Transforming procurement data through AI at Sievo
Johan-Peter Teppala, CEO of Sievo, discusses the importance of leveraging procurement data to achieve results through the implementation of AI amid a significant digital transformation in the industry.
By transforming procurement data from any source to generate real business value, Sievo is widely considered a global leader in procurement analytics.
With the impact of digital transformation becoming increasingly prominent during the past few years, Johan-Peter Teppala, CEO of Sievo, believes it’s important to think about how the implementation of technology can be strategic and used to a company’s advantage. “In the last few years, there has been a lot of adoption of new technologies in procurement,” says Teppala. “There has been more open discussions about how technology can help us move forward and how procurement has transitioned into becoming more strategic within the organisation rather than just being regarded as a tactical function.”
Having joined Sievo in 2006 as a Manager on Project Deployment before moving into roles such as Director of Project Delivery and Customer Support as well as Vice President of Operations, Teppala became CEO of the company in January 2017. Reflecting on his previous experience with the firm, Teppala says it has enabled him with a good understanding of how procurement has changed. “It’s been extremely interesting to see how procurement has evolved in terms of technology,” he explains. “Procurement used to be seen as overly technical and not very forward-thinking technology-wise. Today, procurement teams are now very eager to discuss adopting new technology. We have to think about how we could augment and use technology to expand our capabilities rather than worry that technology will take our jobs away. It’s important we don’t see technology as a threat but consider technology as an advantage to move forward.”
With a great emphasis put on bringing valuable procurement data together through artificial intelligence (AI), Teppala understands the importance of operating with a data-driven approach and implementing technology in the right way to achieve results. “There is so much data at companies’ fingertips these days, such as different monitoring, trends, alternative views and risk information. You need to get a handle on all of it.” Through the introduction of AI, it has allowed companies to decrease the number of repetitive tasks and enable machine learning to speed operations up. Teppala believes that by embracing the latest digital trends, organisations have been able to provide greater value to their supply chains. “Technology and AI will allow people to do more of the strategic thinking and constructive labour tasks that benefit the value chain. However, people are still needed to actually maintain the machines and AI to ensure that everything’s always running as it should be. With AI, you can do so many great things and as long as it’s not taking our jobs away, the results can be very powerful.”
Indeed, Sievo understands the importance of leveraging Big Data from third-party data sources and introducing it into procurement operations in order to compare procurement performances across a range of industries. Through its collaboration with global firms such as Carlsberg, T-Mobile and Go Daddy in the transformation of its procurement data into procurement intelligence, the company remains well-versed in recognising the requirements of different industries and the alternative methods organisations take when adopting AI. Teppala believes there is value to be gained from observing how other firms embrace AI and considering how it could be utilised to accelerate their own ventures. “I believe companies tend to be more open to looking at what's happening in their industry and reacting to it. However, from a procurement angle, you think about the different categories and how they’re industry specific.”
Sievo highlights the importance of identifying and achieving world-class performance with its data-focused procurement benchmarks. Interestingly, Teppala compares the process of leveraging the right data to preparing for running a marathon. “I remember practising for a marathon by myself and not knowing anything about how fast the other people are running,” he explains. “When you run a marathon and complete it in five hours, naturally you’re happy. However, when someone tells you that there are people able to do it in two hours then it forces you to think to yourself that there’s still lots of work to be done. By only reflecting on your own data – you can only go so far. It’s important to always be aware of where you are compared to others.”
While Teppala admits the future is impossible to predict, he affirms that AI will continue to be an increasingly influential force at Sievo, and for procurement leaders across the globe. “We’re beginning to see an increased number of applications where AI can be used and achieving much more concrete results out of the AI.” With technology transformation showing no signs of slowing, it remains key to implement software that will allow operations to drive forward without negating the need for humans. Establishing a key balance is vital.
NTT DATA Services, Remodelling Supply Chains for Resilience
Joey Dean, the man with the coolest name ever and Managing Director in the healthcare consulting practice for NTT DATA and is focused on delivering workplace transformation and enabling the future workforce for healthcare providers. Dean also leads client innovation programs to enhance service delivery and business outcomes for clients.
The pandemic has shifted priorities and created opportunities to do things differently, and companies are now looking to build more resilient supply chains, none needed more urgently than those within the healthcare system. Dean shares with us how he feels they can get there.
A Multi-Vendor Sourcing Approach
“Healthcare systems cannot afford delays in the supply chain when there are lives at stake. Healthcare procurement teams are looking at multi-vendor sourcing strategies, stockpiling more inventory, and ways to use data and AI to have a predictive view into the future and drive greater efficiency.
“The priority should be to shore up procurement channels and re-evaluate inventory management norms, i.e. stockpiling for assurance. Health systems should take the opportunity to renegotiate with their current vendors and broaden the supplier channel. Through those efforts, work with suppliers that have greater geographic diversity and transparency around manufacturing data, process, and continuity plans,” says Dean.
But here ensues the never-ending battle of domestic vs global supply chains. As I see it, domestic sourcing limits the high-risk exposure related to offshore sourcing— Canada’s issue with importing the vaccine is a good example of that. So, of course, I had to ask, for lifesaving products, is building domestic capabilities an option that is being considered?
