power sourcing and as usual I am joined
by Mr. Roy Anderson who is a lecturer
extraordinaire at Nor Eastern University
uh in the supply chain program and I am
Andrew uh Livic founder of Focal Point.
Um today we’re going to talk about AI
powered sourcing and how that is
changing uh everything that we used to
know about uh sourcing from back in the
day. So let’s just jump right into it.
Um to get to the music next slide here.
So as I said, we’re going to talk about
how AI is changing the sourcing
landscape and what we used to do
manually and tactically has changed
dramatically with the admin of AI. And I
especially want Roy to talk about how we
are training and educating our students
in in the supply chain field now that we
have all these great tools uh to help us
out. Now, as we get into this, as usual,
I would love to understand where you
guys are are joining us from. So, if you
can drop your location in the in the
chat, that would be awesome. And and
just before we get started, Roy, uh what
are you guys what’s what is, you know,
what are the kids learning these days?
Yeah. So, it was actually just today I
had teams presenting uh on how they’re
they’re building agentic agents that can
take action. So each of the teams, one
team was um you know call out your
entire list of suppliers and one by one
go through and do a entire risk
analysis. Um and of course they build
out the areas of intensity uh how much
review level of of activity of whether
it’s a A tier, Btier, Ctier supplier.
And then when any of the results come
back in below certain criteria that they
build in, uh the AI agent then goes out
and asks for, you know, certificates,
asks for uh due diligence, uh sets up an
audit, uh all those actions to get
things rolling and moving with no human
intervention. This is this is all just
triggered and you go through hundreds of
suppliers and then pick out the ones
that are going to become a problem. Uh
so that’s that’s one. next team went in
there and said, “All right, we’re going
to be doing here’s our spend analytics.
Uh here’s the uh go through and find the
top five categories based upon our
contracts to find out which ones are
coming due over the next uh six to nine
months that we want to do a deep dive on
the strategy of that category the first
second third tier suppliers what would
be an optimal supplier uh solution set
where’s the competition where are the
choke points in that activity send out
an RFI that that gathers information on
capabilities quality service delivery
and most notably their activity on
innovation and then set it up in terms
of uh what we want to do for a sourcing
plan and these are all AI agents that
the students are running on their own um
which is just really exciting.
Very very cool. I love hearing that. So
Maya, why don’t you advance us to the
next slide? So back in the stone ages
when I learned strategic sourcing,
dinosaurs are ruling the earth, right?
uh basically the automation was
non-existent right so I remember when I
when I when I started we were handed a
binder of paper with our sourcing
processes and it told us to go look for
information here there and everywhere
everything was done manually and we had
to go through the porter analysis the
crawl matrix we have to figure out what
the needs were what the risks were and
and everything was kind of you know done
offline and poorly and I I guess you
know the inter step between then and
sourcing the way we used to know it two
years ago was we had a lot of tools in
place now to help us automate the spend
analysis to figuring out what the risks
were and then figuring out who to invite
to the dance and all those kinds of
things. Um I mean Roy you remember these
Oh the Thomas register with the orange
and green books. That’s that’s how far
So, so, so now you know all these things
are being um being automated to to a
large extent and essentially you know
the way I kind of look at it today is we
look into way into three things right
one is sort of like the event creation
number two is then the uh supplier
selection how do you make that selection
and number three is how do you evaluate
negotiate and award and we’ll kind of
kind of walk through how how things are
happening today now with the advent of
AI so why don’t we go to the next slide
so Roy, talk to us about how you’re
teaching the students about event
creation and what you’re seeing the
best-in-class tools they’re doing.
Yeah. So, right now, um, as I I
mentioned, they’re going into that
category strategy based upon the spend
analytics. So, we now have tie-ins to
all the contract activity, what
contracts are coming due, what new
events are happening. Of course, what
you want the the the people to do is to
be working with their internal
customers, whether it’s the production
line, engineering, R&D, marketing,
advertising, legal, what what are they
looking at over the next coming year?
Not just their spend analytics, which is
historical, but what’s their budget?
Where are they actually thinking of
spending their money uh going forward?
