How AI Can Help Solve Some of the Biggest Challenges in Procurement
Artificial intelligence (AI) has become one of the most significant disruptive forces in years, affecting practically all departments in practically all industries. Machine learning (ML) technology is transforming many business processes today—and the pace of change is accelerating.
Not so long ago, most of the AI talk seemed to be focused on future transformations and future possibilities. But time has continued to play its inimitable trick, and when we open our eyes, we see that this game-changing technology is everywhere.
Highly sophisticated and intelligent computing engines are in use today in everything from video games to analytics and online customer service support. AI is trading stocks, flying planes, and making highly accurate recommendations for our next consumer purchases. In the military, it is interpreting satellite photographs to identify targets and threats; in communications, it's recognizing our speech patterns for security and identification purposes; in our pockets, Siri and Cortana are our very own AI-powered personal assistants.
AI and ML are in the supply chain, too. They are already key to procurement in its quest to solve a growing number of critical problems.
From Virtual Assistants to Cognitive Procurement Advisors
From identifying new markets and tracking exchange rate volatility to managing risks and identifying the best suppliers, procurement leaders are looking into solutions that utilize AI to leverage big data to streamline processes and improve decision-making. Spend analytics software, for example, is enjoying widespread adoption, helping procurement teams identify where cost savings can be made.
Spend and contract analytics are automating the processes of collecting, cleaning, classifying, and analyzing an organization's expenditure data. Yes, they identify areas where savings can be made and point to paths of greater efficiency, but this is only scratching the surface of the transformative powers of AI in procurement.
Today, procurement technology vendors are developing solutions that bring AI into the realms of advanced strategic reasoning and strategic sourcing. Namely, these are manifested as cognitive procurement advisors (CPAs) and virtual personal assistants (VPAs) that use natural-language processing (NLP) and natural-language generation to further increase automation and efficiency in procurement.
In essence, these VPAs and CPAs are not dissimilar from smartphone favorites like Siri and Cortana. The difference, however, is that the new wave of virtual assistants is capable of much more than completing simple tasks such as setting the alarm or retrieving information from the web. This new technology can carry out much more complex operations, like completing transactions based on past, present, and predicted contexts.
"We are seeing a significant uptick in advancements," said Anthony J. Bradley, Group Vice President at Gartner's Technology and Service Provider research practice. "Basic decision tree rules-based technologies are being augmented or replaced with deep learning, semantic engines, intelligent process modeling, and other blended AI capabilities. Additionally, some vendors are taking a "voice-first" approach to development augmenting their text-based analysis with voice recognition. This provides a much richer capability and the potential to address a much broader set of tasks."
Procurement Bots
Cloud procurement solution provider SAP Ariba unveiled an AI-powered enterprise digital procurement bot in 2017 that allows users of its cloud-based applications to manage key tasks with greater efficiency, simplicity, and speed. Leveraging machine learning, the bot can "understand" and implement company policies and procedures to guide actions, reduce errors, and speed processing on things like invoices and payments.
Today, experts are anticipating the mass adoption of bots and enterprise assistants in procurement.
"Mass adoption is only a few years away, said Ian Anstey, Business Development Director at SAP partner apsolut Group, in 2020. "People are just really testing it now to see what the benefits are. SAP is releasing products quarterly to make this more usable, and more products are coming through than ever before."
Anstey also said that younger generations will be more inclined to adopt AI and ML in procurement, if only because they mirror the tools they already use in their personal lives.
"Look at the age of your workforce," he said. "For many of us, having a GUI that just works is enough. But younger generations want the same experience they get in their personal lives, or they may well go somewhere else that can offer it."
Existing Tools Must Be Fit for Purpose
Aside from high-functioning bots, AI technology can also achieve greater levels of trend analysis, with financial modeling being used to predict future pricing patterns and even for risk assessments. For example, if invoices are submitted late, an AI program may trigger an internet search for red flags that may indicate internal problems on the supplier-end, such as share price dips or court orders.
In spend analytics, an AI system can cross-check every single invoice that's entered, instantaneously flag any errors or inconsistencies, and identify and alert the appropriate persons on both sides of the order—a process that can take days when done manually.
But the reality is that for organizations to start creating significant value from AI, they must deploy the technology on top of the right platform, data, and processes. It means a mandatory use of e-sourcing, and, as an absolute minimum, that all contracts are stored in a dedicated repository with smart procure-to-pay solutions properly configured and populated by relevant suppliers.
Only this way will AI be able to help solve the most pressing, contemporary challenges facing the procurement function today.
AI in procurement is set to be a hot topic at this year's ProcureCon Marketing conference, taking place this December 6th to 8th at the Hyatt Regency La Jolla in San Diego, CA.
Be sure to download the agenda for more top insights and challenges facing the industry today.