IBM's Watson computer famously beat human contestants in US game show Jeopardy
IBM's Watson computer famously beat human contestants in US game show Jeopardy

How IBM uses Watson for procurement

27 April 2018

The procurement team at IBM is using the company’s powerful Watson computer to analyse suppliers, rate contracts and manage risk.

Bob Murphy, CPO at IBM, said his team was using IBM’s supercomputer “as much as we can” to improve its contribution to the business.

He said his team had created a “cognitive journey map” of IBM’s procurement processes to see where AI can assist. “We have access to enormous amounts of data, requests from our stakeholders, PO data, invoice date to the data that’s on the internet. For us in procurement, data and data awareness are absolutely huge.

“It’s not that we want to replace humans. We want to leverage automation and technology to help guide us to make better, more important decisions,” he said.

Murphy has been at IBM for 40 years and has been CPO for the last four. IBM runs procurement both for itself and for around 50 companies, and Murphy’s team manages more than $300bn in total.

“The first day I joined procurement I knew I wanted to be the CPO,” he said. “For me procurement is awesome, procurement is fun. We all have a job and a role in convincing the millennials and the talent coming in how awesome and impactful procurement is.”

Speaking at the Procurious Big Ideas Summit in London on Thursday, Murphy spoke about some of the AI tools his team were using.

One of the tools IBM has built with Watson is a system to provide supplier information, called Supplier IQ. Through a smartphone app, buyers can find out specific information about suppliers including IBM’s spend with them, what they buy from IBM, how they compare with the market competition and even the market’s sentiment towards the company based on social media.

“Think how cool that is. Think how much time procurement professionals spend when the boss says, ‘Hey, tell me about Hertz,’” said Murphy.

He added that not only was the tool “loved” by procurement, it was also being deployed to stakeholders. “They also want to know, ‘How much are we buying from these guys? I’m trying to sell them products from IBM, what’s the 360 view of what we are doing?’” he said.

IBM is also using cognitive AI “in a very pervasive way” with contracts through a tool called Watson Contract Analyser. Using a database of both digital contracts and scanned images of contracts, Watson can read “hundreds of millions of pages a second”.

“How many of us have hundreds of thousands of contracts? How many of our teams would want to know, [for example] ‘Do we have a currency clause in our contract?’ How long would that take you to find out from all your buyers globally? It takes forever,” he said. Watson can do this very quickly.

At IBM they are also using AI to rate contracts. He said: “Think how cool this is – we can say, ‘Of all my contracts, how good are they? Let’s score them, let’s metricise them for risk management on metrics that matter’. We can score them, then show them on a dashboard and highlight to our suppliers where there is opportunity for stronger contract terms.”

Watson is also being used to manage risk, and Murphy said IBM is using the tool to prepare for the incoming GDPR regulations. “Everybody is looking to procurement to manage the ever-growing risk of regulations, controls and requirements that are coming from society,” he said.

“It’s brains on scale, that’s what Watson, that’s what AI, that’s what all of that technology is. It’s the scale and capability that we can then derive insight from. Because humans aren’t stupid, they’re very smart, but we only have a fixed capacity.”

Watson is IBM’s AI system that was designed to be able to reason like a human while processing vast datasets, and was made famous for its success in the US gameshow Jeopardy in 2011, in which it beat human contestants in general knowledge and reasoning puzzles.

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