IoT, AI, and Automation are Coming: What is the Future of Public Procurement

By Nancy Clinton posted 22 days ago

  
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Last Wednesday we attended Procurement Week at London Docklands’ The Crystal – amazing views of the Emirates Cable Cars across the Thames. This conference is one of a kind in that it spans three days, is truly international, attracting delegates from all over the world, and focuses on all issues topical for public sector procurement. It is hosted by the Institute for Competition and Procurement Studies (ICPS) at Bangor University, Wales, whose team did a fantastic job in the direction and smooth running of the event (largely sponsored by the ESRC). The speakers came from all industries and sectors, including procurement practitioners, lawyers, economists, and innovators.

We couldn’t attend Days 1 and 3, but we can tell you from speaking with delegates that Day 1’s ‘Rescuing Procurement in a Crisis,’ and Day 2’s ‘Rewriting the Public Procurement Playbook,’ were as well attended and well received as Day 2 – and we are told you will soon be able to access the content on-demand. The three days were heavily supported, led, chaired and contributed to by ICPS’ own team of experts: so hats off to Dermot Cahill, chairman, Gary Clifford, director, Becky Hughes, for superb admin, and Dr Ama Eyo, director of learning (to name a few) for their involvement in making it a very successful few days.

The theme for Day 2, which we did attend, Procuring a Connected Living: The Internet of Things (IoT) was introduced by Gary Clifford. He gave an engaging story about the interconnection of all devices, with a clear message that AI (artificial intelligence) is here to stay, and we need it to sustain a growing global population: be that, for example, with drones to monitor crop fields. It is estimated, he says, that AI will contribute £650 billion to the UK economy alone by 2035. And governments are already investing heavily in robotics to accommodate the evolving needs of citizens.

The following presentations focused on how the world of procurement (and citizens) will change, and how we will approach things differently. The premise is that in 10 years’ time, everything around us will be connected – homes, offices, vehicles, public and private spaces, health services and so on – via smart devices.

In the opening keynote we heard from Joe O’Sullivan, founder and CEO of Ophir Manufacturing Solutions, who took us through the evolution of the silicon age, from the first micro-processor, to a time when the biggest challenge was getting connected to the Internet. He reminded us how Apple’s iMac advert in 1995 boasted how it could connect you in 60 seconds – which was amazing if (like me) you remember dialling in via your modem at home and having time to go make a cup of tea while it connected – if at all! Just look at where we are now. If the rate of change doubles every two years, who knows where it will all go. One thing is for sure – sensors will play a huge role. We have already digitised sight, sound, touch and hearing – and we are close to doing the same for smell. So the world is changing, but what does it mean for procurement people?

As businesses expand and sales increase, our role is to maintain control, to ensure the full potential of supply chain performance. Capabilities development will be crucial – we must keep up. The expanding role of procurement will see us spending less time getting quotes and having protracted negotiations. Instead, it will be all about partnerships, while recognising that the supplier needs to make a margin. However, the one thing we will always have is the contract, there always has to be an agreement of some sort, and it won’t be in the domain of lawyers anymore, it will be in ours. The most important thing to procurement will be its people.

The rest of the morning session was devoted to Procuring Technology. We heard about social care trends from Steve Robinson of Cardiff County Council, purchasing services for the connected home, from Henrik Holen and Mark Gates of AVIVA, and procuring contents, from Kristian James of David Philips.

One of Cardiff’s key services is social care, accounting for £130 million of its £380 million yearly spend. The council’s biggest challenge is budget pressures, like the rest of UK. Social care is an area that is constantly scrutinised to save money, at the same time facing more demand and higher expectations.

What technology will bring is greater interaction between social care and health services, bringing budgets together to better meet an individual’s outcomes. It will mean better monitoring of illnesses, prevention of accidents, alternative choices of accommodation with less reliance on residential care, and for us, it will mean different engagement with the market – a joint approach to commissioning and contracting with Health.

Traditional frameworks and block contracts have delivered significant savings, but in the face of fragile supply chains, we must look to new models, and dynamic purchasing systems with more flexibility. We must focus less on being custodians of regulations, and more on delivering value and challenging demand. For example, two-thirds of people in residential care have needs that could be better serviced elsewhere.

In terms of the home, IoT will change everything. It’s not really about ‘things’ – they are merely the means to an end, allowing us to add software to devices to enable change. We are all set for sensors and actuators to control our homes, we will be replacing light switches, heating controls, locks, with smart devices. Although that involves investment, once made, it will open up a whole new world of services. It will also enable us to stay in our homes for longer, avoiding residential care costs for example. So when you are buying for a connected home, you are really buying software-as-a-service. The home of the future will be a platform for digital services. And we need to invest in that platform for the longer term.

And what about the items that go into these new homes? Even furniture will be part of this connected world, and therefore focus will be on longevity. Interactive chairs, fridges that tell you when to stock up, beds that warm themselves for when you get home, all will be more costly to buy and store. So we need to ask ourselves, how will this affect our business model, our inventory, our stock, order fulfilment and the supply chain? Order fulfilment is likely to be the biggest challenge – with everyone wanting a faster turnaround – 18 minutes for a small item in London is already here. While manufacturing and innovation steam ahead, can the supply chain keep up?

Technology, like it or not, is disrupting our industry. How we buy services will change dramatically – no more calling out a plumber in the middle of the night, a component will alert us when it is nearing end of life.

Local authorities are embracing new technology more and more, but the biggest issue going forward will be investment, and being able to demonstrate clear outcomes. The Welsh Government is storming ahead with innovation, but there is huge variance across the UK in adoption, with some still demanding paper-based documentation.

So, a massively changing world of goods and services, automation and job displacement, but the experts believe we will never have a world without Procurement. We just need to think beyond the sticker price, and look ahead to value, which will come from technology and partnerships. Stop buying old or even obsolete products, because budget or incompetence dictate. We must buy in new ways, not keep squeezing margins, and look at new ways of reducing costs – this requires innovation. And on that note, we will leave you with a question from the audience – is Procurement stifling innovation through compliance? Answers on a postcard please …!

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