Arkestro brings AI to ERP

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The supply chain – a once-forgotten part of the economy that was largely adapted to the epidemic – is being re-imagined with predictive machine learning algorithms. The orchestra, the San Francisco-based producers it calls the “Predictable Acquisition Orchestration Platform”, today announced a successful series of funding rounds that will raise $ 28 million to boost their efforts and expand their production.

The process of manipulating the often complex steps of turning parts and raw materials into finished goods has been the work of digital computers for decades. Companies like IBM, SAP and Oracle built empires by tracking goods, invoices and landing bills, a process they often describe with the acronym “Enterprise Resource Planning” or ERP. They were often so successful that everyone forgot that they existed. The Covid-19 epidemic then sent shockwaves through industries as managers at the top and bottom of the supply chain worked to control holdups, interruptions and delays.

ERP modernization

Arkestro is bringing a mix of modern artificial intelligence algorithms to the world of ERP. It seeks to use a combination of machine learning, game theory and behavioral science to make the supply chain more efficient and more capable of dealing with failures.

“If you talk to most procurement and supply chain leaders in the global economy today, they will tell you that the number one challenge is that there are not enough qualified people to do the work of gathering the information needed to support the supply of goods and services. Competitive prices, ”said Edward Zagori, CEO of Orchestra.

Much of Orchestro’s solution focuses on algorithms helping people find prices and value, a challenge that is now becoming more complex as inflation puts more pressure on the enterprise to recover the right amount. When prices are stable, suppliers can work together for years without renegotiating prices. But apprehension of currency erosion makes it crucial for companies to find the right price.

Arkestro offers an approximate price model that tracks the relationship between both sides of a transaction while folding data from others in the same marketplace. It also tracks discrepancies and disruptions that can send price shocks.

“We don’t just rely on what the previous price purchase was,” Zagorin said. “We really integrate a number of factors.”

The algorithm can take into account details such as locations on both sides of the transaction, frequency of transactions, and prices paid by other similar companies in the same contract.

The main system also includes recommendation engines that are similar in the least sense to consumer-content recommendation systems built into ecommerce sites. However, their approach is adjusted to work better with small dynamics in industrial supply chains, if there are very few sellers and buyers.

The team at the orchestra is heavily influenced by most of the economic principles of finding the best value solution for both parties. In an interview before the announcement, Zagorin referred to classic game theory models such as Prisoner Confusion and explained how the orchestra wanted to help both sides of any transaction find the best long-term solution.

When the orchestra enters into negotiations as a third party, the dynamics may change. When the algorithm indicates a price in the middle of a transaction, sellers and buyers may think outside the zero-sum nature of the price negotiation.

“When it offers a machine supplier instead, it really flips the game theoretical logic of the motivation to accept,” Zagorin said. “Suppliers are more motivated to accept offers generated by orchestras because they know that other suppliers have the ability to show similar offers, and so they do not want to miss a competitor.”

How AI research folds into ERP

The field is also bringing artificial intelligence to many business decisions, but perhaps without the same attention as the orchestra. Oracle, Microsoft, IBM and SAP all have strong programs in Artificial Intelligence (AI) research and have been folding them into their ERP offerings for some time.

Microsoft’s Dynamics 365, for example, is one of the platforms created by Microsoft to manage business processes. The Azure platform offers both directly with Predictive Analytics or by activating a pre-integrated version with the Dynamics 365 system.

Their systems, however, are more general and can be applied to all types of business statistics, not just to supply chain decisions. They are more open tools, and the orchestra is focusing on creating the best algorithms for an important part of the business that is very much in discussion today.

“If you look at the procurement over the last 30 years, a lot of the procurement teams were primarily administrative and they were categorized only on cost savings,” Zagorin said. “If you look at where the procurement and supply chain is today, it’s in many cases at the forefront of every issue that comes out of the C-suite, whether it’s moving towards sustainability and the ESG effect or dealing with sanctions.”

The funding round was led by New Enterprise Associates (NEA), Construction, Coach Deceptive Technologies (KDT) and Four More Capital.

In the announcement, NEA venture partner Jeff Emelt praised the company’s “diverse, AI-powered solution” to simplify supply chain management.

“We see significant potential for the orchestra and its technology platform in the supply chain; In terms of value in particular, it will help enterprises in the procurement market realize increased efficiency and savings in their operations, “said Byron Knight, COO and Managing Director, Koch Disruptive Technologies.” We look forward to helping you find potential solutions. “

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