Is the Strait of Hormuz leading companies towards AI?
Written by: Alex Saric
Written by: Alex Saric
About Alex Saric
Alex Saric is a spend management expert who works as Chief Marketing Officer at Ivalua - a unified, enterprise AI platform for managing spend and suppliers.
Are there going to be knock-on effects from the Middle East crisis on computing and on AI?
We’re already starting to see them, with higher-end laptop prices jumping up as chips are becoming scarce. Businesses that have the highest margins and the highest ability to pay, will be able to maintain their supply over businesses with slimmer margins. You stand to lose your share of the market if you don't have resilient supply chains, and ultimately, consumers are going to pay for a lot of the costs. Our research shows that 71% of UK businesses report passing increased costs onto customers over the last year.
Despite this, is the crisis accelerating a move to AI?
I think it was happening anyway, but this has given it an extra push. There's a tremendous amount of discussion, some of it hype, some of it real, around AI, but you can’t deny that the move has already started. Most organisations are still in the pilot or exploratory phases, but a high percentage of procurement leaders see AI as the number one strategy that they are planning to put in place.
But how can AI help organisations manage their response to a crisis?
In a few ways. On the indirect side, it frees up time by getting rid of about 70% of the time procurement and supply chain professionals historically spent on things that can be automated almost entirely.
Instead, you can work with suppliers to find out how you can keep supplies flowing. You can look at whether you need to change shipping routes, and what needs to happen if they need to move to a different plant or a different region of the world. You can focus on relationships, on strategies and on staying abreast of what's going on in the market.
The more direct benefit is that there's so much information out there. AI is very good at scouring what's happening from the web, matching that against your internal data, and those of your supply chains. With that knowledge, you can work out where you're most exposed and help identify alternate sources of supply that you may not have been aware of, so that when shocks like this happen, you can find new suppliers.
Is data playing a role in the crisis and in the adoption of AI?
There is a fundamental midterm strategy that people need to work on as soon as they catch their breath from the immediate impacts that are hitting them. That is to take their data and establish a single source of truth. Responding to crises, understanding your supply chain visibility and successfully adopting AI, all flow from that.
The underlying issue most organisations have is their data and data architecture. I hear all the time that it is preventing people from understanding that visibility. People have fragmented data on their supply chains, on what they're buying, spread across different systems, with no map.
Many organisations have addressed this problem with an underlying strategy to improve data architecture and establish this single source of truth that all these different sources map to. When you have that, you can make much better decisions and understand your exposure. Coincidentally, that is also required for AI to be able to do all the great things we talk about it being able to do.
Too many projects are not getting out of the pilot stage because they don't have this foundation. A lot of people seem to think you can slap a shiny new tool on a broken foundation, and it somehow magically fixes it. But if you can't find and understand the information you need, AI is not going to solve that problem. It needs access to information that's reliable. If it has that, then it's very powerful.
How do you see AI helping?
You're not spending your time on irritated employees asking where their order is, or on a supplier asking you where their payment is. They can find out themselves by typing in their details and asking AI, so that’s one instance of it freeing your time.
Where it helps with crises, like the one we’re going through now, is in decision-making. If it's an issue about your supplies that were flowing through the Strait, you need to get on the phone and explore whether an alternative may work. Perhaps you need to go around the Cape of Good Hope, but it's going to take longer, and the costs have gone up. You could potentially ship from somewhere else, but that has other implications.
Being able to have these conversations can allow organisations to be more agile. It’s not going to solve your problems. You’ll still have higher costs, you’ll still have delays, but you can react in strategic ways and make a joint decision based on the options that are available.
For a closer look at how AI is transforming the profession, follow the link below: