Erin McFarlane - Solving Procurement Challenges with AI Technologies

Erin McFarlane -  Solving Procurement Challenges with AI Technologies

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Welcome our guest today is erin mcfarland  she is the vp of innovation with fair market   how are you doing today i'm doing fantastic  today melissa it's wonderful to talk to you   yes um so for transparency i have known erin since  probably around 2016. so full transparency there   but i did in you know invite her to to be a  guest today primarily because of what she's   doing with fair market so over the last you  know year i've been really focused on the   future of procurement technology and where that is  leading our transformation and we've noticed that   procurement you know companies organizations are  working with 40 more suppliers as of 2022 than   they have ever before and primarily with that new  influx of suppliers is because we have a lot of   startups and these startups are there solving  very specific business challenges that these   enterprise applications haven't really either been  able to do or because they're focused on the full   life cycle of suite of products some of these  smaller business challenges just aren't in their   immediate roadmap so now you have a group of  startups using ai technology able to solve some of   those business challenges that we have before and  when looking at companies that i wanted to talk to   fair market has been very visible it is still as  considered a startup it's worked through and i   think just recently another series of funding  so congratulations thank you and also this is   a unique story with aaron herself she's been in  industry her entire career up until about three   years ago and then just took the plunge and  shifted to startup so there's a lot of things   that we really want to explore with you today  aaron absolutely and i'm excited to talk about   this uh you know you and i work together while  we're in industry uh you know sort of sitting   on the procurement side of the house and um yeah  it's been an exciting few years up here in boston   so let's start with that again you know if you  go back on your linkedin you've been in industry   and every company you've really been in those  those companies for at least a good six years   and then out of the blue three years ago just  shifted from what some people would consider   stable income stable industry and these are these  are you know these are very well known companies   not you know small small companies and then just  went to a startup that was and three years ago   fair market was still really young in its startup  stage yeah it was very very small um when i   uh when i walked in we were um the interview was  above a bar the corner pub in outside of south   station and i was employee number 10 so i mean  i was super early on the ground with fair market   but i i think i saw and i was lucky enough to  see what the potential was around procurement   technology so you and i had rolled out some of  the quote-unquote cutting-edge technology at a   major bank and um and we you know by all notes it  was it was a successful project um but despite it   being cutting edge and top of the line there  was still a lot of frustration that it didn't   have the level of automation and data support  that you get when you have say hr applications   or it applications or really marketing or  any of the other pieces of the business   so there was sort of this expectation that oh  well now that we've modernized we're going to   be at that level and have that same level of  intelligence behind our software and it really   didn't exist so when that project came to an  end i i had a choice i could either stay with   the safe choice um you know stay in industry  and sort of continue working within the box   or try and do something new and different and fair  market was doing something new and different um   was really looking at enterprise procurement  um in a very different way rather than   just putting a pretty face on the same processes  over and over again the mission was to really   revolutionize the way enterprise procurement  specifically enterprise sourcing works um   and that that resonated with me the other thing  that really resonated with me was was this mission   to make enterprise procurement more fair more fair  for enterprises to know that they were engaging   with a supplier who was selling to them at the  right price and and bringing bringing everything   that they said they would and also more fair  to the suppliers because it's so hard for small   businesses minority-owned businesses women-owned  businesses to to get in to some of these big   enterprises so i was i was inspired by the  technology but i was also inspired by the mission   and that inspiration trumped the safety security  um the stability the known and really you went   into something more risky because again employee  number 10 doesn't necessarily mean this is going   to be a successful you know no it was a big risk  it was a big risk and um i went back and forth   on it i um i had a couple of different options on  the table and some of them were were very safe um   and very straightforward but um so i'll tell you  a little story so right at the end of my tenure   with the bank um i was briefly moved on to another  project and the project was that i was in charge   of revising the policy on policies oh and that  was kind of a light bulb moment i was like do i   really want to be the one working on revising the  policy on policies um is that really how i want to   spend the next several years of my career is with  that level of bureaucracy and my answer was no   i want to be able to be unfettered and  use my creativity and um and really really   revolutionize things and in order to do that  i think you have to be willing to take a risk so three years later well three years  and yeah three and a half three years   and eight months later company is still  going you are what series round series   yeah we just completed our series c we  just announced on september 1st and uh   that was 35.6 million um with one of our first  customers servicenow is joining us as an investor   so uh very exciting and yeah we we now are working  with some of the largest companies in the world   and helping them with autonomous sourcing helping  them manage their tail spend and it's been an   incredible journey and it's really exciting  to see fair market taking off like wildfire   so i recently well see we're still in 2022.  