI research and development have been supercharged by improvements in computer hardware, and it comes down to the old reliable Moore’s law, which indicates that the processing speed of computers will double every two years.

So on one hand we have this amazingly powerful and intelligent technology, while on the other we have traditional sourcing methods at most supermarket chains.  This article will outline how AI is being applied to supplier sourcing and procurement, to save smart buyers time, money and hassle when sourcing, vetting and onboarding great new suppliers. Through Kwayga and similar systems, supermarket buyers are using smart technology to source the right supplier at the right time for every sourcing request. Whether a grocery category has a supply chain issue or a market opportunity, the smartest buyers are now using smart technology to reduce sourcing times from months to minutes.

AI Definitions

In terms of AI, there is some confusion about the varying descriptions in the market across machine learning, deep learning and RPA. Therefore, from a procurement perspective, any software solution that includes self-learning within the technology and smart algorithms can be considered AI. AI is defined as any algorithm that exhibits any behaviour that is considered intelligent. AI is a branch of computer science and works as an umbrella term for technologies that exhibit human-like behaviour. These include machine learning (ML). ML are algorithms that detect patterns in data and they can automatically improve through experience. Taking this a step further, Deep Learning is a class of machine learning but its methods are much more advanced than ML.

They use artificial and neural networks that progressively improve our ability to perform a task. A basic example of this is that regular machine learning is like drawing a stick figure. However, when it comes to deep learning, it’s like a full- painting that you see in an art gallery. Deep Learning is significantly more powerful and creative than basic machine learning. Finally, Robotic Process Automation (RPA) has been around for a very long time and RPA’s are algorithms that mimic human actions to reduce simple repetitive tasks. RPA is generally not considered a powerful form of AI for simplicity, just think of it, it’s a simple software robot.

Now that we understand the context of these smart technologies, let’s review the sourcing benefits of AI and how smart buyers are using this daily. Over the past 5 years, AI has been the driving force behind the rise of sourcing technologies. AI can gather and analyse vast volumes of supplier data to enable supermarket chain buyers to make strategic decisions. AI can be embedded in most procurement software applications spanning from spend analysis to contract management and particularly in strategic sourcing. The key benefits of AI for procurement are listed below but ultimately it empowers busy buyers to make better and quicker decisions.

AI Benefits for Supermarket Buyers

• Make better decisions – artificial intelligence can provide timely analytics and data-driven insights to make better sourcing decisions.

• Identify new opportunities – sifting through vast amounts of data, AI can uncover new savings or revenue opportunities.

• Automate manual tasks – AI can automate many time-consuming tasks, such as monthly processes, or Procurement performance reporting.

• • Free up time / improve lifestyle – by taking care of more routine tasks, AI can free up Procurement resources for more creative or strategic tasks like key supplier relationship management.
  • Capture or apply scarce knowledge – artificial intelligence can help Procurement organizations capture relevant new sources of data, for example, from external data sources like the Internet.

• Optimize supplier relationships – AI has the potential to make supplier relationship management more data-informed.

• Identify new suppliers or markets – with access to vast amounts of external data, AI can help identify new suppliers or even new markets to enter.

A well-known industry example of this smart technology at work is Walmart’s AI-based tool called Pactum which is used for autonomous negotiations with suppliers. Walmart introduced it to save time and money, but interestingly over 75% of suppliers prefer dealing with Pactum over human buyers at Walmart because of the transparency, the lack of bias, and the efficient and effective use of information. Walmart said Pactum has successfully reached deals with about 68% of suppliers approached, with an average savings of 3% on contracts handled via computer since introducing the program in early 2021.

A more well-known but still underutilised AI tool is ChatGPT which is a form of Generative AI affecting sourcing across the entire realm of tasks from supplier discovery, contract and supplier management to negotiations and product ordering. Generative AI is a type of artificial intelligence that can produce various types of content, text, images, audio and even synthetic data. The buzz behind Generative AI has been driven by the simplicity of its user interface and has been described as the most transformative technology on the market in the last 12 months, led by ChatGPT from OpenAI. Lots of smart buyers are using this every day to find out what’s happening in their sector and to automate many research and mundane tasks.

So, the question remains, how to busy buyers use smart technology to reduce supplier sourcing times? It is clear from our research that AI is not for everyone. People are fearful of it but the innovators amongst us have enough inquisitive nature to probe this technology further. Progressive buyers need to be critical thinkers and upskill in “prompt engineering” to be able to gather sourcing data quickly but also have the know-how to critically analyse the output. Having that ability to prompt and engineer a question is a key skill to empower busy buyers to leverage smart technology to reduce supplier sourcing times in the future.

Similarly, others are worried if their jobs will be replaced but my view is that most jobs will be transformed. Opportunities will arise for people who are adaptable and have the intelligence to upskill and be flexible. Busy buyers will correctly use AI to automate routine and repetitive sourcing tasks. This will give them more time (our most precious resource), to undertake strategic sourcing tasks. AI is going to enhance a lot of jobs and it is going to move people up the chain and allow them to be more creative, work more strategically and create more value. The most adaptive supermarket buyers are the ones that will progress most in their careers over the next 10 years because they will be those who are familiar with AI and are comfortable using it.

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