As procurement function moves from trusted operator status to business co-creator, CPOs and business leaders are now acknowledging the role artificial intelligence can play in driving procurement performance. The 2017 Deloitte Global CPO survey — which polled 480 procurement leaders from 36 countries — found that the leaders believed that the impact of robotics and automation will increase from 50 percent to 88 percent by 2020, and up to 93 percent by 2025.
With AI making inroads across different sectors, procurement is no different. However, procurement sector has already been digitised, and CPOs are proudly acknowledging how impactful analytics has been for the business. However, experts believe that procurement has to go beyond analytics and embrace smart and intelligent technologies to reap financial gains and generate more business value. A GEP report emphasises that with procurement teams under immense pressure to deliver more business value, AI-powered systems can reduce some of the workload. Most enterprises have deployed Spend Analytics Software which gives procurement teams more visibility and control in managing contracts.
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In the procurement sector, intelligent automation technologies can be used across a slew of functions — from e-bidding on tenders, to purchasing material by relocating resources, or arranging data and sheets in an array fashion. In fact, automating procurement transactions is a big step in achieving control over purchasing, vendors and spend management. In fact, basic machine learning technology is already used in areas such as spend analytics and contract analytics. This is mostly limited to automating the processes of collecting, cleaning, classifying and analysing expenditure data in an organisation to identify savings or paths to greater efficiency.
AI In Procurement
Category Strategy, Sourcing And Auction Services: We are increasingly seeing the deployment of Cognitive Procurement Advisors (CPAs) and Virtual Personal Assistants (VPAs) which use natural-language processing (NLP) and natural-language generation. AI plays a huge role in helping procurement professionals who respond better to ongoing customers and market trends. While digital technologies promote automation, the new cognitive technologies can also predict and proactively guide by examining sets of unstructured data.
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VPAs In Procurement Can Improve End-User Experience: According to a report, a procurement VPA can significantly improve the end-user experience of traditional procurement tools and increase spend under management by guiding people to the correct purchasing tool, such as defining the correct request for proposal. Magnus Bergfors, research director at Gartner observed that cognitive procurement advisors can dish up recommendations and advice ranging from supplier assessments and performance management, to risk management and compliance. These technologies can process intelligence from a vast amount of resources and deliver intel on supply and demand parameters. Talking about this technology, SAP senior executive said that machines can find out the risk of forced labor in global supply chains and even recommending precautionary actions.
Contract Management: ML tools revolutionised contract analytics by identifying relevant terms and conditions, similar to legal taxonomy and language. It automated processes such as raising an alert on contract expiration, non-fulfillment or provide benchmarking data for commodities based on region and industry, among others.
Tail Spend Management: Infosys report defines tail spend as a “clutch of a sizeable number of items with lower spend value”. This has an impact on an organisation’s financial performance and their product called Infosys Procurement Work Bench (PWB), a spend visibility procurement application which helps in tail spend assessment. On the other end of the spectrum, IoT-enabled reports on inventory turnover and warehouse stock utilisation can help assess stock-outs. Which means that when supply gets low, AI-enabled bots can order items which can help procurement teams score in lead time and reduce costs.
Some of the top players providing procurement solutions in contract management, forecasting, inventory control, order approval management and spend management are SAP, Ariba, Oracle, and Infosys.
Challenges
- The 2017 Deloitte Survey cited a lack of data integration as the main barrier to the effective application of digital technology. Also, improvement in the quality of data is seen as key to optimise the procurement process with CPOs citing quality of data as the main barrier to the application of digital technology.
- Talent crunch has been cited as one of the major barriers to adoption of cognitive technologies. Gartner report also cited leaders who lack the right set of analytical skills who will not be able to understand the scope of opportunities AI presents in procurement.
- As part of the roadmap to embracing AI, enterprises can set up incubator teams and deploy digital technologies on areas they want to focus on. Based on the results, it should be scaled up.
- Before adopting the digital procurement strategy, companies should beef up their infrastructure for the adoption of cognitive technologies
- The Deloitte report suggested building “a mind and machine” procurement strategy.