i earlier this year i made a claim that   we are you know shifting away from the strategic  and the agile so 2015 you know the industry   thought procurement organizations were in this  agile state and primarily to really to try to   to move more quickly to meet the the  constantly changing consumer demand   but i think you've just highlighted it because  that was around the time that you also made that   decision hey we've got this enterprise you  know innovative at the time and it's still   not fulfilling everything we wanted to so you  know the theory is and with all the technology   and the automation we're now moving into this  you know and the term intelligent intelligence   sourcing intelligent procurement organization  is out there primarily because we now have   access to ai technologies that can really  collect and synthesize and and understand   large large data sets which now comes you know  bring it full circle and back to fair market   what are what are some of the things that  you're solving you mentioned tailspin   you mentioned automation but can you give us  some business challenges that fair market has   really been able to succeed in so fair market  at the heart of what it does is it helps supply   it helps enterprises find the right suppliers for  the stuff and the services that they're buying   you already mentioned that the supplier base has  grown at most companies um by exponential levels   there are far more suppliers at your fingertips to  buy from than ever before but the knowledge about   who sells what and who has what in stock  and who's capable of supplying you with what   um is locked down um people store it in their  heads they store it in excel spreadsheets um they   ask their neighbor hey who am i supposed to buy  this from um and procurement organizations really   struggle to communicate who preferred suppliers  are who diverse suppliers are basically who are   you supposed to buy this stuff from and what  you end up with is people just going to google   or asking their neighbor and that's not a  particularly efficient way to go so fair market   fundamentally solves that problem we digest and  ingest into our machine learning system all of our   customers purchase history and we align with their  strategic initiatives um like diverse suppliers or   preferred suppliers or sustainable suppliers and  then we use the power of that machine learning   as requests come through the system to surface  hey these are the top five or the top 10 suppliers   that are likely to be able to help you find that  item and some of the real world challenges that   that has been is is first and foremost um savings  uh procurement is driven by savings and one of   the best ways to get savings is to leverage  competitive quoting and competitive bidding   so we automate competitive bidding and  competitive sourcing and we're ending   up with the results of of 11.4 on average savings  of everything coming through fair market which is  

unbelievable and that's been consistent even  through because kovid was out there and then we're   just maybe coming out of covid but maybe we might  be going back and then you've got so yeah despite   inflationary pressures we expected to see those  numbers drop and they haven't i mean it's category   by category and region by region things change but  no we're still maintaining those savings numbers   which is really cool um but what we learned during  covid was that price while it's it's important   and that's what we built the software to really  highlight and and get to know in order to do price   you also have to get availability so fair market  got very good at finding things that were in stock   when your regular supplier was out so if you  had a primary supplier and you've been using   them for 20 years that supplier has a major  issue many companies were just left hanging   or they were left making desperate phone  calls to anyone they could think of   and fair market solves that problem with  business intelligence so if you're out of   stock with your current supplier put it into  fair market and fair market will help you find   not only just a secondary third fourth  supplier but frequently one that's already   in your database that you're already working  with that you didn't realize sold that thing   oh and you're you're not just looking at suppliers  within the company's database you're actually   looking externally at all the suppliers that are  out there we can do both um some of our customers   are have supplier rationalization initiatives and  if that's the case then we support it by sourcing   only through their existing supplier databases  they've got 35 000 suppliers 40 000 suppliers   so we can narrow it and we can really focus the  machine learning on just their database or um on   a region by region category by category basis we  can add in external suppliers from the marketplace   yeah so if a company already has a procurement  team that's you know perhaps you know a couple   years ago you know when when they had downtime  for covid they went and looked at their suppliers   they thought they had rationalized it they'd  spend a lot of you know focus time and energy   help me understand why then bringing fair market  in in that scenario is adding additional value   because you may not be competitively sourcing  everything that you could um or you may be having   your people spending their time on competitively  sourcing things that um that are pretty rote   and expected so what fair market allows  procurement teams to do is to take some of that   tactical sourcing activity and let the machine  do it so they can focus on the strategic stuff   at the top that really requires brain power we  say all the time let's automate the boring stuff   so if you're buying 10 000 headsets that might  not be something that you normally would do a   full-blown rfp for it's just headsets but 20 000  headsets wasn't what you negotiated your catalog   for you figured you were going to be buying five  here or there so fair market enables procurement   organizations to to run rfqs and rfps on that  sort of mid-range spend that hundred thousand   dollar purchase that fifty thousand dollar  purchase um and automate it so