Um as and that that’s huge. When I was
at Metife, almost a third of our
suppliers were net new. And that’s
that’s 6,000 suppliers every year were
net new um and and basically didn’t have
any activity because of the changes in
what our internal customers were were
were driving. Uh but so once you have an
understanding of the budget and you you
understand which categories you have to
go after and have appropriate suppliers,
finding the right supplier is literally
I consider it job number one because um
you can have the best negotiation with a
horrible supplier and you’re going to
get a horrible result. So making sure
that you go deep into the global
environment to understand which
suppliers are are driving innovation.
Which suppliers are are have the
capability have the highest lowest risk
structure uh highest level of agility
and flexibility to be able to get these
things done within this environment i.e.
this world where you never know what’s
shutting down next or or or what uh
calamity will will be around the next
corner. Um, and then building up the
questions. And I find that the AI tools
are doing an amazing job of being able
to think outside the box of what
information do we need to collect from
these suppliers in order to be able to
uh understand their competency and
capability in relationship to their peer
group. And that that step um is a
crucial RFI type of component so that
you know that you’re dealing with the
suppliers that are going to meet your
expectations shortterm and long term.
Actually that’s before the event
creation but that’s all the stuff that
has to happen before we get into one.
I think it’s fascinating to me as I’m
seeing uh customers using the AI
generated questions and how critically
important it is to have context related
to those types of questions. Right? So
you could source something
relatively bit services for example and
who you are is in terms of the company
that you are who’s regulating you and
how critical that service is to you
really matters a lot and that will then
help you drive the questions that you
ask for janitorial services for a
company like us means nothing because
customers don’t come into our offices
but if you’re a bank it matters a lot
because customers come here every day
so that also not only you know in terms
of like what you’re doing but also how
often you do it and and how thoroughly
you do it could really make a
Yeah. Significant. And the fun part here
is uh you know in in at one point in
time people in the sourcing world like
well I asked a hundred questions. I’m
like okay uh how many of them had any
weighted value to the decision- making
process? Uh and you realize the AI
engine can answer 80 of those questions.
So you really don’t have to go to the
supplier and waste their time. I’m a big
believer in what I call a lowcost
customer. That means I’m trying to drive
the cost out of this process so the
suppliers can be more profitable and
provide me lower holistic cost
structures. So that means don’t waste
their time. Uh I I believe uh the uh the
sourcing world still has to learn the
fact that salespeople are incredibly
valuable, the good ones, and and they
have a limited amount of time. So they
have to decide where they’re going to
put that time in order to get the best
uh opportunity for them to be able to
drive a a sale. We need to be able to be
transparent with what requirements are
as quickly and as effectively as
possible so that we get the best
suppliers wanting to do business with us
which is going to lead to a greater
result as we generate the next step
which is the RFP. Uh and then the timing
of it um which let me jump into that.
whole concept is people go, “Well, how
long does it take you?” I said, “I don’t
care if I start early enough. As long as
I finish the contract before you need
the material, I’m fine. It did it take
me a year? Did it take me three weeks?”
Not relevant. It it is did I get the
work I need to do to offer the most
optimal suppliers with the most risk
reduced contractual relationships um to
the internal customer when they need it.
And I think there’s got to be a real
determination. It’s not how fast you get
it done, it’s how effectively you get it
Yeah. No, without a doubt. And the other
thing that I think AI is getting better
at now and we’re getting better at
writing, you know, the questions is AI
can suggest the best ways of actually
getting the questions answered. So for
example, a pick list to say yes, we do
this today, you know, out of the box, we
do it with customization or
modifications. We do it, you know, it’s
part of our road map or it’s not part of
road map at all. so that you actually
can automatically score questions and
not rely on on people reading it or AI
reading it for that matter.
Um and so I think you know number one
getting a structured question set that
are best you know answers your
questions. Number two is then
normalizing those things that you sort
of focus on the right things. Uh so
again you don’t waste people’s time.