“Domestic supply chains are sparse or have a high dependence on overseas centres for parts and raw materials. There are measures being discussed from a legislative perspective to drive more domestic sourcing, and there will need to be a concerted effort by Western countries through a mix of investments and financial incentives,” Dean explains.
Wielding Big Tech for Better Outcomes
So, that’s a long way off. In the meantime, leveraging technology is another way to mitigate the risks that lie within global supply chains while decreasing costs and improving quality. Dean expands on the potential of blockchain and AI in the industry.
“Blockchain is particularly interesting in creating more transparency and visibility across all supply chain activities. Organisations can create a decentralised record of all transactions to track assets from production to delivery or use by end-user. This increased supply chain transparency provides more visibility to both buyers and suppliers to resolve disputes and build more trusting relationships. Another benefit is that the validation of data is more efficient to prioritise time on the delivery of goods and services to reduce cost and improve quality.
“Artificial Intelligence and Machine Learning (AI/ML) is another area where there’s incredible value in processing massive amounts of data to aggregate and normalise the data to produce proactive recommendations on actions to improve the speed and cost-efficiency of the supply chain.”
Evolving Procurement Models
From asking more of suppliers to beefing up stocks, Dean believes procurement models should be remodelled to favour resilience, mitigate risk and ensure the needs of the customer are kept in view.
“The bottom line is that healthcare systems are expecting more from their suppliers. While transactional approaches focused solely on price and transactions have been the norm, collaborative relationships, where the buyer and supplier establish mutual objectives and outcomes, drives a trusting and transparent relationship. Healthcare systems are also looking to multi-vendor strategies to mitigate risk, so it is imperative for suppliers to stand out and embrace evolving procurement models.
“Healthcare systems are looking at partners that can establish domestic centres for supplies to mitigate the risks of having ‘all of their eggs’ in overseas locations. Suppliers should look to perform a strategic evaluation review that includes a distribution network analysis and distribution footprint review to understand cost, service, flexibility, and risks. Included in that strategy should be a “voice of the customer” assessment to understand current pain points and needs of customers.”
“Healthcare supply chain leaders are re-evaluating the Just In Time (JIT) model with supplies delivered on a regular basis. The approach does not require an investment in infrastructure but leaves organisations open to risk of disruption. Having domestic centres and warehousing from suppliers gives healthcare systems the ability to have inventory on hand without having to invest in their own infrastructure. Also, in the spirit of transparency, having predictive views into inventory levels can help enable better decision making from both sides.”
But, again, I had to ask, what about the risks and associated costs that come with higher inventory levels, such as expired product if there isn’t fast enough turnover, tying up cash flow, warehousing and inventory management costs?
“In the current supply chain environment, it is advisable for buyers to carry an in-house inventory on a just-in-time basis, while suppliers take a just-in-case approach, preserving capacity for surges, retaining safety stock, and building rapid replenishment channels for restock. But the risk of expired product is very real. This could be curbed with better data intelligence and improved technology that could forecast surges and predictively automate future supply needs. In this way, ordering would be more data-driven and rationalised to align with anticipated surges. Further adoption of data and intelligence and will be crucial for modernised buying in the new normal.
These are tough tasks, so I asked Dean to speak to some of the challenges. Luckily, he’s a patient guy with a lot to say.
On managing stakeholders and ensuring alignment on priorities and objectives, Dean says, “In order for managing stakeholders to stay aligned on priorities, they’ll need more transparency and collaborative win-win business relationships in which both healthcare systems and medical device manufacturers are equally committed to each other’s success. On the healthcare side, they need to understand where parts and products are manufactured to perform more predictive data and analytics for forecasting and planning efforts. And the manufacturers should offer more data transparency which will result in better planning and forecasting to navigate the ebbs and flows and enable better decision-making by healthcare systems.
Due to the sensitive nature of the information being requested, the effort to increase visibility is typically met with a lot of reluctance and push back. Dean essentially puts the onus back on suppliers to get with the times. “Traditionally, the relationships between buyers and suppliers are transactional, based only on the transaction between the two parties: what is the supplier providing, at what cost, and for what length of time. The relationship begins and ends there. The tide is shifting, and buyers expect more from their suppliers, especially given what the pandemic exposed around the fragility of the supply chain. The suppliers that get ahead of this will not only reap the benefits of improved relationships, but they will be able to take action on insights derived from greater visibility to manage risks more effectively.”
He offers a final tip. “A first step in enabling a supply chain data exchange is to make sure partners and buyers are aware of the conditions throughout the supply chain based on real-time data to enable predictive views into delays and disruptions. With well understand data sets, both parties can respond more effectively and work together when disruptions occur.”
As for where supply chain is heading, Dean says, “Moving forward, we’ll continue to see a shift toward Robotic Process Automation (RPA), Artificial Intelligence (AI), and advanced analytics to optimise the supply chain. The pandemic, as it has done in many other industries, will accelerate the move to digital, with the benefits of improving efficiency, visibility, and error rate. AI can consume enormous amounts of data to drive real-time pattern detection and mitigate risk from global disruptive events.”