that your people   can spend their time on the 500 million dollar  activity or the 50 million dollar contract right so aaron earlier on you mentioned the term tail  spend so is is this what you're talking about also   or is tailspin something different because i  know i know everybody seems to have a slightly   different definition on what tailspin really means  absolutely and most of our customers have a very   different definition but where i tend to place  it is there's almost always this upper threshold   where you're required to get say legal involved  if you spend over x or you're required to have   an msa in place and you you know whatever that  top limit is and sometimes it's 250 sometimes   it's 100 000 sometimes it's 50 000. and then  there's usually sort of this bottom level where   um where companies will say use your p card it's  under a thousand dollars we really don't care but   there's this huge space in between the two that  is usually just left up to the business to do   whatever they feel is appropriate and most of the  time the business has better things to do than you   know than be procurement so where we focus is  in that sort of tactical spend that's between   the the bottom bottom buying paper clips um and  using your p card and the upper limit where you   really need to have uh procurement professionals  supervising and assisting and helping the purchase   i i was i had the the luxury uh last year 2021  of working with some folks and in that process   they were you know implementing a very large  cloud procurement implementation and one of   the challenges that they kept coming back to was  you know what we talked about earlier there's so   many suppliers out there i want to go and do this  you know what you call the tactical sourcing this   quick bid or quote but i don't want to just do  it within the suppliers that are in the database   of the procurement application i really need  to understand and expand it to all these other   suppliers that are out there and i didn't realize  that that that that business challenge was as   prevalent and until having that conversation and  i understand that at that point in time they were   they were in conversations with fair market and  that's i think where fair market kind of came back   on my my radar um so i thought that was really  interesting and i think that's a really good   example of a use case do you have another one  that you've seen more recently so i think what has   astonished me is that is watching the  ways that our customers use fair market in   in ways we didn't anticipate and i think what i've  seen recently is our shift into some handling some   direct spend we assumed that people would be  very comfortable using autonomous sourcing   and ai and you know really focus around indirect  but what we saw over the last especially over the   last couple of years is some of our customers  dipping their toes into using fair market to   manage some of their direct spend and specifically  to solve some of these supply chain challenges   um so i've seen things like frozen  broccolini in bulk and coconut oil and   flanges and rubber and all of these direct  materials flowing through fair market   at remarkable volumes and i think that's really  where the difference is um when i've rolled out   ariba and some of these other tools it was typical  to see maybe one or two hundred rfps a year being   done out of the sourcing module what's fascinating  about fair market is because it's all automated   and because it's focused on the tactical spend  it's fairly typical for our customers to run 5   000 sourcing events a week oh my gosh oh it's huge  yeah so the impact that you can have when you're   functioning at scale like that is just astonishing  and when we add in the machine learning's ability   to prioritize diverse and sustainable suppliers  not only are you having an impact on the cost   aspect but we're very tactically helping large  organizations um make an impact in esg and   it's very challenging to take a strategic supplier  and move a strategic rfp to a small business   very challenging because small businesses struggle  to be able to fulfill those huge contracts but   parking lot resurfacing in poughkeepsie we  can help you find a small business for that   and maybe one of those doesn't add up but  when you're sourcing 500 facilities sourcing   events a week and you're giving small  businesses and women-owned businesses   and minority-owned businesses and sustainable  business a seat at the table impact is amazing   on both sides not just the it because a lot of  times procurement will come across as i'm going   to give that that small business a chance but  i think what you're what i'm what i hear you   saying is it's not necessarily you're giving them  a chance it's it's a win-win because you should   recognize that this small business has value it  just doesn't have you know 100 million dollars of   revenue like a larger company about a year  ago we decided to challenge the assumption   that working with diverse suppliers was  always definitely going to cost more   there seemed to be this sort of assumption that  in order to drive your supplier diversity programs   you had to be willing to spend a little more in  order to fulfill these and we've been able to   challenge that with data and found that at least  in this tactical sourcing space that's not true   you can still save money and work with small  businesses and minority owned businesses and   women-owned businesses and that's really cool  which full circle my statement earlier 2022   companies are working with or should be  working with 40 more suppliers than they've   have before simply because there's so many um  small businesses startups that are out there   that truly can provide value absolutely i want to  um pivot a little bit more to the technology so uh let's see earlier this year i went  to a conference and i walked into the   the the space where you have all your vendors and  all the vendors are showing off you know demos   of their application and what i found um the  statement that that i was trying to pursue was   do is everybody using ai and yes everybody's  using ai but the more i started to to really dive   into that there are people out there that claim  they're using ai but then after reviewing their   applications at depth there's no ai technology  there's no