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Will 2020 be the Year of AI for Procurement?

Dec. 10, 2019
A new report paints a picture of a profession that’s about to experience major change as it continues to move toward a more digital order.

If a new report from Globality has it right, 2020 could be the year where procurement departments begin using more artificial intelligence (AI) to scope, source, and select vendors.

In “Procurement at the Inflection Point”, the technology firm and maker of an AI-powered platform paints a picture of an industry that’s about to experience major change as it continues to move toward a more digital order. As part of that progression, procurement will use more AI, or those smart machines that can perform tasks that usually require human intelligence.

“This shift has been a long time coming,” Globality points out in its report. “The established processes for scoping, sourcing, vendor selection, and other procurement responsibilities are straining under the pressures of growing spend, the expanding numbers of providers, elevated expectations by line of business stakeholders, and business demands for spend effectiveness combined with operational excellence.”

A domain not always viewed as being technologically advanced, procurement is now “poised for radical reinvention through the help of advanced technology,” Globality continues. “Digitization is the start of a shift that has the potential to truly make procurement a strategic factor in attaining corporate goals.”

It’s Still Early

Procurement’s digitization journey is still in its early stages, according to Globality, which in 2019 conducted a survey to find out how the sector is using technology to manage costs, improve operational efficiencies, gain stronger process controls, and leverage analytics.

What it found was that respondents are grappling with myriad problems, and spend—especially for services—just keeps growing. In fact, 31% of professionals reported that services comprise more than half of their company’s spend. Globality also learned that:

  • 73% of respondents had limited experience and exposure to AI in the procurement realm.
  • Just 6% of respondents are actively using AI in their procurement digitization initiatives.
  • 87% of companies are in the early stages of utilizing technology to improve their procurement processes.
  • 94% are exploring or just starting to use advanced technologies such as AI.
  • Procurement’s expectations are high for technology to provide strong strategic value for the entire corporation.
  • Procurement executives are looking for ways to achieve greater efficiency, increased transparency, and standardization of the procurement process.
  • Additional priorities include extending influence into the broader organization, striving to achieve spend effectiveness, ensuring better integration with lines of business on purchasing needs, and achieving increased alignment with overall corporate strategy.

In summary,” Globality concludes, “procurement leaders are increasingly viewing digitization as the next needed step in accelerating corporate goals and gaining recognition with their senior corporate leadership as drivers of strategic company transformation.”

The Journey Begins

According to the survey, 43% of companies started their digitization journeys within the past year. Another 29% are in the planning stages; the remainder are deciding what to do (but have not yet taken action).

Globality also notes that the largest companies (25%) and multinational companies (37%) are the furthest along in their digital journeys, but adds that the smallest companies (fewer than 1,000 employees) are nearly on par in their progress with midsized companies (1,001–20,000 employees).

Regardless of how far they’ve progressed in their digital initiatives, procurement professionals collectively see the value in using advanced technology to improve, speed up, and remove the risk from their global supply chains. According to Globality, 96% of them recognize this potential, with 66% saying that it could have a strong impact.

“Clearly, expectations are high,” the company concludes. “Executives in the largest corporations as well as organizations with a multinational presence held the greatest expectations for digitization’s potential. Thirty-eight percent of leaders at companies with more than 20,000 employees rated [digital transformation’s] potential as strong—as did 55% of respondents from multinational organizations.”

About the Author

Bridget McCrea | Contributing Writer | Supply Chain Connect

Bridget McCrea is a freelance writer who covers business and technology for various publications.

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