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Artificial Intelligence-Powered Procurement

March 8, 2021
How advanced technology is helping procurement departments operate more efficiently and effectively in today’s uncertain business landscape.

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A wide-ranging branch of computer science focused on building smart machines that can perform tasks that would otherwise require human intelligence, artificial intelligence (AI) is impacting a wide range of industries and disciplines right now. With its ability to replicate or simulate human intelligence in machines, AI has found its way into ride-sharing mobile apps, spam filters, smart assistants and manufacturing robots.

Artificial intelligence is also impacting the procurement space, where the blend of AI and automation is helping buyers work faster and more efficiently. In “Incremental to exponential: 5 overlooked benefits of procurement automation,” Keelvar’s Alan Holland outlines some of the top rewards that procurement departments are gleaning from their investments in AI. In looking beyond the most obvious benefits, he says AI-driven digitization and traceability help buyers attain more complete data pictures, while AI-based sourcing tools enable more accurate “quality checks” of supplier bids.

Even where data is already being captured and stored, ensuring quality standards can be difficult to achieve,” Holland writes. “Humans are indeed error-prone, particularly when tasks are highly repetitive, tedious, and frankly better suited for machine automation.” Automation also helps strengthen compliance and best practice adherence for procurement departments.

“Let’s face it: leaders can spend hours defining excellent processes and rules, but if that process doesn’t capture a meaningful-enough percentage of activity, outcomes will be sub-optimal,” Holland points out. “Having a trusted and complete data picture leads to stronger process compliance.”

Enhancing Company Value

In “AI-powered solutions turn procurement into a catalyst for company value,” Spend Matters discusses how the modern-day procurement team needs to be able to quickly draw from complex, compounding data pools, as well as process and analyze relevant information to mine insights. The problem is that up until recently, procurement technology “did little more than automate manual processes,” Spend Matters points out.

“This provided some gains but didn’t allow procurement teams to move into a more strategic role where they could partner with business stakeholders,” it continues, “to make the most of outside services and deliver greater value to their company, customers, and partners.”

Thanks to advancements in AI and how it’s being fused with procurement platforms, Spend Matters says companies are beginning to see how the technology can create more efficient, effective operations. For example, a survey by Globality and Digital Procurement World (DPW) found that 96% of procurement leaders surveyed see digitization giving them the opportunity to “accelerate their corporate goals,” including improved operations, reduced costs and increased efficiencies.

AI-based procurement solutions allow users to shift their perspectives and look at procurement and sourcing from a business stakeholder perspective,” Spend Matters concludes. “Procurement and supplier experiences can be optimized, which makes companies more competitive and more likely to grow.”

How AI Steps in to Help

According to procurement analytics provider Sievo, some of the most common uses of AI in procurement right now include: 

  • Spend classification. Using machine learning (ML) algorithms (which rely on statistics to find patterns in massive amounts of data) to classify procurement spend into categories and sub-categories. For example, reviewing millions of invoices to automatically categorize spend in different categories of cardboard packaging.
  • Vendor matching. Using ML to connect supplier data contained in invoices and purchase orders to a vendor hierarchy. For example, connecting different local subsidiaries of a freight and logistics company to one international supplier.
  • Capturing supplier or market data. Use techniques such as NLP to look for and capture data on suppliers or specific markets. For example, tracking social media channels for signals about suppliers’ risk positions.
  • Improve decision making. AI can provide timely analytics and data-driven insights to make better sourcing decisions.
  • Identify new opportunities. By shifting through vast amounts of data, AI can uncover new savings or revenue opportunities.

According to Sievo, AI can also automate time-consuming tasks (e.g., procurement performance reporting); manage routine tasks (thus freeing up procurement resources to focus on more important projects); help buyers identify new suppliers or markets; and optimize supplier relationships.

Don’t Look for a Miracle

To companies looking for new ways to merge AI and procurement automation, Sievo tells them not to look for “miraculous new solutions to change the way you run your procurement operations.” Rather than viewing AI as magical new technology, think of it from the business process point of view.

“Consider the challenging-but-boring business operations that already take time and resources to manage,” it advises. “The most immediate value of AI will not come from new applications, but from embedding technology into existing processes—for example, improving your existing spend analysis or contract management processes.”

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About the Author

Bridget McCrea | Contributing Writer | Supply Chain Connect

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