Yeah. When you focus on those right
things, uh you’re going to get the best
result from those suppliers as well as
long as you give them the data they need
in order to be able to provide you that.
uh you know I’m sure you’ve experienced
it but you know when you switch from the
sourcing side and then into the sales
like when when I ran my own company and
I had to sell this these these services
how many sourcing people were cutting
and pasting from a wrong category and
then just giving it to you and it’s like
this is not even relevant and he goes oh
I I copied it from another another event
I said you’re just wasting my time it’s
all right uh next slide of my
So now that you got your RFP out the
door, you know, you got those responses
back, how is AI helping us select the
Yeah. So we talked a little bit about
the setting up those questions and how
those questions are developed. Uh one is
some level of those questions have to be
um such that they can be easily
comparable, right? So you you have uh
you know quantitative uh analysis that
says oh this supplier has a 50% uh
improvement in delivery or has a 80% uh
larger comp capability to get to your
your uh needed quantity on time uh in
the locations that that you need. Um so
as much of that quantitative stuff where
you can now have a clear audit trail. So
if someone ever asks you is well why did
supply select supplier C you clearly
show where supplier C has an edge in
terms of the quantitative issues and
then and that’s that can all be done by
AI uh then you get into the qualitative
level and that’s where you want to be
able to spend more time to understand
the nuances is this going to be a good
fit within our culture is this supplier
understand the the the activities that
are driving my internal customers the
R&D activity the innovation
the the my customer base do they
resonate in that structure and that is s
such that the AI engines are not very
good at actually to the point where
they’re horrible at and therefore we
need to bring that within the disc
discussions with our internal customers
and that’s qualitative versus
quantitative qualitative give it to AI
quantitative that’s where you the
sourcing leader should be really driving
all right Maya why don’t you jump to the
and now as you sort of get into
evaluation and award. So the whole idea
recommending a supplier, negotiating
with the supplier and and basically
getting to an award. What do you see out
Uh it is so fun out there now. Uh so if
I look at the tail which so few people
are touching there is a aentic AI
negotiation bots that are doing a great
job of not only bidding it out with the
right criteria with your guidance and
and selection process but u being able
to find the supplier connecting with the
supplier based upon the information
updating the the supplier information so
that you have accurate information on
that supplier everything from their
banking information to their
certification levels. All that can be
done in the agentic AI world. And then
when it gets down to it, because you’ve
you’ve created the structure, the
criteria of what a success looks like,
it can negotiate on your behalf within
those criteria in order to be able to
get to an optimal negotiated solution
with this supplier’s salesperson or the
negotiation bot. And they can get to the
point where it says, “Yeah, this is a
win-win for both sides.” And that’s for
the tail, which basically can still save
you a ton of money. It can get things
under contract, which is going to reduce
your risk on those things that you never
touched before, but it’s going to do it
without a lot of human interaction. Uh
so that that takes care of a lot of act
thousands potentially thousands of
suppliers, thousands of contracts um
that can be easily auditable. Then you
can spend more and more of your time on
the A and B items which is are really
crucial to the success of your company
where you have a split where you say
okay bot you negotiate uh these types of
terms conditions delivery schedules uh
maybe first level uh holistic pricing
structure while I spend more time on the
specifications the innovation categories
the activity and therefore just like is
if you had two or three members of your
team the bot is one member of the team
that can go after activity or follow up
with the activity to keep people up on
on schedule with the activity. All those
things are good uses of the agentic AI
Do you think that organizations are
hands off for some of these things? I
mean, for me as a procurement guy,
right, it’s a little bit scary now to
Yeah. I I would suggest you that there’s
uh air traffic controller concepts. You
know the idea is that okay this bots’s
going off doing doing uh 10 20 30 a day
uh can you see what’s happening do you
get feedback reports the bot can
actually highlight areas where there’s
difficulty or constraints or delays
therefore you can target your time and
attention on the areas which are it’s
needed and the areas that are just going
through smoothly you see the results um
it is going to be very much a um system
generate you Gentic AI generated flow
and it’s going to highlight the areas
that you need to be more involved in.
