Companies looking to keep their finger on the pulse of every potential vendor in the market face a challenge.
According to A.T. Kearney’s "The Management of Global Innovation: Business Expectations for 2020," 57% of surveyed executives think identifying potential partners globally is a challenge. In the same survey, though, A.T. Kearney also found 67% of executives expect partnerships with start-ups and small suppliers to grow by 2020.
"This makes it really difficult as a buyer," Yves Thill, a partner in A.T. Kearney's strategic operations practice, told Supply Chain Dive in an interview. "How do you keep up with what’s going on?"
That’s where machine learning and artificial intelligence (AI) come in and may help companies identify those new potential suppliers.
Where technology can find vendors
The sheer size and scope of a constantly changing marketplace can be overwhelming, especially for companies looking to do business with startups.
"It really is a jungle out there in the sense that you’ve got an extremely dynamic market," Thill said. "If you really want to make sure that you know what these companies are doing, you almost have to use technology and AI or some kind of machine learning algorithm to track the space."
Thill added that the value of these kinds of tools depends on the business sector. Companies that buy high quality resins, for example, aren’t going to need a tool to scrape the web for suppliers because there are so few of them, and it’s unlikely that startups are going to try to disrupt that space.
But "if you are trying to find new technology, to find new suppliers in a large community," Thill said, "technology may be a solution and may be helping you find the right suppliers.” It can also help companies keep an eye on the marketplace to identify trends and changes.
"It really is a jungle out there in the sense that you’ve got an extremely dynamic market."
Partner, A.T. Kearney
Using a third-party technology vendor is another potential solution, which has been the case for NTT DATA, a consultant and technology provider.
Jeffrey R. Tramel, vice president of procurement at NTT DATA, told Supply Chain Dive in an interview that his company uses SAP Ariba. "Think of it as another Amazon-type opportunity, where it’s a consortium of suppliers in which you can order and operate," he said. It’s a way to outsource finding vendors, which his employees can then vet.
"The platform works with all systems and all types of goods and services, making it an ideal procurement and supply chain enterprise application," said Tramel. "Our goal in using the technology is to improve speed, accuracy and automate processes for our team."
He added that they’re also looking to use SAP Ariba’s Spot Buy feature, which he said allows them to find specific solutions for one-off and emergency purchases. The Ariba system "definitely speeds up the global view and reach for supplier," Tramel said.
Tramel said Spot Buy utilizes a volume price negotiated by SAP Ariba. In turn, that speeds up the negotiation process in procurement and helps to secure a lower price when buying commodities
Technology is the start, but not everything
While technology can help procurement professionals find vendors, they’re not the be-all and end-all, said Thill.
"Technology will never replace screening vendors" he said. "Do these suppliers have the right capabilities? Do they have the right service levels?"
While NTT Data uses technology to identify vendors, the company also finds vendors in traditional ways: their own networks, recommendations, even contacts received via Linkedin. The company also needs to research vendors, especially in international markets.
"There’s no magic bullet," Tramel said.
Vetting vendors is especially crucial in countries like China and the Middle East, where fake companies can pop up on vendor lists. "You have to be able to vet and ensure that you have the right suppliers and that they’re really real suppliers. Otherwise you could be getting yourself into trouble," Tramel said. That means not just visiting vendors but also looking at government records to make sure the company is legitimate. "Otherwise you can be on the surface, picking a supplier that you think is valid and great and it could turn into an empty shell."
"You have to be able to vet ... Otherwise you could be getting yourself into trouble."
Jeffrey R. Tramel
VP of Procurement, NTT DATA
In the end, he said, he expects technology to not just identify vendors, but free up time for the company’s high-level procurement professionals because they won’t be spending it on the identification end. “I’ve got to be able to optimize my staff’s time for things that are of value,” he said.
Technology lets less experienced employees use technology tools to identify vendors and “high skilled and high-powered people do what they do best, which is negotiating deals and driving down spend."
This story was first published in our weekly newsletter, Supply Chain Dive: Procurement. Sign up here.