For Schneider Electric, it's all about having a competitive advantage with AI

Ard Verboon, Chief Procurement Officer, Global Supply Chains, at Schneider Electric explains the need to have a competitive advantage, especially when it comes to procurement in an era of uncertainties.

For Schneider Electric, any disruption to its operations can be a costly affair. This is why it is crucial to have visibility and the ability to plan for any situations from any circumstances.

When it comes to the supply chain, global uncertainties are not just the only factor that can cause disruptions. Many organizations have already learned to improve their supply chain from the COVID-19 pandemic as well as natural disasters. Yet, most of these plans would still not give them a competitive advantage. This is where the procurement process plays a key factor. How an organization plans and executes its supply chain, from routes to working with the right partners, is imperative.

Ard Verboon, Chief Procurement Officer, Global Supply Chains at Schneider Electric explains more about the need to have a competitive advantage, especially when it comes to procurement in an era of uncertainties in an interview with CRN Asia.

How important is procurement when it comes to the supply chain?

Procurement is all about creating competitive advantage through the supply base, and that's fundamental. What we do is create a competitive advantage. This can be cost, quality, agility, and even resilience. And so it makes a very easy bridge to all the unpredictability in the world right now.

The second core belief that we have is that we can only be as good as our supply base allows us to be, because ultimately, we can't make any product without suppliers' contribution. So those are pretty fundamental.

If you look at the procurement journey, I'd say, there is very much unpredictability of the world right now. For us, as a group, we have a leading market share in data centers. That creates also a lot of challenges with supply chain predictability. But if you look at the amount of compute power that is being installed in the world, we sit firsthand observing how the world will change.

And so, the journey is, on the one hand, dealing with increased unpredictability, while on the other hand, also making sure that you go along and utilize, the increased capabilities in the world.

So how does Schneider deal with this?

We're in a different environment, and the way we operate will change with that. So, when it comes to a changing global equilibrium, we clearly do not want to take any position in any conflict. What we want to figure out as supply chain professionals is, despite all that uncertainty, how do we serve those customers the best way everywhere?

Right now, the world is focused on driving economies of scale. It is really about agility. How do you deal with unpredictability? And the unpredictability that we've seen, from COVID-19 to a ship going vertical in the Suez Canal to blockages of the Strait of Hormuz, to tensions around Taiwan, the headlines have been numerous.

What we try to do is tell our teams to stay away from the headlines and think of scenarios. For example, we encourage our teams to think of scenarios like what if supply lines from Asia into Europe would become two weeks longer? What if they become four weeks longer? What if they become six weeks longer, right? What if certain regions of the world would no longer accessible for a month or two months or three months?

Secondly, Schneider has been driving regionalization for years and we're just going harder on that. The more you supply region for region, the less susceptible you are to what happens in the periphery.

And our regionalization is currently at around 83 percent. We're targeting to bring that to 90 percent. It will never be 100, as that's just not economic, but it gives you a focus area.

When it comes to scenarios and regionalization, how is AI being utilized?

I think AI is one of these topics where everyone right now is scratching the surface. But what happens if you don't embrace it, and one of your competitors embraces it more aggressively? You need to be in the front row, and you need to be in an innovative position.

So, we have defined several parts of the procure-to-pay process that we want to invest in, that we are investing in. And it goes from some relatively small proof-of-concepts.

We are running proof-of-concepts on autonomous negotiation bots, which has been around for a while. We are also looking at how do we re-architect the data lakes so that we can turn all that information into actionable intelligence.

Here’s an example of how we are doing it. Schneider, with its huge M&A history, has more than one ERP system. We also have more than one accounting system, and pretty much multiple systems. Wouldn't it be great if we could connect all of that? We need to break down the silos to automate processes and improve productivity.

Another example was a situation that happened in Japan after an earthquake. As we are subscribed to one of those AI web scraping services that gives us alerts, we realized that there were 25 Japanese suppliers have factories in this area. However, we would still have to call out each supplier to find out how affected they are and if it will impact productivity and such.

Still, wouldn’t it be more efficient if when the alerts came out, we receive data on how our partners are affected and have the capability to switch order books? This connection would be actionable intelligence and that creates competitive advantage if you can do that before anyone else. Data, even information, is worth nothing if you cannot act on it.

Once you can act on it, then you make an easy bridge to what agentic AI is really going to do for us. Agentic AI is essentially automating that action. There is a logical sequence and hierarchy of things here that I think will create competitive advantage.

How do you foresee the future of procurement looking like?

It's an interesting question and also a very hard question. Ultimately, we're in business to make our customers, employees and stakeholders happy.

We want a very predictable supply chain. And with predictability comes a need to digitize and standardize your processes much more than we have today. And once you have digitized and standardized processes, that whole AI adoption curve will just go a lot faster. So, it's probably the most honest way I can describe the journey. It always starts with the customer.

And that's the definition of competitive advantage. It's like, how do we do a better job serving customers than everyone else in the market? How do we get to the most predictable supply chain? How do I get to the most predictable supplier performance to support that objective?

Ideally, be faster, be quicker, be more predictable, be more reliable. It's pretty much every word that you associate with supply chain, it's either better or more.