Edward O’Donnell

The Digital Procurement Process

How the Integration of Data and Analytics is Revolutionizing the End-to-end & Cognitive Procurement Process

IBM Procurement Data Officer

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• IBM’s statements regarding its plans, directions, and intent are subject to change or withdrawal without notice at IBM’s sole discretion.

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The Digitization of Procurement

Procurement functions are a rich

source of data

740KPurchase Orders

2MInvoices

14KSuppliers Managed

148KActive Contracts

$50B Spend Managed

22K Sourcing

Events

IBM Procurement

Cost Management

Contract Management

Supply Chain Risk & Social

Responsibility

Supplier Selection

Material and Labor Sourcing

Supplier Relationship Management

Accessing this data

unlocks benefits

Innovation

Quality

Efficiency

Accuracy

Speed

Flexibility

Phase 5

� Behavioral

Influencing

concepts.

Automation & HandsFree ramp upEvolution of IBM Procurement catalog strategy

2003 2008 2010 2011 2012 2013 2015

80%

75%

78.9%79.2%

81%

86.8%

90% +

Percentage of

hands-free orders

Global Catalog Facility

deployement GCF

Phase 1

• Establish e-

commerce &

catalogs as

backbone of order

processing

strategy

Phase 2

� Transition

content

maintenance to

suppliers via

B2B solutions

Phase 3

� Revise strategy

and eliminate

use of Punch

Out catalogs

Phase 4

� Implement

analytics, and

automation to the

data “flood”

Journey

Hands Free Center of

Excellence HFCoE

IBM Procurement – Cognitive Journey Map

5

Blue HoundPricing IQ

Contracting

Supplier risk management

Supplier evaluation & qualification

Supplier IQ

User experience

journey New User Experience

Procurement

Pricing negotiation

Current Solutions in Development

Supplier lifecycle management

Risk Insights

User Experience

� Simple easy engagements completed with speed

� Ability to use natural language, unstructured text &

digital imagery.

� Highly personalized experience that learns over

time

Procurement Experience

� Refined real time data to make quicker more informed

decisions

� Maximizes preferred suppliers

� Tactical and administrative tasks automated to allow a

focus on strategic and relationship management

activities

Deep supplier insight Dynamic pricing info Instant contract analysis Trusted Buying Advisor

Predictive risk mitigation info

Requisition Purchase

Virtual Agent Assistant

Client Transaction Support

The vision

A mobile-enabled, smart,

digital buying assistant which

recommends appropriate &

preferred products &

suppliers to business users

‘on the go’.

The disruption

Allows users to specify their

procurement needs through natural

language, unstructured text & digital

imagery, including active dialogue.

The result: Business utilizes preferred suppliers and users get a

highly personalized experience that learns over time

IBM Catalog

information

Natural

Language

Classifier

Speech to Text

Trusted

Buying

Advisor

+ +

Cognitive Procurement Assistant

6Demo link Tool

The vision

Collect and refine real time

comprehensive market

intelligence data to identify

pricing trends by category or

skill and recommend

optimized price points

The disruption

Procurement Professionals

freed from time consuming

research and data aggregation

Internal pricing

trends

External market

intelligenceWatson APIs

The result: Procurement professional equipped with enhanced

pricing knowledge for improved negotiations

Dynamic

Pricing

Information

+ +

Pricing IQ

7

Market Intelligence - market

forces pressuring rates to go

up or down?

� Services value added (% of

GDP) in short term?

� Investments in IT?

� GDP growth according to

capacity?

� Demand inflation for price

increase?

� Inflation rate?

� Interest rate?

� Currency exchange rate?

� Unemployment %?

� Minimum wages?

� Employment in technology

sectors and knowledge-

intensive service sectors?

Demo link

Pricing IQ - Market Intelligence Advisor (MIA)

8

Agile Development with Progressive Enhancements

Crawl Walk Run

• Start with Category with

strong taxonomy

• Good market insight and

benchmarking data

• Technical Services

• Large spend/strategic

category

• Connect pricing data with

market benchmarks

• Leverage data to identify

trends in pricing – new

insights in context of historical

spending and market

sentiment/price

• Use trends to start building

predictive model

• Correlate predictive pricing

with macro data points and

indexes

• Infuse cognition – a smart

pricing system

• Predictive pricing leveraged

to secure competitive

advantage

• Optimal time to buy

• Deploy across broader set of

categories across the

portfolio

• Trusted buying advisor for

Category and Sourcing

teams

9

Predicting

Risk with

Certainty

The vision

Monitor natural, social, and

economic supply chain

disruptions to make fast

informed decisions in the

most critical situations when

every minute counts.

The disruption

Hyper-localized insights that are now

built into supply chain models

.

The result: Cognitive event monitoring that saves time and money

focusing efforts on true impacts to your supply chain

Supply chain

operational data

Twitter

The Weather Company

Local events+ + Watson APIs

IBM Supply Chain Risk Insights

10

The vision

Accelerate contract analysis

by identifying clause

similarities and deviations

from IBM standards

The disruption

This solution manages large

volumes of unstructured written

data with leading-edge Watson

technology

The result: Maximize T&C’s to IBM’s benefit, and reduce overall risk

Differing contract

language

Natural Language

Classifier

Ontology

builder

Instant

Contract

Analysis

+ +

Demo link

Procurement Agreement Risk Manager (Bluehound)

11

Virtual Agent Project for Internal Help Desks

Business objective

� Reduce operational cost by driving to intelligent self service

channels

Approach

� Cognitive Chat Agent that can identify issues and drive to

resolution

Delivery - In Process

� Early stage engagement for internal end user help desk

Opportunity

� Once core components are working leverage for other

internal and external channel.

12

Cognitive Spend Enrichment

13

Watson Analytics in Procurement

Key Values

Predictive and Prescriptive

Analytics

Customized Reporting

Real-Time Data

Maintenance

Common use cases

Payment Term

Analysis

Payment Term

Analysis

Compliance

Analytics

Compliance

Analytics

Master Data Management

Analysis

Master Data Management

Analysis

Transaction Automation

Analysis

Transaction Automation

Analysis

Risk and Fraud

Analytics

Risk and Fraud

Analytics

14

Explore and Predict – Watson Analytics

15

Impact Analysis using Predict Module in Watson Analytics

16

� Big Data and Analytics are foundational in delivering contribution from

hidden insights

� Intelligent tools and processes elevate the Procurement Professional

� Cognitive Procurement brings a new Era to our profession – an

opportunity to take outcomes to new levels of excellence

Key Take aways

14