Why AI is Needed Procurement and Supply Chains

This presentation was delivered to a mixed sector industrial audience to provide a balanced view of why AI is necessary in many working environments, and further, how it can advantage the individual and organisation. It also dispels the widely held (media) view that AI will destroy jobs and displace people on a socially damaging scale. The really serious threat scenarios actually remain the domain of human players, and not as depicted by some Hollywood dystopian ‘machines take over’ nightmare!

“Primarily seeing AI as a downsizing opportunity is to miss the key point: by empowering employees it is the biggest growth agent!”

The nonsensical nature of ‘AI v human supremacy arguments’ also distract from the symbiotic relationships we are forging. This is especially evident when confronted by complexity beyond our natural abilities. For example: procurement and supply chains may now see >>60 independent variables (features and parameters) with many requiring real time control. Humans can typically cope with 5 - 7, whilst our mathematical framework fails at 5. This primal limiter also compounds the risks involved in designing for:

optimisation v brittleness v resilience

In this context, the digitisation process is largely regarded as an ‘event instead of a continuum’ and this greatly exacerbates the risks involved. This is illustrated against the backdrop of several past tech-revolutions and the changes they invoked. Two ongoing revolutions are also included with ‘projections’ for likely futures/outcomes.

The closing remarks remind the audience of just one observation that we all need to keep in mind:

“Things that think want to link
and
Things that link want to think”

1. WHY AI IN
Procurement
And Supply ?
Prof Peter Cochrane OBE DSc
www.petercochrane.com

2. “AI is now an essential element across most human endeavours spanning:
Healthcare, Medicine, Genomics, Proteomics, Engineering, Technology,
Science, Mathematics, R&D, Manufacturing, Production, Logistics, Supply,
Transport, Banking, Finance +++”
STATUS QUO
The great value that AI delivers comes in three of it’s prime characteristics:
- It does not think like us
- It can see patterns and relationships that escape us
- it can solve problems that will always defeat the human brain

3. 2012 Data Overload
IBM Watson
True of ALL
Professions
“This condition has now impacted
most professions for well 50 years and
it only gets worse with time ”

4. IBM Watson
True of ALL
Professions
Real time monitoring
Auto-record updates
New Diagnostics
Research papers
Regulatory changes
Treatment advisories
+++++++
2024 Data
Overload

5. Change has To
BE Embraced
Technological advancements amplify
human abilities and empower us to
do more, with greater efficiency and
creativity to the benefit of individuals
teams, organisations and society
“AI not only endows greater efficiency,
it empowers people to engage in
the more creative/innovative
aspects of operations”

6. REALITY BYTES
-All new technologies create a degree of concern
-Initial reporting tends to focus on ‘downers’
-A media feeding frenzy is now the norm
-Hollywood often conditions expectation
-Most commentators never built an AI
-Most politicians never used an AI
-Negativity/threat scenarios sell
-Media promotes negativity
- Dystopia is popular !

7. Positioning
-It has taken ~80 years to get here
-AI has attained ‘super human’ levels of capability
-Computing power has been the prime limiter
-AI has now overtaken humans in many spheres
-AI can solve many problems that are way beyond us
-AI is already saving human lives in medicine & care
-AI is now core to the survival of our species
- Our future is about a symbiosis with AI

8. Unthinking
NONSENSE
“Robots and AI don’t
type, they plug in”
Media Panic: “A big threat to jobs”
Reality: “People empowered
to do more and be
innovative”

9. Nonsensical
Expectations
Mobile
Animated
Integrated
Socio/Environ
Sensorially Rich
Fixed/Mobile
Inanimate/Robotic
Sensorially Deprived?
Socio/Environ/Networked
“These two forms of intelligence defy
comparison and argument, so we will
leave that debate to the philosophers”
Speciated diversification

10. MIND Experiment
-Isolate a human at birth
-Restrict all physical movement
-Constrain all sensory stimulation
-Keep well fed and free of ailments
-Use machine interfaces for interaction
-Deny all human contact/experiences
-Teach this human to read everything
-Provide unlimited textural info/data
-+++++
After 50 years pay a visit !
What should we expect when
we ask questions of literature,
love, life, death, science and
try to discuss intelligence…
This ‘man’ is neither
human nor machine,
he thinks and behaves
in ways we have never
encountered before.
BUT he is alive, aware,
a cognisant entity: at
once alert to inputs &
keen to engage/learn…

11. HUMAN BIAS
Don’t berate, embrace
Vive La
difference

12. Why we need AI IN
Supply Chains ?

13. “Not only is Procurement and Supply more complex than we think,
it is more complex than we can think”
Peter Cochrane 2008
With apologies to Werner Heisenberg 1901

14. Global warming/Climate Change
Growing energy demand
Population migration
Resource shortages
Wars and conflict
Skills shortages
‘Potty Politics’
Management
Emergent Disruptors
Pandemic
Ghost wars
Cyber crime/war
Technology availability
Failing education systems
Natural & unnatural disasters
Supplier, supplies & facility shortages
Global wealth generation restructuring

15. ExtremE Human
THREAT Agents
War
Shadow War
Cyber/Information War
Trade War
Economic War
A long list of potential conflicts
Certainly beyond our control - but AI
might be trained to adopt a damage
control mode based on prior models?

