Masters in Business: The ROI Rules of AI: Procuring Success

Release Date: December 16, 2024

In the December 16, 2024 episode of Bloomberg’s Masters in Business, the sponsored series “The ROI Rules of AI” delves into the transformative impact of artificial intelligence on procurement processes. Hosted by Edward Adams and featuring insights from Gary Kodowitz, Chief Data and Analytics Officer at Dun & Bradstreet, the episode explores how AI-driven solutions are revolutionizing supplier management and risk assessment in large organizations.

1. Introduction to the Procurement Challenge

The episode opens with a portrayal of the intricate challenges faced by procurement professionals in large corporations. Edward Adams sets the stage by illustrating the exhaustive process of vetting suppliers, which involves assessing financial health, legal standings, ESG (Environmental, Social, and Governance) scores, and vulnerability to geopolitical or natural disruptions. “[...] It could take you days to thoroughly investigate just one potential supplier” (00:00).

2. The Efficiency Problem in Procurement

Gary Kodowitz highlights the core issue: inefficiency. “[...] every one of these tasks are pretty time-consuming” (01:15). He emphasizes that the traditional methods of supplier evaluation are not only labor-intensive but also slow, hindering companies from making timely and informed decisions.

3. Dun & Bradstreet’s AI-Powered Solution

a. Building Ask Procurement

To address these challenges, Dun & Bradstreet collaborated with IBM and Bloomberg Media Studios to develop “Ask Procurement,” an AI-powered natural language interface. This tool leverages IBM’s WatsonX platform to allow procurement officers to swiftly research and evaluate suppliers. “Give me everything I need to know about company ABC” (04:04) is an example of the type of queries users can input, enabling comprehensive and rapid data retrieval.

b. Features and Capabilities

Ask Procurement integrates extensive data on over 590 million private companies, encompassing supply chain management, credit decisioning, and ESG metrics. Users can perform multifaceted searches, such as identifying widget manufacturers with strong credit ratings, low debt-to-equity ratios, and minority ownership. This holistic approach streamlines the supplier vetting process, significantly reducing the time required to assess potential partners.

4. Measuring Return on Investment (ROI)

Gary Kodowitz outlines two primary metrics for evaluating the ROI of AI implementations:

1. Accuracy in Decision Making: Ensuring that procurement professionals have immediate access to comprehensive and accurate information to make informed decisions. “[...] Do I have all the information readily available to me in order to make the right decision?” (04:42).

2. Efficiency and Productivity: Enhancing the speed and effectiveness of procurement workflows. Early users reported a reduction in vendor vetting time by 10 to 20%, allowing procurement teams to focus on more strategic initiatives (06:03).

5. Collaborative Development with IBM

The partnership with IBM was pivotal in the creation of Ask Procurement. Gary Kodowitz praises IBM’s multifaceted role: “IBM is an amazing partner [...] they have a build team that helped us gather the requirements as well as actually develop” (06:37). IBM provided not only the technological infrastructure but also expertise in developing and fine-tuning the AI solution to meet Dun & Bradstreet’s specific needs.

6. Insights and Lessons Learned

Dave McDonald, General Manager of the US Industry Market for IBM, shares valuable lessons for organizations embarking on AI projects:

• People, Process, and Technology: Successful AI transformations require a balanced focus on people and processes, not just technology. “AI shouldn’t be an IT only led initiative [...] you always need to have a line of business sponsor” (07:31).

• Competitive Advantage through Data Integration: Combining proprietary data with advanced natural language processing capabilities is crucial for creating unique and competitive AI solutions. “Being able to combine private data that others don't have access to with the traditional large language model capabilities” (07:31).

7. Future Developments and Phase Two

Looking ahead, Dun & Bradstreet is advancing to phase two of Ask Procurement, which involves integrating customers’ proprietary supplier data into the platform. This enhancement will allow more departments within organizations to leverage the tool, further increasing efficiency and reducing redundant tasks. “[...] the stakeholders are able to ask and get the questions answered themselves” (09:07).

8. Conclusion

The episode concludes by underscoring the significant impact AI-driven tools like Ask Procurement can have on large organizations' procurement processes. By enhancing both the accuracy and efficiency of supplier evaluations, AI not only mitigates risks but also frees up valuable resources for more strategic activities. Edward Adams wraps up by encouraging listeners to subscribe and engage with the content, highlighting the ongoing exploration of AI’s role in transforming business operations.

Notable Quotes

• Gary Kodowitz [01:15]: “Every one of these tasks are pretty time-consuming.”

• Gary Kodowitz [04:42]: “Do I have all the information readily available to me in order to make the right decision?”

• Gary Kodowitz [06:37]: “IBM is an amazing partner and they partner with their customers, I think from multiple different dimensions.”

• Dave McDonald [07:31]: “AI shouldn’t be an IT only led initiative [...] you always need to have a line of business sponsor.”

Timestamps

• 00:00: Introduction to the podcast and procurement challenges.
• 01:15: Gary Kodowitz on efficiency issues.
• 02:18: Overview of Dun & Bradstreet’s data capabilities.
• 03:26: Specific data points used in procurement.
• 03:48: Introduction to Ask Procurement.
• 04:04: Examples of user queries.
• 04:42: Defining ROI metrics.
• 05:03: Understanding customer workflows.
• 05:30: Educating customers on generative AI.
• 05:37: Customer “aha” moments with AI.
• 06:03: Early ROI results.
• 06:37: Partnership with IBM.
• 07:17: Insights from IBM’s Dave McDonald.
• 08:41: Plans for phase two of Ask Procurement.
• 09:07: Expanding product usage across departments.
• 09:27: Conclusion and sign-off.

This summary encapsulates the key discussions, insights, and conclusions from the podcast episode, providing a comprehensive overview for those who haven't had the chance to listen.