When it comes to the three biggest trends within integrated supply this year, the need for accurate data is a common thread. With access to accurate data, progress in all three areas can accelerate – and the benefits for customers accrue
Artificial Intelligence and integrated supply
When The Economist makes Chat GPT its word of the year for 2023 you know that Artificial Intelligence, or AI, has been in the news a lot. AI will continue to make headlines in 2024, but within the world of integrated supply, it is already making a difference on the ground.
“AI advancements in the areas of machine learning and large language models are important developments for integrated supply,” observes Robert Kline, Chief Technology Officer for the global technology team at RS Integrated Supply, a Maintenance, Repair and Operations (MRO) supply chain services company. “Pursuing automation of our overall processes so that we can be more efficient and effective.
“Understanding and adopting AI technology inside the business is an opportunity that offers advantages to our customers in terms of improving service and streamlining efficiency,” Kline added. “High quality data is an important enabler of integrated supply.”
“It all comes back to the data,” agrees Tom Cummins, Vice President of Global Procurement at RS Integrated Supply. “If we use AI right then it’s an opportunity to be more efficient, do more with less resources and be more accurate. We are already using AI tools in our market intelligence data gathering to get better quality information, faster, so we can tell our operations teams where the risks are, where we are seeing issues and with which product types, so they can consider stocking up before prices rise or availability is affected.”
Use of AI will continue to transform procurement in the years to come. “More AI tools will help us to get cleaner data and will change the way we work in terms of how we buy,” argues Cummins. “It will make identification and validation of savings easier and faster so that we can spend more time on driving the biggest savings opportunities.”
There will be major changes in other aspects of integrated supply too. “The convergence of AI with other digital technologies will allow us to develop products and capabilities that will improve the overall customer experience and it’ll expand beyond sourcing and procurement,” says Kline. “The ability to, for example, read text from images or leverage speech recognition provides an opportunity for us to enhance the way that we manage storerooms and potentially the way that we interact with customers.”
Growing sustainability within the MRO supply chain
The climate crisis is another subject making headlines. According to the National Oceanic and Atmospheric Administration, part of the US Department of Commerce, the US alone experienced 25 weather and climate disasters that cost $1 billion or more in the first 11 months of 2023. The total cost came to more than $81 billion.
How does this destruction and disruption affect integrated supply? “Getting products to storerooms is the greatest challenge,” says Cummins. “While there is more talk about rightsizing inventory, without question we’ve seen a move to increase inventory because some of the risks have changed.”
RS Integrated Supply helps customers actively manage these risks. “We use market intelligence and our day-to-day experience with our supply base,” he continues. “The operations teams that work with clients look at minimum and maximum levels. We then provide recommendations on where to increase inventory levels.”
Integrated supply providers can also play a significant role in clients developing more sustainable operations. “Many organizations have set themselves big sustainability goals that cover their scope one, two, and three emissions,” says Andrea Barrett, Vice President of Social Responsibility and Sustainability at RS Group, the parent company of RS Integrated Supply. “And rightly so because the latter is often the biggest part of their carbon footprint. However, to tackle scope 3 emissions affectively, you need partners that are willing to collaborate and take action to measure and reduce carbon emissions from their products, operations, and logistics.”
“With increasing regulation around carbon reporting and target setting, it’s really important that companies make sure they are following a scientific approach and established protocols around greenhouse gas emissions and target setting. For example, our targets have been verified by the Science-based targets initiatives (SBTi) and we ask our suppliers to do the same.”
Working with an integrated supply provider that is proactive about sustainability makes this much easier. “If you want to make something happen in your MRO supply base, it is hard and you get very little return because it is a fairly low part of overall spend,” notes Costanza Campi, Senior Vice President of Global Procurement for RS Integrated Supply. Partner with an integrator and “instead of having 10,000 suppliers, you have one. That is an advantage.”
It is particularly advantageous when that supplier seeks out independent verification of its sustainability credentials, for example, by seeking verification of carbon targets with the SBTi or via an EcoVadis assessment. EcoVadis is a platform that helps suppliers measure and improve environmental, social, and ethical performance across the supply chain. RS Group received the highest rating, Platinum, and we also ask our suppliers to get assessed and report back to our clients on this.
Ensuring ethical standards
Ethical procurement includes topics from human rights and modern-day slavery to health and safety practices, fair pay, and worker welfare. “Every business needs to look at how they get to the bottom of their supply chain. How do they map their tier one, two, three, four suppliers?” says Barrett. “That’s obviously extremely complex, especially if you don’t have a big team working on it. Using tools such as Sedex or EcoVadis can help with this. It’s a key value-add from integrated supply, too. We’re doing that work on behalf of our clients to provide them with greater visibility and assurance over their product purchases.”
Accurate data is fundamental to this due diligence process. It can also help organizations to achieve other ethical business goals. “From a data perspective, you can move forward when you have visibility of your supply base,” says Campi. “When you clearly identify your suppliers, you can assess levels of diversity, for instance, and look for alternative sources such as suppliers providing employment to military veterans.”
Once again, better data enables better decision making. With increased access to data and, crucially, more accurate data, integrated supply providers can realize the promised benefits of AI, driving vital cost savings for clients while also raising standards in terms of ethical and sustainable procurement. These are welcome trends in 2024 and beyond.