16. Real-Time Data Integration
•IoT inventory and asset tracking
•Digital twin supply chain modelling
•API integration with suppliers
•Real-time market data feeds
•Logistics tracking systems
Data Quality & Governance
•Standardised data collection
•Automated data validation
•Data ownership and stewardship
•Data quality audits
•Data management system
•
Predictive Analytics
•Demand forecasting
•Supplier risk assessment
•Price trend analysis
•Lead time prediction
•Inventory optimisation
Prescriptive Analytics
•Automated order optimisation
•Route optimisation
•Supplier selection algorithms
•Dynamic pricing models
•Risk mitigation recommendations
•
Process Automation
•Smart procurement contracts
•Automated purchasing
•Automated Invoice processing
•Inventory reordering/control
•Supplier onboarding automation
Decision Support Systems
•AI-powered supplier selection
•Automated risk alerts
•Smart sourcing recommendations
•Dynamic pricing engines
•Exception handling systems
•
In general: humans can think in 3 or 4 dimensions; rely on mathematical
frameworks that fail beyond order 5; and we are now dependent on AI
for our wellbeing and survival
Variables

17. Machine Learning Integration
•Supply chain pattern recognition
•Continuous process optimisation
•Anomaly detection
•Supplier performance prediction
•Customer behaviour prediction
•Dynamic lead time adjustment
Feedback
•Performance monitoring systems
•Continuous improvement protocols
•Disruption event data
•Market demand adaptation
•Strategy refinement
•
Internal Collaboration
•Cross-functional data sharing
•Real-time communication tools
•Shared analytics dashboards
•Knowledge management systems
•Change management protocols
External Collaboration
•Supplier portal integration
•Customer demand sharing
•Market intelligence sharing
•Collaborative planning tools
•Joint innovation platforms
•
Proactive Risk Management
•Early warning systems
•Scenario planning tools
•Risk scoring models
•Compliance monitoring
•Environmental scanning
Responsive Risk Management
•Dynamic risk mitigation
•Alternative supplier activation
•Route modification systems
•Inventory rebalancing
•Crisis response protocols
•
In general: humans can think in 3 or 4 dimensions; rely on mathematical
frameworks that fail beyond order 5; and we are now dependent on AI
for our wellbeing and survival
Variables

18. COMPLEX REALITY
At best we can deal with ~5 independent
variables/trains of thought
Our mathematical framework fails
beyond order 5
Many of the >>60 variables are
stochastic - that is time variable
and probabalistic
“AI is the only tool we have that is capable of dealing with the developing complexity
of modern supply chains with reasonable efficiency and adaptability ”
“There can now be >> 60 independent variables governing the process of
procurement and supply - this is way more than any number of humans or
computer algorithms can deal with (process and organise) effectively

19. Just In Time supply/demand work well in a stable world, but tend
to collapse rapidly in the face of instability and the unexpected!
Reliability & Resilience

20. High Efficiency => Brittleness => High Failure Rates
Low Efficiency => Low Failure Rates => Reliability
Redundancy => Greater Adaptability & Resilience
FUNDAMENTAL
“In a chaotic environment static optimisation is at least risky, and at worst fatal”

21. High Efficiency => Brittleness => High Failure Rates
Low Efficiency => Low Failure Rates => Reliability
Redundancy => Greater Adaptability & Resilience
FUNDAMENTAL
“In a chaotic environment static optimisation is at least risky, and at worst fatal”
Reliability
Efficiency Effectiveness
AI
Predictive
Monitoring & Control
“Real Time (Dynamic) Optimisation”

22. SEMI-Blind DESIGN
We have no generalised theory
of System Efficiency & Resilience
A growing biological bias: our
most complex systems exist
on a precarious knife edge
between stability and chaos,
success and failure…
strange attractors often emerge
as a natural consequence of
increasing complexity…
a new tech/engineering epoch
of evolutionary design has
arrived and we have to rise to
the challenge…
“AI is not only a design tool, it
is a (multi-) component of the
systems we are now devising”
“Many complex systems do not enjoy stability
as a ‘designed-in or given property’, it must be
established and maintained by adaptation”

23. No one solution set
Any operating environment uncertainty implies designed in redundancies,
contingency/adaptability measures, leading to reduced (overall) efficiency