Again, as you get to the A items, the
bots’s just one of your team members and
you’re watching over that really closely
because it’s part of a integrated
solution set that you’re trying to
Yeah. I was talking to a CPO of a very
large healthcare network um a few weeks
ago and they went from having a hundred
buyers to having 17 buyers and
everything else was handled by AI and it
was everything was going really great
until one of the models drifted
and basically as the model drifted it it
influenced all the other bots or all the
and things went off the rails. real
fast. And to me, it’s fascinating how an
organizations can literally remove 83%
and and use that air traffic control
concept that you talked about. But
again, as you were saying before, it is
tailspin related. Um, and it’s
in the tail spin though it’s important
to to somebody to the whole it still
needs to get done. you want to improve
the process, but you have to make sure
that that you have the the controls in
place and not just walk away. Now, if
you can get rid of 83% of your
transactional that that’s a lot of labor
costs. Now, so the question now becomes
from some of those labor costs, can you
bring in uh some expertise to be able to
do the audit trails and the management
and the control functions? So have the
right number of skill sets uh funded by
that reduction that keeps the AI bots in
line and keeps them under control
because it is not a set and forget. It
is not this stuff moves too quickly.
It’s too dynamic and it it can can be
outside or jump the rails as you say uh
easily enough. So take some of those
savings and maybe give higher level
people that can be able to watch and
control it and report on it more
effectively. And then of course I
strongly suggest you use some of those
savings to raise up the compensation
level and the skill levels of those
sourcing people that are going after
your a items so that you can be a um
partner with your internal customers.
You can actually be an advocate. They
actually come to you because you’re
hiring people that have the knowledge
and skill sets that are going to be
supportive of what they’re trying to
Yeah. And we can go on and on about the
impacts of of you know succession
planning and and talent pool and all
that other stuff, right? because we all
learn how to do stuff based on doing
junior level work and if all that goes
away it’s kind of interesting right the
so my can you move to the next slide
please so this is sort of my my
hypothesis and I would love to
understand what you think about this Roy
right so I think the future around AI
sourcing is going to be more strategic
as as things go by so the the three the
three phases we talked about are
relatively I would argue tactical in
nature like building an RFP deciding
where suppliers to participate and and
negotiating a tail spin deal. And what I
would say is that where we’re going to
get to next is having AI help us create
overarching category sourcing strategies
that brings together data like spend
analysis but also contract data,
requirements data, uh external analysis
data to help us figure out where do we
have the most leverage to maximize, you
know, our spend dollars, right? And then
you can use something like a focal point
to automatically configure the processes
using workflow and help that pushing it
through the pipeline. And and I think
we’re going to get there sooner than we
think. Um we’re heads down right now
building a category management solution.
Um that obviously is a bit more
heavyweight than than you know a part of
sourcing engagement, but this is kind of
where I see things going. Uh how do you
feel about that Roy? Yeah, I I believe
when if you only talk about the sourcing
event and the closure to contract,
you’re you’re only seeing 10% of the
true value. I what what Focal Points
working on now in terms of pulling all
that pre-data together to saying, “Hey,
this is what we’re expecting. This is
what we’re we’ve negotiated to. Now, how
do we help our internal customers and
our suppliers optimize that contract and
that that relationship in order to be
able to make sure that we have um better
and better solutions, innovation uh that
delivers on the expectations to not only
our internal customers but to our
external customers and that we we track
it and control it with with data points
that we never had before. And this is
the fun part. When you start to realize,
okay, I’m going to have fewer and fewer
people, hopefully higher and higher
compensation levels. I’ve got more data
elements. Well, how you got to manage
all that data? Well, guess what? It’s
going to have to be an an AI based
solution to absorb all that data. Look
for trends. Look for areas of concern.
