Edmund Zagorin: Today we’re speaking with Damian Beil, a practitioner and professor specializing in strategic sourcing and operations at the University of Michigan’s Ross School of Business. Damian’s research focuses on multi-phase procurement auctions and the discovery of uncommon value in common requests for goods and services up and down the supply chain. Damian, is there anything you'd like to add to that, that introduction?
Damian Beil: Mostly right. Uncommon value sounds grandiose, but we do try to teach business students at the University of Michigan how to identify and create value in supply chain relationships. Happy to chat with you today.
Edmund: Excellent. Well, Damian, I'm only going to ask you a few questions because I know your time is very valuable. I'll just dive right in. What do you see as happening in the next five and 10 years in supply chain, particularly in the Source to Contract phase as a technology becomes more sophisticated both in the gathering of data and of course in use of digital commerce networks?
Damian: Good question. I think data is going to be increasingly important in a lot of different areas. One major way is that data will to allow us to make better predictions about things. If you put that into the context of procurement, you could, for example, better predict which supplier is going to perform well, under what circumstances. At scale, you could predict what a certain market is going to look like in the next six months, maybe even what the outcome of a certain auction would be. Of course, we developed a lot of models on outcomes in markets like auctions, but I think with more and more data available, it will become easier and easier to do that well. The data may be slow in coming, but I expect it will come – eventually, emerging technologies like blockchain will probably help here. So I really think the big change is mostly is going to be around making better predictions and it's going to be a question what are the ingenious ways people think of to use that in in sourcing settings.
Edmund: Absolutely. Very insightful. I’d tend to agree with that and would be interested actually in at another time digging more in on the types of models that you’re using today for these procurement auction forecasts. Shifting gears for a second, I’d like to also ask what you see as the biggest priority for a procurement or a supply chain leader today? I know historically it's saving money and, and delivering bottom line revenue. Are there other leadership priorities that you see emerging?
Damian: I think one big area that is really hot right now is risk management around global supply chains. With all the movement on tariffs that is a big issue on people's radars. And it has huge implications for sourcing and procurement. It's unclear how long lasting this will be but that's definitely something important right at this moment. Taking a 30,000 foot view, talent development will continue to be important. There's still a lot of firms out there that have talent needs in the supply chain area, sourcing in particular. So it will continue to be a priority to grow talent and invest in people who can add value to the firm.
Edmund: Absolutely. And out of curiosity and I know you train, teach and coach folks that are going into the field in the Ross MBA program, so I wonder if you could share one question that you could ask someone to determine their kind of aptitude or in a job screening process for procurement?
Damian: That one is pretty easy. I think it would be a question devised to assess, for whatever industry I’m recruiting for, whether or not the candidate is able to identify the business case - the value add - between a buyer and supplier relationship.
Edmund: Absolutely, yeah. Holistic analysis.
Damian: I think that is what separates the wheat from the chaff. It's all about “why” a buyer and supplier are doing business together - understanding really clearly what the case is. The details are less important, but if you have clarity on the case, the details will work themselves out. I think that's where a lot of people struggle --- to identify or think at that kind of strategic level from the get-go.
Edmund: Right, to kind of see the value both short and long term in a decision.
Damian: Yes. It’s the ability to identify the value/business case/opportunity and to be able to understand it and articulate it. And then the rest of it is execution. The identification of the opportunity in the business case is where the creativity and seeing the big picture come into play. That's what justifies the high salaries that the people who are really talented in supply chain deserve.
Edmund: Completely agree. Shifting gears for a second, I wanted to get your view on the future of procurement with a different phrasing of an earlier question: are there any tools that you see used by procurement or supply chain practitioners today that you think will not be used, say 10 or 20 years from now?
Damian: Airplanes. By which I mean that I think eventually we'll get to the point where virtual meetings do a sufficiently good job replicating face to face relationships that people won’t need to travel so many days a year in these positions. For other market mechanism tools, I think the tools are going to get more sophisticated. Simple tools still have a place in your toolbox, like your price only auction, but you may become more sophisticated and use it for fewer applications than you would today as you becomes more sophisticated and can incorporate more aspects like full cost and value and all that stuff. That’s going to continue to become more widespread. I think it will probably supplant some of the simpler manifestations.
Edmund: Haha, I think many folks in the industry would be just fine with fewer travel days, not to mention our families. And my last question, well, I can't not ask you about this. Where do you see any leading indicators of the role that artificial intelligence and machine learning is going to play in supply chain and procurement today, or in the near future?
Damian: I think it gets back to how you identify creative applications of better prediction abilities. You can think of a self-driving car. Why does that work? Because we’ve had computers looking over the shoulders drivers for millions of miles and eventually they became able to predict what a good driver would do in any given situation. Right? So if you can have a computer look over the shoulders of procurement agents for millions and millions of transactions then maybe you could do something similar, in other words, you can predict when suppliers are going to have a problem and take proactive steps to counter that or predict what the market is going to be, when an event's going to be successful, when it's not. These aren't necessarily the best applications. But I think the really interesting things will happen when people get creative about what cool things you can get data on, and therefore when you can make good predictions. That's where there's going to be a lot of applications and new value created. Have to call out blockchain again (sighs) it might help with the data needs.
Edmund: Damian, that’s a fantastic note to end it on. It’s wild to think about what the procurement landscape and the economy as a whole will look like when more of the business commerce is transacted automatically, even autonomously. Thanks for talking with us today!