24. Education, legal, government, always the back foot
More new jobs created than old jobs destroyed
The West perpetually faces skill shortages
Late adoption of new tech fuels failure
Early adoption sees a degree of risk!
The risk averse are prone to fail!
Tech REVOLUTIONS
In perspective
Exponentially more for exponentially
less material, time, energy, cost, but
a far better performance/capability

25. AXIOMS
Change is the new stable!
Tech driven change is the dominant driver
Adaptability and flexibility are essential at all levels
Education/training has become a lifetime continuum
Skilled and educated people have to be created/nurtured
Embracing new technologies, products, and skills are prime
Affording people the opportunity to innovate can be a big positive
Technology and commercial ‘Threat Radar’ and ‘War Gaming’ are key
Continual reorganisations are symptomatic of poor management systems
Networked AI/Robotics/Humans facilitates exponential education &
> JIT knowledge and experience+++

26. Tech Driven Change
“Embrace the new and displace
the old at every opportunity, but
seek the sector changing agents
that free humans to move up the
value chain”
“Removing humans as mere
components of a system or a
process is a vital step in the
improvement of quality,
reliability, resilience”
Real life experiences, recollections, observations

27. AXIOM
“Threats/Death tends to come from a direction you are not looking,
by a mechanism you did not anticipate, at a time that is really
inconvenient”
Peter Cochrane 1990

28. A LIFETIME SAMPLE OF revolutions
Invoked large scale change; destroyed jobs, but created even more!

29. Revolution 1.0
Educated/trained here
as a technician
Designed with these as a
professional engineer
Pushed CAD/CAM/AI to
realise greater transistor
density, complexity, and
performance…
1960/70s 1970/80s 1980s

30. 35 years
CRAY-2 Super Computer (1985)
weighed 2500 kg @ 4.5 m
3, and
consumed 200kW
=>
Implications?
We all enjoy a ‘Super Computing’ in our pocket that is
connected to the internet!
iPhone 12 (2020), weighs
0.14 kg & 0.05 m
3 and
consumes ~10W

31. Revolution 2.0
PhD Focus
But on
the radar
Educated/trained
here as a technician
1960s 1970s

32. Implications?
Multi-Channel
per Fibre
Single Mode
Modulation
Multi-Fibre per
Cable
>>99% of all long-lines telecom/internet traffic transported
with single hop lengths ~ 100km and multi-hop <10,000km
No optical fibre cables - No Internet as we know it!

33. THE NET CORE
The most secure sector

34. Revolution 3.0
Offices, homes, vehicles, possessions, as a part of
the IoT and an increasingly intelligent planet?

35. At the core: greater connectivity
…and ‘The IoT’ as the nervous
system of societies and planet
wide resources…orchestrated to
achieve sustainable outcomes
BIO-TECH nano-TECH
Lower energy
Lower waste
Less friction
New materials
New industries
New processes
New capabilities
AI
AL
Robotics
IoT Positioning
INDUSTRY 4.0
IoT

36. Implications?
Sustainable societies based on Industry 4/5 - and our
relationship with everything becoming a part of the
internet user behavioural/design fingerprint?
Design Loop, Health System, AI-Human Symbiosis, Work Force, Society,
Resource, Logistics Loop…
How far you opt-in or out is up to you?
WE are then a ‘component’ in the/a global

37. Revolution 4.0
Digitisation is not an event it is a continuum
1987 (Mac Desk Top) 2016 (Alexa) 2023 (Claude.ai)

38. Revolution 4.0
Digitisation is not an event it is a continuum
1987 (Mac Desk Top) 2016 (Alexa) 2023 (Claude.ai)
Play, Test, Explore, (Reject/Accept), Adopt Technologies
A technology has to improve professional and/or social life to be adopted

39. Digitisation is not an event it is a continuum
1987 (Mac Desk Top) 2016 (Alexa) 2023 (Claude.ai)
Play, Test, Explore, (Reject/Accept), Adopt Technologies
A technology has to improve professional and/or social life to be adopted
Implications?
A vast range of new work and lifestyle choices become
vital components in our day-to-day living, company/
organisation and societal operations

40. Revolution 5.0
EXPONENTIAL
EDUCATION
When paper publishing is
overtaken by all minds
networked across the
bio - techno - divide,
then all will know &
comprehend in sync
with the ratification of
facts, truisms, theories,
statements, wisdoms et al
at every level of checking and
testing on a global scale. Keeping &
protecting the truth will become a vital
preoccupation!
“If we lose sight of the truth, we will lose our civilisation”
Peter Cochrane 2024
(How to Build a Truth Engine)
2020…..s

41. Getting people to do things
they might no prefer to do!
IMPLICATIONS
Getting people to achieve things
they did not realise they were
capable of!
Management And Leadership
A further accelerant in human - machine symbiotic
progress that sees greater progress/understanding
in science, technology, medicine… transformation
Of education, training, R&D…

42. Final Thought!
“Things that think want to link
and
Things that link want to think”

43. www.petercochrane.com
Thank You