Wednesday, March 1, 2017
This blog post is written by Timothy Wood, Public Sector Operations & Supply Chain Management Practice Area Leader, IBM Global Business Services.

In my previous blog post, I discussed category management, cognitive, and how these two tools can be used to provide value in the federal government. By reviewing best practices in the private sector as well as initial pilots in the federal government, transformation is possible. 

The dawn of the cognitive era has brought forth two game-changing capabilities. First, cognitive tools can capture and interpret unstructured data, such as text, speech, or images. Considering that 80 percent of all information that humans capture and process is unstructured, this vastly expands the data set for analysis and provides more insight to the procurement decision. Second, cognitive tools learn based on feedback, which allows filtering and prioritization, and more quickly summarizes the most relevant information to a scenario. Over time, the tools will provide increasingly more accurate views of data relevancy.

Cognitive Category Management

Commercial companies use cognitive tools in their own procurement processes to drive additional value, as outlined in a few examples below.

  • Deep supplier insight captures and prioritizes critical internal and external unstructured and structured data around a supplier, summarizing that information for a corporate buyer. Based on feedback from the contract officer, it can hone its future searches to prioritize key attributes of the search. 
  • Dynamic pricing enables procurement specialists with enhanced pricing knowledge for improved negotiations that will reduce time aggregating market research by refining real- time comprehensive external market intelligence data and providing optimized price point recommendations for negotiations. 
  • Instant contract analysis reviews text in contracts and automatically identifies clause similarities and deviations from reference standards to improve contract compliance and reduce protest potential. 
  • Virtual agents support procurement specialists with natural language interaction to reduce time to field contract inquiries through enabled self-service and improved access to acquisition regulations and policies, such as the FAR for specific questions.
  • User buying advisory tools provide catalogue-enabled, mobile, digital buying assistant by recommending appropriate and preferred products to business users ‘on the go.’

Cognitive Category Management Use Case

How do these components integrate to provide value to the buyer and end-user? Below is a graphical use case of how cognitive tools could be used to enhance visibility to the process, improve the end-user experience, and enable the category strategy. (1) Data is extracted from multiple agencies and external data sources. Cognitive tools clean and normalize the data for commonality. Then, this data can be used to (2) conduct cross-agency spend analytics, made visible through a dashboard to a category lead, contract officer, or program manager. From this analysis, category leads would craft strategies and conduct a strategic sourcing events based on those strategies. Negotiations of the resulting contracts would (3) leverage tools, like a cognitive dynamic pricing engine, to capture key data pertinent for price negotiations. Preferred products and services would be advocated and available through (4) an easy-to-use buying assistant, simplifying the buying experience and enabling the planned category strategy.

Use Cases

Getting Started

While transformation across all federal categories could take 5-7 years, significant value can be realized in six to nine months with the right strategy and approach.  As such, below is a proposed set of guidelines to migrate to a Cognitive Category Management (CCM) model.

  • Pilot the CCM process with targeted cognitive tools on a few priority categories. Successful deployments in commercial entities is focused at the category level. Each category has fundamental different markets and successful strategies. While recent efforts have been focused on IT and professional services category, a fresh category could yield larger and more accelerated results, such as marketing/advertising or travel.
  • Secure deep category/sub-category expertise and related tools to accelerate the value through pooling talented expertise from the agencies and partnering with external entities.
  • Leverage and rapidly deploy cloud-based cognitive tools to accelerate stand-up, use, and refinement of these tools with the procurement and user communities. Start with cognitive analytics and buying advisors with a subset of users to demonstrate the value.
  • Initiate a federal change management program to engage agencies, suppliers, small business community, and procurement organizations in this process. Socialization and commitment from the key stakeholder community will be critical to realization of the benefit.
  • Evaluate policies that will lift barriers and enable the value proposition. For example, re-investment policy of the savings achieved within an agency should be evaluated closely.
  • Exercise the established governance model with the pilot programs. An active and purposeful governance has been a critical element in successful efforts.
  • Build on the acquisition gateway to capture key requirements and deploy Federal-wide contract use. The required cognitive collaborative and analytics platform will be key to the effort and expanding the use and value will drive the pace of the overall opportunity.

Category Management is a proven and powerful supply chain practice, used by government and industry alike to save money and enable key mission goals. The use of more sophisticated technology and digital services, such as cognitive capabilities, provides a focal point for maximizing and accelerating the benefits.  CCM would expand the current Category Management effort by addressing key federal gaps in people, process and technology capabilities. While the federal government has established a solid Category Management framework, it is not enough to realize the potential. Deep category expertise will accelerate strategies and value. User-centric mobile capability will simplify ordering and status checks. A cloud-based cognitive analytics platform that captures target data from all agencies, and leading-edge cognitive tools will capture and normalize both structured and unstructured data to provide buyers with critical suppliers, pricing, risk, and contract data and analysis at their fingertips. 

In summary, CCM is a key enabler of up to $340 billion of value, as a subset of the $500 billion in potential cost reductions as a result of supply chain and acquisition improvements outlined in the TCC report. Further, these tools will serve to enhance the experience and provide more insightful information for both our procurement specialists and buyers of goods and services across the government.