machine learning no deep learning no   neural networks no um you know all the other  you know automation that we've been talking   about so i i did hear you mention machine  learning several times so i want to come   back and just ask you this question are  you really using these ai technologies and   and where and how are you using them so i saw  a joke at one of these ai conventions that said   machine learning is written in  python ai is written in powerpoint   uh that resonated with me i love that uh so  what we're using um are a combination right now   of multiple technologies that fall into this this  digital space um the first is that we're really   leveraging neural networks and natural language  processing to understand requests coming through   the system you know that people want create  requests for things in procurement they call it   jet fuel but it's really fish tank supplies right  so we know that we can't trust um categorization   and stuff like that to to necessarily drive our  supplier recommendations so one of the first   places we invested in was in understanding  what is it you're really trying to buy   so we're leveraging natural language processing  to understand that a boot is a shoe or that blk   means black and doing that in multiple languages  to auto sense oh is this request coming in in   french or is it coming in english so we're  leveraging natural language processing there   um and then the machine learning is is really  a deep learning um that can pull data in from   multiple sources and it's all focused around  finding the right supplier for this request   and it learns every single night so every  night using ci cd it's resetting itself   for each individual customer and learning  from from the bid activity of suppliers   so as you purchase things and as you decide  to award to one supplier over another   or invite or not invite certain people it's  learning and the next piece on the bookends   of both sides is that we're using robotic process  automation to automatically create these sourcing   events in some cases automatically send them and  we even have the technology to automatically award   so really we're layering those three  technologies um together with a little bit   of um of with the neural networks tossed in um  and even with a little bit of blockchain um to   trace these transactions as they wander through  the system so we're we're trying it all and   we're using it all um and as things are used more  by ours by our customers and by our suppliers we   double down on that but i would say kind of  machine learning is the heart of what we do   um but we're taking advantage of a lot of of next  generation technologies to to to pull off the   revolution are you storing that customer's data  or because you're utilizing these technologies   you're not storing it it's just a funnel of data  that comes through you read it you do what you   need to do with it but you're not physically  storing that customer's data on your on your   so we work with amazon web services so we do store  some data on aws obviously security has to be an   important part of what we do we work with the  biggest companies in the world and their data   is really important um but we don't store a ton  of sensitive information really any sensitive   information it's just a purchase history who are  you buying what are you buying for but that can be   important so we keep it really secure i like what  you said and i think this was a bit new for me   is i've heard of companies that are trying to  automatically create you know the rfx um pull   it together i i i've all you know you and i  have been on the sourcing side where we've   created those manually in word documents  we've put those in in technologies to   automate them as much as possible but yeah there's  still some you know tactical manual i'm going to   use the word tail and tailing manual steps and  activities that automation is supposed to support   but i hadn't really heard of anybody yet fully  until just now that you're you're even looking at   automating that piece of it and the reason i bring  that up is there are companies out there that are   being told they have to continuously reduce their  their budgets so that we could keep staffing   um and you know there are other procurement  organizations that are really seriously looking   at i think i'm just going to offshore 45 of my  my organization to try to keep the cost down   but in the end you know you lose you lose  some some continuity you lose some consistency   maybe some quality and not necessarily because  it's offshore but the connectivity between the   individuals building the strategy and  the individuals offshore executing it   there's never going to be that i'm in sync  with them we're always on the same page   so yeah i'm i hear what you're saying and then  my head is just spinning like wow i this would be   great for this and maybe this would help companies  you know not try to offshore as much because maybe   they could use automation and i think that's  really what these podcasts are all about is   how is ai and data impacting us daily you know  not just personally but also professionally   and if a chief procurement officer  or a chief analytics officer or   you know chief tran we've got so many c's now she  chief transformation officer chief digital officer   i think if they're not really focused on taking  the effort to look at a lot of the startups and   what they're offering then i think they're doing a  disservice to the to the rest of the organization   yeah we agree um when people ask who is firmware's  biggest competitor i always have to pause because   people don't believe me when i say this oh well  we really right now there's nobody doing exactly   what we do okay except um people are solving  this problem right now with offshore bid desks   and so we're a different way to solve the problem  um or if you want to split things up and have   some things handled by a bid desk or you really  want to optimize that bid desk um capgemini and   jen pact are two of our best partners um and in  both of those cases they're giving a best of both   worlds in that we do have offshore resources that  are that are piloting fair market and piloting   the systems and uh you're able to achieve the  results of having some people some automation   and still some people that are are native  