The Onset of AI Within Procurement

We have all heard the headlines of how A.I. is going revolutionise “everything” but how do we separate the fact from the fiction, especially within the remit of Procurement where the relentless onset of technology not only dominates how businesses source and procure goods and services but offers such a wealth of advantages that it is only set to continue as the technology is further embraced and developed.

Firstly, let us breakdown the challenges of a Corporate CPO and see how A.I. can assist in the provision of a more efficient cost-effective methodology in which to tackle those same challenges.

Risk Management

It is essential that Procurement understand the risks and pitfalls ahead within many areas especially in supplier, category management, supply chain and ethically sourcing of goods and services.

A.I. can assess risks associated with suppliers, such as financial stability, geopolitical factors, and compliance issues. By identifying potential risks early on, businesses can take proactive measures to mitigate them.

Market Analysis

Sometimes the availability of information both being requested and provided can be daunting and result in huge manual effort when just addressing the basic criteria, never mind the detail.

A.I. can sift through vast amounts of data to provide real-time market insights. It can analyze market trends, supplier performance, and pricing dynamics to help business make better, more informed procurement decisions.

Ethical & Sustainable Sourcing

Anyone who has responded to an RFP/RFQ from the supplier side will have no doubt encountered “supplier fatigue” the endless and seemingly majority of pointless questions raised by a prospective customer before you get the chance to engage on a personal level. But this works both ways as the Procurement Department have to go through this process and maintain relevant information requests to ensure that they are supporting their own stakeholders and making the correct choice of supplier.

A.I. can catalogue and maintain an up-to-date profile of suppliers working for both sides to reduce the huge manual task in addressing these questions, hopefully in the future even validating the response from the supplier with credentials and case studies which will further aid both sides.

Supplier Selection

A lucrative Government RFQ can have many potential suppliers responding, some of whom contribute directly to the localised funding of that geographic area, or who may have a vested interest in the term of the contract, Procurement has to ensure that the correct selection is made using the proper criteria to whittle down the right suppliers for justifiable reasons.

A.I. can assist this in helping evaluate the manual process of potential suppliers based upon pre-identified parameters such as quality, reliability, cost effectiveness and policy fit. This can greatly help the process, reducing manual decision making in a fair process which can be fully auditable.

Cost Optimization

Data is the life blood of Procurement, with good data you know what you have spent in the support of the stake holders, on what and to whom.

A.I. powered tools can now analyse historical data and current market conditions to highlight trends, volumes and prices to optimise costs. This includes negotiating better deals, identifying cost-saving opportunities, consolidating suppliers when/if there is an option and improving overall procurement cost effectiveness and efficiency.

Contract Management

As anyone knows the management of contracts with a supplier can be disheartening on both sides after so much effort preceding. You can find the right supplier only to be let down by some missing policy, contract issue or other pitfalls.

 A.I. can assist in reviewing and managing contracts to ensure compliance and identifying areas of potential improvement. Although we have not yet extracted the need for legal counsel potentially it is on the horizon as the A.I. technology improves constantly.

Profiled Sourcing

Sometimes selection of the correct sourcing strategy can be daunting and time consuming, from a key regional supplier to the correct product being provided in the correct way.

A.I. can identify unique needs and preferences of a business to ensure that the process decision making is aligned with specific organisation goals and objectives that can be monitored and benchmarked.

Process Automation

Mentioned within most of these elements, the manual tasks often slow down a good procurement team even with a well proven streamlined process.

A.I. can reduce manual tasks and assessments bringing together processes and automation, freeing up many hours of laborious labour

Real-time Collaboration

Collaboration greatly helps to detail a stake holders’ expectation into a procurement process, Procurement Managers have to be an expert in all things when managing a complex supply chain.

A.I. powered collaboration tools can facilitate real-time communication and collaboration between different stakeholders in the procurement process. This assists in fast decision making, improved efficiency both in time and cost, internally and externally to the organisation.

Predictive Analytics

While no one can really predict the future some factors can be catered for when manging Stake Holder expectation by reviewing the potentially huge number of variable factors that can affect the markets we operate within or are influenced by.

A.I. can use historical data to predict future demand and trends which can compare existing sourcing or inventory data and outside variables that may affect the supply chain giving a clearer picture of potential disruptions the businesses sourcing of critical categories.

In summary, A.I. has many advantages to offer the Procurement process that can lead to increased efficiency, time/cost savings and better strategic decision making for the business. It can also assist the management of an effective supply chain ensuring potential pitfalls can be more readily addressed should they arise. A.I. is here and starting to make a strong impact into the world of procurement.