We have compiled a few ways in which artificial intelligence is reshaping procurement.
To be relevant in today’s competitive environment, the company’s around the globe are integrating a host of technologies in their organizations. Although digital transformation is the need of the hour many companies are still at a very nascent stage not exploiting the potential impact AI can have in their businesses.
The Internet is full of articles on AI revamping supply chain but what impact does it have on procurement?
Procurement is central to a business’s financial outcome. A healthy and efficient procurement process is crucial for the financial performance of a company and to be competitive in the market. When procurement is performing efficiently the organization is able to not just generate revenue but make optimum utilization of their existing resources.
A McKinsey survey had found that the majority of chief procurement officers believe digitizing procurement can produce significant value for businesses and lead to an increase in savings by 40%, reduce spend on transactional sourcing by 30% to 50% and reduce value leakage by 50%
Below are 3 ways artificial intelligence is transforming procurement:
Automation of repetitive tasks:
The menial and repetitive tasks in procurement can be automated through the use of AI. Robotic process automation and AI can create bots and alerts system which can streamline tasks and automate redundant procedures. Automation of these tasks and will allow companies to garner actionable insights in minutes or lesser rather than spending days doing the transactional activities.
The main areas wherein procurement professionals are demanding automation are invoice processing and approval of proposed purchases. Procurement professionals on a daily basis have to deal with tons of data and it causes administrative burden and uses up the buyer’s time. When procurement is digitized the daily task such as inspecting invoices against contracts, recording transactions and transcriptions gets handled automatically.[i]
On automating these tasks in procurement organizations are allowed to move their focus from transactional activities to more strategic initiatives. As procurement has vast amount of data involved AI provides key insights that aid in decision making and simplifying the complex value chains.
Identification of supplier risk
Ai is very reactive to situations like the crash of the stock market or natural calamities or political tensions in a country. Advanced algorithms react immediately and the same can be implied in the supply chain process mainly procurement.
Artificial intelligence can manage risks through monitoring new and emerging risks in processes. When procurement professional tries to track supplier risk there are chances of errors and omissions largely due to the vast amount of information but ai can do so with accuracy and efficiency.
AI is able to identify the main source of risk, quantify it based on the impact it has had in the past, and provide strategies to mitigate the risk in a particular situation. AI can provide speedy analysis of historical data to avoid future risks.[ii]
For instance, if we want to source food from a particular farm artificial intelligence can analyze the weather pattern and predict which farm could potentially be affected in the future and do a portfolio analysis to redesign sourcing to minimise the disruption it could cause by identifying the appropriate suppliers from the existing portfolio. [iii]
AI allows real-time scoping due to the presence of automated query resolution. The Question and answer application help create comprehensive project briefs. AI promptly handles a user’s queries and presents them with the following steps or alternative query. Ai based systems can allow users to defined their requirements with precision and prompt information that might not have been considered by the user previously. This helps restructure the functional capabilities of an organization and allows procurement to become more relevant. Executives claim that the distance between procurement and business is a block between relevance and fit. Usually by the time an RFP process gets completed either the business needs have changed or the requirements scoping is insufficient. Ai based platforms have transformative capabilities that allow organizations to procure services that meet their needs accurately.
Although the journey to get digitally transformed using AI takes time and substantial effort there is a high return on investment for organizations. Once the newer technology is integrated with the business procurement can leverage it to constantly deliver value.
For companies that are still hesitant in adopting AI just ask the question if your company is ready for a digital transformation because if it is then it’s ready to take on artificial intelligence.
[i] Retrieved September 22, 2020, from https://www.sourcetoday.com/supply-chain/article/21867095/4-ways-artificial-intelligence-impacts-procurement
[ii] Sammalkorpi, S., & *, N. (2018, November 14). 6 Ways to Leverage AI in Procurement Today. Retrieved September 22, 2020, from https://spendmatters.com/2018/11/15/6-ways-to-leverage-ai-in-procurement-today/
[iii] Camara, D. (2020, June 03). Utilising AI in Supply Chain Risk Management. Retrieved September 22, 2020, from https://www.thefuturefactory.com/blog/54