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How AI is assisting Coca-Cola in increasing supply chain purchasing | Technology and Business

How AI is assisting Coca-Cola in increasing supply chain purchasing | Technology and Business
How AI is assisting Coca-Cola in increasing supply chain purchasing 

How AI helps Coca-Cola boost supply chain buying

Artificial intelligence (AI) and machine learning tools have become indispensable to fuel procurement and sourcing efforts at the Atlanta-based global beverage leader, according to Brett Fultz, director of global analysis, global procurement and supply chain at Coca-Cola.

"Previously, we were masters of Excel and email," he told VentureBeat. "When I first started at Coca-Cola 10 years ago, we didn't have any sort of AI or advanced procurement or sourcing tools available." Now, however, leveraging AI has greatly improved not only for procurement across more than 50 categories, but also for supplier communication, governance and process, he said.

For any company that manufactures or sells goods, buying and sourcing are integral functions of supply chain management. Sourcing, an early stage of the buying process, is about identifying and assessing potential suppliers of goods or services, negotiating terms, and selecting vendors. Procurement, however, goes further, and is about getting supplies and payment from suppliers who compete for business by submitting bids and negotiating contracts.

But challenges abound in a supply chain landscape full of constraints and risks - from issues related to the COVID-19 pandemic and the war in Ukraine to climate change. For procurement leaders, this poses a major hurdle: The pandemic has intensified the challenge of detecting, measuring and managing risk, according to Deloitte's Global 2021 Chief Procurement Officer survey. And the survey found that very few CPOs (18%) were formally tracking the risks that existed in their direct (Tier 1) supplier base, and only 15% had visibility beyond that.

AI, however, can be a game changer: a Deloitte survey found that high-performing procurement organizations were 18 times more likely to fully deploy AI/cognitive capabilities. 

AI can help boost decision-making amid buying chaos

The current focus in procurement is one of "firefighting" -- that is, daily efforts to stay on top and ahead of the next seemingly unexpected disruption, said Shanton Wilcox, US manufacturing lead at PA Consulting. Today's companies are facing availability issues, wildly fluctuating commodity prices, transportation challenges and increased costs, he explained.

“AI solutions help with decision making in a seemingly chaotic business environment,” he said. He said artificial intelligence can range from developing scenarios and modeling potential scenario effects and decisions to developing AI models that forecast prices and help balance the trade-off between current and future prices. 

Traditional models of procurement and sourcing systems that previously brought success to organizations have become obsolete and stressful, said Kushal Nahata, CEO and cofounder of Fairei, a supply chain management company that provides "real-time AI insights" for companies including Domino's and DHL. and leverages visibility". 

AI has the potential to "explore insights and patterns in the supply chain to find correlations that escape the realm of the human mind," he explained. For example, determining the future availability of resources in an organization can calculate the estimated time frame for delivery. Historical data can be used to understand the potential demand in future and make relevant decisions accordingly.

However, AI is a new area for many procurement departments, said Brian Prantil, senior vice president of Insight Sourcing Group. “The biggest area we see companies taking advantage of AI is related to spend classification to provide insights and identify opportunities,” he said. Other areas include using AI to monitor and identify potential risk areas in the supply chain, automating simple tasks such as checking purchase order status, and scanning and interpreting contract documents.R

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Keelvar tackles supply chain procurement challenges 

Cork, Ireland-based Keelvar, which recently raised $24 million to fund its "intelligent sourcing" platform, is one company to tackle the procurement problem. It has developed sourcing bots that allow customers to examine direct and indirect purchase bid information from suppliers and then analyze multiple awarding scenarios based on those criteria and other constraints. Using Keelvar's platform, they can also launch and conduct new bidding events. Algorithms sort through data on supply chain disruptions and vendors, clean it up and extract the information before making recommendations. 

As a Ph.D. student in the AI ​​Research Laboratory, Kilver founder and CEO Alan Holland worked part-time for his parent's business, which sold chemicals to companies such as Coca-Cola.

"They were disappointed because it was difficult for them to navigate the procurement processes," he said. "There was a tendency to simplify things by giving rewards to a small number of vendors because it was too hard to manage." More sophisticated tools were needed, he explained, to help procurement teams manage the influx of data and get more rich data out of the market.

Coca-Cola Uses AI for Supply Chain Visibility

Coca-Cola began using Keelvar two-and-a-half years ago exclusively for logistics procurement, and has now incorporated it into its software to direct content into packaging and materials.

