AI and Blockchain -
Driven Procurement
Transformation at a Global FMCG Giant
Client Background
The client is a global FMCG company with a diverse product portfolio, including personal care and food items. Operating in over 100 countries, the company relies on a complex supply chain involving over 1,000 suppliers. Their key operations are distributed across multiple regions, and they consistently seek innovative technologies to improve efficiency and cost-effectiveness.
Problem Statement
The client faced challenges in their Source to Value (S2V) process:
- Inefficient supplier performance evaluation and lack of transparency.
- Significant procurement costs due to redundant spending.
- Frequent overstocking or stockouts caused by inaccurate demand forecasting.
- Limited visibility and traceability across the supply chain.
- High risk of fraud and compliance issues due to manual processes.
Suggested Solution:
To address these issues, an integrated solution combining Artificial Intelligence (AI) and blockchain technology was proposed to enhance procurement, improve transparency, and secure the supply chain.
Detailed Technical Implementation:
1. AI-Powered Tools
- Invoice Automation:
- AI tools generated invoices with pre-validated data from order systems, ensuring accuracy.
- Automated scheduling for timely dispatch based on customer preferences and regulatory requirements.
- Credit Risk Assessment:
- AI algorithms analyzed customer payment histories, financial data, and market trends to predict creditworthiness and recommend payment terms.
- Payment Matching:
- AI models matched incoming payments to open invoices, resolving mismatches caused by partial payments, incorrect references, or currency differences.
- Predictive Collections:
- Machine learning models flagged accounts with a high risk of late payments.
- Automated prioritization of follow-up actions based on customer payment behavior.
- AI-Powered Customer Support:
- Chatbots integrated with the invoicing system to provide instant responses to customer queries, such as payment status, invoice discrepancies, and due dates.
2. Blockchain Integration
- Smart Contracts:
- Automated execution of supplier contracts based on pre-defined milestones (e.g., delivery and quality benchmarks).
- Supply Chain Traceability:
- Blockchain created an immutable ledger of transactions, ensuring transparency and accountability.
- Fraud Prevention:
- Procurement and payment records were encrypted and secured using blockchain to prevent tampering and unauthorized access.
- Risk Management:
- Real-time monitoring of geopolitical and environmental risks was supported by blockchain records for proactive decision-making.
Challenges Encountered in Real-Time:
- Data Integration Issues:
Integrating legacy systems with AI and blockchain required significant customization. - Supplier Adoption:
Convincing suppliers to onboard blockchain systems required training and incentive structures. - Scalability:
Managing blockchain infrastructure to handle large-scale operations across multiple geographies.
Client's Collaboration and Support in the Process:
The client provided critical support:
- Offered comprehensive historical data for AI model training.
- Facilitated supplier engagement through dedicated onboarding sessions.
- Actively participated in pilot testing to refine the AI models and blockchain deployment.
Benefits Realized:
Operational Improvements
- Reduced vendor onboarding time by 40%.
- Improved inventory accuracy, reducing holding costs by 20%.
- Enhanced supply chain transparency, reducing fraud and disputes by 30%.
Financial Gains
- Annual Savings:
- $10 million from spend optimization.
- $2 million in inventory cost reduction.
- $1.5 million from improved operational efficiency.
- $1 million from fraud prevention and compliance improvements.
Suggestions for the Future:
- Enhanced AI Models:
Expand AI capabilities to include predictive analytics for sustainability metrics. - Blockchain Scalability:
Adopt advanced blockchain frameworks to handle larger transaction volumes. - Integration with IoT:
Use IoT devices for real-time data collection, further improving traceability. - Supplier Incentives:
Introduce reward programs for suppliers adopting sustainable and tech-driven practices.
ROI Calculation:
Conclusion:
The integration of AI and blockchain in the client’s procurement and supply chain processes transformed their Source to Value (S2V) operations. This innovative approach improved efficiency, transparency, and security while delivering significant cost savings.
The project highlights how emerging technologies can drive value in procurement, setting a precedent for similar transformations across the FMCG industry.