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Artificial Intelligence in Procurement: Where and How?

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The conversation surrounding Artificial Intelligence and its potential applications is among the most intense within today’s organizations. At once fearful and hopeful, it’s a conversation that’s ignited passionate debate for over half a century. Even after all that time, it seems we’ve still got more questions than answers, more speculation than certainty.

For Procurement professionals, the landscape of artificially intelligent technologies can look particularly overwhelming. While it’s clear these technologies can provide for more efficient operations throughout the sourcing process, maturity levels vary wildly. Procurement can already count on mature text analytics tool study contracts and other relevant documents. More robust decision management tools have even facilitated more strategic sourcing and contracting decisions. The truly remarkable, sought-after technologies, however, are still in their infancy. Expect some years to pass before Procurement can truly take advantage of robotic process automation of deep learning platforms.

Years of development means even more years of sweating and speculating. Count on many of these discussions to land on one question in particular: Will I be replaced?

It’s a natural concern. Generations worth of science fiction tales have conditioned us to run in fear from robotic encroachment. While certain tactical processes are easily automated, truly strategic Procurement pros have little to fear. Experts predict emerging tools will enhance human capital rather than supplanting it. We can already see this happening in the spend analysis, sourcing, and contracting processes.

Let’s take a closer look at how Artificial Intelligence is empowering Procurement and where it might go from here.

Spend Analysis
At even its most basic, Artificial Intelligence makes it faster, easier, and more efficient to cleanse, normalize, and classify historical spend data. Taking these time-consuming, tactical processes off Procurement’s plate frees up time for the department to carry out more value-adding functions. Procurement should take care, however, not to forgo these processes altogether. While more advanced solutions might soon recognize spelling errors, duplicates, and other tell-tale signs of dirty data, most existing tools will ultimately exacerbate an inefficient department’s troubles.

AI’s true capacity to evolve the spend analysis process lies in opportunity and compliance analysis. After all, heaps of spend data alone won’t do Procurement much good – even if it is well organized. Opportunity assessment tools can dig into spend data, assess the market, and ultimately help dictate sourcing strategy. Highlighting opportunities for cost reduction, they make it simple for Procurement to draw actionable conclusions from their historical spend. Compliance assessments, too, will turn data’s raw information into valuable insight. Pointing out off contract spend and other inefficiencies, they’ll enable Procurement to improve vendor performance and better manage its purchases.

Sourcing
As Artificial Intelligence continues to evolve and power eSourcing platforms, it’ll take a more active role in developing sourcing documents, conducting sourcing events, and analyzing responses. Again, this will mean fewer tactical tasks for living Procurement professionals and more opportunity to drive company strategy and enhance the business.

Machine learning and natural language processing are already mature enough that AI can assembles RFx documents based on specific requirements and even respond to queries from suppliers. Once a sourcing event is underway, Procurement can trust their solution to rate and rank responses based on the criteria they’ve presented. Though a hands-off approach to these processes is not recommended, it’s clear that Procurement can trust quite a bit to its machines. For the foreseeable future, AI in the sourcing process will perform best in combination with the human element. By pairing their soft skills with AI’s speed and efficiency, Procurement professionals can consistently carry out effective events and build long-term strategic partnerships.

Contracting and Contract Management
Here’s another area where even the simplest tools can make a huge difference for Procurement. Pointing out upcoming deadlines or renewal dates might sound like a simple function. These alerts, however, can easily stop Procurement from paying for services it doesn’t need, getting saddled with a late fee, or locking itself into a relationship that’s no longer valuable. Procurement might have spotted these deadlines on their own, but that would’ve entailed manually pouring over documents. With its head out of the filing cabinet, Procurement can focus on directly engaging with the supply base  and developing competitive advantages.

AI can also analyze Procurement’s contracts against actual supplier performance. Identifying concerns before they lead to lost savings can help Procurement retain the upper-hand in negotiations and ultimately insist on better compliance moving forward. AI’s assessments can also unveil hidden risk factors in existing contracts. Armed with this knowledge, Procurement will confidently refine its contracting processes and make more strategic, informed decisions throughout the sourcing process.

Source One’s Procurement Technology advisers know that navigating the market for new solutions is a challenge for even the savviest professionals. Add implementation and everything that entails, and things can really get out of hand. That’s why we offer our end-to-end advisory services. We’ll help your organization select and implement the tools that’ll best serve your organization’s unique needs and business objectives. Reach out today.