Fultz pointed out that his global buying group controls more than $25 billion in spending in more than 50 categories, and in some categories hundreds of suppliers bid for Coca-Cola's business. “With this comes all the pain points in the process of being able to standardize our data, standardize our process so that we are able to move quickly to a sound sourcing recommendation,” he said. "Keelvar has allowed us to help simplify that process."

The most important price, he said, has come in relation to matrix-style pricing, including raw material, conversion and logistics costs – as well as to automate the bidding cleanup process. 

For example, “We will have over 200 suppliers invited to an event in a category like shrink and stretch film and we will have all hands on deck to clear and validate these bids at the end of each round.” “This tool has allowed us to streamline that process so that we are able to aggregate valid bids that are essentially aggregated.”

Other vendors provide solutions to purchase challenges

Several other, larger, AI-powered procurement solutions are in this area, such as Coupa and Jaggaer. Both of these vendors are leaders in the Procure-to-Pay space, called Gartner's 2021 Procure-to-Pay Magic Quadrant, "with automated workflows for requesting, buying, receiving, and paying for goods and services in an enterprise." 

Coupa emphasizes that it offers a wider range of products and services than "niche, to the point solutions" such as Keelvar. “From sourcing to contract management to purchase-to-pay, Coupa continuously measures supplier risk and performance,” said Dr. Madhav Durbha, VP of Supply Chain Strategy at Coupa. “Through our supplier risk and performance management solutions, we can score suppliers at risk through a variety of internal and external data.” However, merely marking a supplier as risky is not enough, he said. “Through the use of advanced optimization techniques on the digital twin model of the physical supply chain, we can run different scenarios and compare risk scores with other KPIs.”

He also pointed to Coupa's Community.ai, which combines AI and human connections, anonymized, aggregated and analyzed data. He said, “We currently have cumulative spending of $3.3 trillion under management, a wealth of data that we use with the permission of our customers to abstract insights that benefit the broader community through AI-powered algorithms.” 

Neil D'Souza, founder of Stuttgart-based MakerSight, says the complexities of procurement and sourcing have increased significantly since the beginning of 2020. Though supply chain risk has always been a part of procurement and sourcing, he said, “Covid and geopolitical issues have made it difficult. And more important than ever, while visibility issues…. Suppliers take huge business risks,” he said. "Additionally, with increased regulations, and enterprises openly communicating NetZero goals, procurement is now in the driver's seat to reduce emissions from the supply chain."

He added that AI enables procurement and sourcing to tackle the challenges at scale. MakerSight's Digital Twin technology, he explained, "provides a transparent and supplier-specific view of product supply chains and insights into deeper levels of the supply chain, associated risks and emissions from goods purchased for manufacturing suppliers."

Moving forward with AI for supply chain procurement

Investing in AI to boost procurement and sourcing will become a priority investment area in the near future, said Wilcox, as the complex challenges around business volatility and increased labor mobility remain. “Long gone piecemeal price comparisons – decisions now include aspects such as flex capability/responsiveness, initial sustainability interest, transportation options and resulting costs,” he said. 

In the long term, procurement departments should consider investing in AI tools that will improve decision-making by leveraging internal and external data through anomaly detection, predictive analysis and advanced shoulder costing, Prantil said. That said, before investing, companies should evaluate their use cases and examine their data architectures to understand how they can take advantage of these tools. “AI can certainly automate cleaning and classification, but data needs to be captured, so defining what is available and what is not is the first step,” he said.

Data is absolutely the biggest challenge when it comes to applying AI for strategic procurement, Prantil continued. "Data exists in purchase orders, accounts payable systems, contracts, specifications, drawings, vendor masters, spreadsheets, etc., and is not necessarily electronically linked, centrally or always very robustly stored."

The future will bring acceleration of AI and software systems in the procurement and sourcing space, predicted Durbha. "They will grow into a broader ecosystem and bring together data, algorithmic engines and capabilities to solve specific procurement and sourcing challenges," he said.

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    Coca-Cola based on purchase success using AI

    Keelvar's Holland said that in the future, the company will focus on integration between multiple systems and best-of-breed vendors pulling data from other sources.

    “There are great supply chain visibility tools so you can see where your containers and trucks are, and there are also providers that provide sustainability data,” he said. "We think it's important that we start to integrate more of that data into our systems - which is a trend that I think will gain momentum and will accelerate over the next 2-3 years."

    Fultz said there is still room to grow for Coca-Cola to improve supply chain procurement and sourcing.

    "We're very mature in the logistics space, and now it's really about bringing the rest of our categories to that level," he said. "Across the board, in our direct and commodity categories, we've had really great success. So it's really been able to build on that success and try new things, versus the standard way of operating."