0-100 Sourcing: AI as the Unlock to Supply Chain Growth & Decarbonization
The ever-present pressure to grow profitably and to do more with less, combined with mounting resource pressure, both environmental and economic, has led to a new, bigger mission for Chief Procurement Officers (CPOs) and their leaders. We are working with our Community on five strategies to propel sourcing into the next frontier, which we call 0-100 Sourcing.
Sourcing Leaders Must Move from Saying to Doing
Over 4,300 companies have committed to sustainability targets, and yet very few companies are operationalizing decarbonization or moving the needle on Scope 3. Meanwhile, resources are scarce, and labor costs are on the rise – with the significant jump in average annual rate increases for UPS drivers being just one indicator.
The ever-present pressure to grow profitably and to do more with less, combined with mounting resource pressure, both environmental and economic, is top of mind for CEOs, COOs, and CSCOs. And the pressure has led to a new, bigger mission for CPOs and their leaders.
AI is an excellent co-worker to put on the case. A recent MIT study reveals that people who use ChatGPT are 40% more productive and have better output quality. And CEOs are no longer taking a “wait and see” position and instead are interested in getting started. Supply chain is seizing the opportunity – yet our data suggests that sourcing is lagging compared to the rest of their peer supply chain functions in terms of both interest in and adoption of AI.
Bring Your Sourcing Team off the Bench
It’s time for sourcing to get in the game. In a dual confluence of impactful forces, sourcing sits squarely in the middle of supply and demand, with the power to both deliver financial growth and realize sustainability progress.
Gone are the days of pure procurement, penny-pinching suppliers for cost savings, gatekeeping information, and the focus on short-term gains. A progressive cohort of sourcing leaders is pioneering the shift into partnership-driven relationship management, where all parties involved win.
How Do I Get Started?
We at Zero100 are all about the digitization of operations and are working with our Community on five strategies to propel sourcing into the next frontier. We call this 0-100 Sourcing, and it involves:
1. Autonomous Sourcing: Unleash the creativity of your sourcing team to drive value by leveraging AI to digitize routine activities.
- Industry Inspiration: To better service their occasionally neglected longtail suppliers, Walmart turned to Pactum AI and their negotiation chatbot. Since its introduction in 2021, Walmart has saved an average of 3% on contracts.
- Recommendation: Ask your sourcing team what their least favorite part of the job is and then assemble a tiger team with dedicated resources and funding to pilot automating that task. Conduct an AI blueprint exercise with Zero100 to explore additional opportunities to apply AI across The Loop.
2. Regenerative Supply: Renew and restore inputs, materials, and costs that go into the production of products and services, taking a page out of nature’s playbook to build resiliency and optimize costs.
- Industry Inspiration: From trash to trendy, Nike’s Space Hippie shoes are made from factory scraps, regenerating a waste side-stream and minimizing the costs and environmental impact of input materials. The trainers are made with 25%-50% recycled materials and generate 70% less carbon dioxide as compared to their usual sneakers.
- Recommendation: Analyze the portfolio of your inputs to determine what materials make up a large majority of your costs and get started with evaluating waste side-streams that could be regenerated, replacing virgin materials.
3. Proactive Product Lifecycle Management (PLM): Shape new product design through Design-for-X (DFx), where X is cost, quality, manufacturability, sustainability, and supply resilience. Automate and accelerate proactive specification changes to optimize costs and risks through a robust bill of materials visibility and connected technology architecture.
- Industry Inspiration: Volvo CE established a PLM-enabled digital thread with their partner Windchill, resulting in a unified and collaborative product development system. Commonality across processes, systems, and data means getting to market more quickly as well as better manufacturability.
- Recommendation: Make sure you have a data strategy for your supplier and BOM data and ensure there is clarity on who owns data quality and what the governance process is. Platform data in order to apply optimization engines and AI.
4. Co-Innovation Culture: Build a culture of co-innovation with your suppliers to multiply your talent, accelerate your digital strategy, and progress the decarbonization of your value chain.
- Industry Inspiration: Schneider Electric is partnering with its top 1,000 suppliers to cut their carbon footprint in half by 2025. The program provides tools and resources to help suppliers set and accomplish their carbon reduction goals, including an opportunity to exchange innovative ideas with peers.
- Recommendation: Through a Pareto analysis, determine the biggest driver of both costs and carbon in your supply chain. Then, identify key strategic partners in your value chain that intersect with that input material, share your findings, and begin co-innovating solutions to pilot.
5. Traceability: Build resilience and see around corners with a robust strategy to make risks visible and assure supply on a broad time horizon. Use AI to risk-sense macro events that may require action.
- Industry Inspiration: Merck turns to partners Aera and TraceLink to increase agility and improve availability, bringing customer service levels from 97% to 99.9%. TraceLink assigns a unique product number to medicines, enabling Merck to view the journey and touchpoints for each drug, while Aera’s Cognitive Operating System uses machine learning to run what-if scenarios and determine materials that need to be rerouted.
- Recommendation: Select one or two product lines and trial AI applications for traceability. Align them with your company's Sustainability Materiality Assessment for an even greater impact.
The future of sourcing is a move from transacting to leading, where the C-suite relies on the sourcing team as a competitive advantage. 0-100 Sourcing amplifies sourcing’s impact, accelerating the rate of progress, and predicting and shaping the future – all built on emerging AI. Most importantly, it unleashes the creativity of your sourcing team, unbridling them from routine tasks that distract from driving value.