within the client who can oversee and create   those strategies um and use the technology to  make sure that they're implemented properly   so in your three years it sounds like you're happy  because you you stayed with fair market since   employee 10 which is still fantastic um you've  got a big smile on your face so this is this   sounds like the right place for you in the three  years that you've been working with a startup um   is there anything that you've learned that  you'd like to share with with others who might   be thinking the exact same thing i really  don't want to be here startups seem really   exciting and fantastic and but it is it's not  just a leap of faith it's a scary leap of faith   yeah it's a scary leap of faith so i think to a  certain extent you get out of it what you put in   startups can be really fun but they're also a  whole lot of work um you have to be willing to   put in the effort put in the hours put in the  dedication and also to be very comfortable with   uncertainty um when you work at a big company  you have a job description you have very   clear marching orders you have um parameters  and and a way of working that's very clear   and when you switch to a smaller company  especially one that's in a high growth mode   you have to become very comfortable with  constantly changing responsibilities constantly   changing direction and there's no procedure on how  to do that um there's no process there's no policy   at first you have to write those policies and you  have to put those processes together so i think   the biggest transition for someone coming from  a large organization and moving into a startup   is embracing that chaos um and if if you're  not willing to do that it's going to be really   challenging and really hard because nobody's going  to tell you the right way to get it done and you   have to work together with your team to figure  it out and in a much much more collaborative way   than in than most people realize and i think a  lot of startups fail because they're not being   agile enough they're trying to plan out three and  five-year road maps and they're not responding to   and watching okay how are our customers using the  software what are they doing what do they need   what do they need to do and pivoting to support  their needs instead i think some people either   fall in love with the technology or they fall in  love with a concept and try and make it fit so   finding product market fit means listening to your  customers and and changing what you're doing to   support what they need does that tie back to what  you mentioned earlier about some of the things   that surprise you like some of the ways that the  you know you thought that your use cases were x   you're seeing that people are using the  technology differently and so your conversation   now just about pivoting is okay well we didn't  think that we could use this software this way   or this process let's go and talk about let's add  it in there let's see what other challenges are   coming from that perspective and and that's  what you're talking about this agile the   shift absolutely um one of the examples would  be uh we didn't carefully think out and plan a   global expansion our customers took us there um i  remember waking up one morning and servicenow who   i've talked about uh several times we logged into  the system to see what activity had been going on   and found out that we had a couple of customers  using fair market to source things in india did   you tell them they could do that did you tell them  they could do that well no they're doing it okay   i guess we we're we got to figure out how to  do that um so fair markets now being used in   71 countries oh my god and yeah and that wasn't  something that we were with that we were like   you know we're gonna do a global rollout it was  okay i guess i guess we're going global guys   so um so having that elasticity um to be able to  support our customers to see what they were doing   and um and support those business objectives i  think is part of the reason we've been successful   you know as as you're talking i'm i'm constantly  thinking and true or false so question to you   aaron true or false would would fair market have  been able you know the product and the services   that you're providing last three years would  fair market have been able to do that if those   ai technologies weren't there no right hands down  we wouldn't be able to do anything of what we're   doing um without the technologies but that's all  we've ever tried to build technology forward has   always been where we are but no we wouldn't  exist as a company without those technologies   so as we wrap up today uh one last question  to you anything you'd like to leave behind   anything about fair market or your personal  you know journey um for the the audience   i think it's probably this concept  of fair we put it in the name   but somehow uh we sort of gave up on the idea that  enterprise procurement could do things in a way   that is fair and transparent it's just too hard  and it's not it's doable and not only is it doable   it's it's worthwhile to do for its own purposes  um you can make a difference in the world through   lots of different things you know you can  help out at your local soup kitchen you can   you can sponsor somebody you can mentor  somebody but when your company as a whole can   help to make the way that companies buy  and sell more fair and more transparent   that's a big deal um that shifts how the  world works and so i would say my message   isn't necessarily just about fair market but with  regard to if you're looking into a startup if   you're thinking about your own career really get  to the purpose behind it um and understand the why   of what you're doing that goes far beyond we're  just going to make some money or we're going to   have a very successful company because that  purpose is what can really drive you forward   and what can unify your entire organization and  unify you with your customers on a common goal   brilliantly said i perfect way  to end this interview today   thank you so much thank you so much aaron for  for coming in today you're welcome i'll talk   to you whenever you want melissa okay yeah next  year see where the journeys led you let's do that

2022-10-15 16:56

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