Look for areas where you need to take
action. have the AI agent, you know,
issue warnings or concerns or requests
uh in order to get it started and then
be able to track those items and come
back to you goes, “Okay, here’s your
list of of action items. Suppliers one,
five, and seven are are seems like
there’s a problem that we have to work
on.” And and we’re only talking right
now first tier. When we start getting to
second tier and third tier suppliers,
now it’s, you know, you go from 18,000
suppliers to 180,000 suppliers to a
million suppliers, that amount of data
load just is not possible. But your
knowledge base can go back from you to
your top suppliers to make sure they’re
doing their best. Because what I started
to find is my savings weren’t coming
from negotiations with my tier
suppliers, but helping my first tier
suppliers get a better deal from my
second tier suppliers, their first tier
Right. And I think, you know, bring up a
very good good point. I one of one of
the things that we need to look at now
as part of sourcing is the whole idea of
the the cost breakdown structure of
whatever services are being provided. So
what’s material, what’s labor, what’s
transportation and so on and and keeping
a keeping a finger on the pulse on how
those things are moving and there’s
there’s really no limit to how deep you
can go with these things, right? Because
a lot of these are geography dependent,
Um, you know, so, you know, where do you
and it go it goes back to I believe that
once you have this in control, it’s
never set and forget. Let’s just make
sure. Never set and forget. It is a
constant dynamic activity, but it allows
you to look at your job descriptions,
which I’m a big fan of. Like, you got to
fix your job descriptions. You have to
make your job descriptions
uh you know, mirror the work that needs
to be done. And those are higher skilled
people with greater capability, years of
in those areas such as advertising or
legal or manufacturing or or whatever
product or service that you’re buying.
You need to have experts that understand
it from the suppliers perspective, from
the from the uh internal customers
perspective. And then what’s really
exciting is we get to spend more and
more time with our internal customers.
Where you going? What are you trying to
accomplish? I’ve got suppliers that can
meet those expectations. Why? Because
I’ve got that data in my back pocket now
to say I and I I I can present to you
suppliers that are going to meet your
next generation requirements. then we
become valuable to that internal
customer because they don’t have the
time uh or the capability to be able to
find all those suppliers on a global
basis to be able to make that happen.
That’s when we become that strategic
partner with our internal customers
which we talk about a lot but I’ll tell
you unless you change your skill sets
and change the data you can bring
forward you that that’s just a a fake
Amazing. I I appreciate that so much. Uh
Maya why don’t we move to the next slide
wrapping up here. So uh this little eye
chart that you see in front of you now
is how focal point builds your uh
supplier questionnaires. So you can see
here that you ask the assistant to come
up with questions for a specific event
and the the the agent basically comes up
with the questions and then you can
select which ones to include and you
keep on building it until you’re done.
And as you can see on the on the left
hand side these are all the surveys that
we have pre-built as part of using that
AI um capability. So eating again these
are things we can select. Uh
I would I would suggest that this eye
chart is just that but it does trigger
the idea like man a demo in this space
by your listeners because what you’ve
already presented and and and developed
is going to save them a ton of time and
create greater accuracy and results and
then lead them into that uh more
And Maya next slide please. And here are
another couple of artifacts that we sort
of developed sort of agentically, right?
So this financial stability report that
you see, it’s obviously from Microsoft,
right? This is a relatively safe
company, but uh being able to sort of
say, I need these three metrics to come
up with an overall financial stability
assessment and you can automatically
pull the ticker symbols and come up with
that evaluation as soon as you drag and
drop a supplier into an event. I mean,
it’s very, very powerful and you kind of
know where you’re standing.
And the other thing here you see on the
on the right hand side of the screen is
is AI recommending which suppliers to
pick and and and moving sort of that
forward through the pipeline and makes
things much much faster. Right? So this
is not a sales stick but this is
supposed to be sort of like the art of
the possible and obviously you can get
into collecting sock twos and
certificates of insurance and and other
supplier evaluations all that other good
stuff. um even even um G2 assessments on
the on this on the space like all those
kinds of things are automatic can
automatically be pulled in. It’s kind of
cool, right? So that’s it for today. My
last slide. Um so basically now we have
um two things we want to talk about.
Number one is if you need to understand
more about what we talked about today,
that’s the QR code on the left. And if
you want to register for our May 27th
event, which is all about AI power
category management, which I am very
very nerdy about, uh I love uh the whole
idea of AI powered category management
and what this going to bring us into uh
into the into the future. So please um
register and and and reach out for more
information. Roy, thanks a lot for your
participation as always. It’s super nice
to be with you and I’m sure we’ll talk
Sounds good. Thank you. Thanks
