How AI & ML are expected to revolutionize procurement function?
Artificial intelligence (AI) and machine learning (ML) are transforming various industries, and the procurement function is no exception. By leveraging AI and ML technologies, businesses can streamline processes, make data-driven decisions, and achieve cost savings. In this blog, we will explore how AI and ML are revolutionizing the procurement function and reshaping the way organizations manage their spend, suppliers, and strategic planning.
1. Introduction to AI and ML in Procurement
AI refers to the ability of a system or application to mimic human intelligence, while ML enables machines to learn and improve from experience without being explicitly programmed. When applied to procurement, AI and ML can analyze vast amounts of data quickly, reveal patterns, and provide actionable insights. This combination of human intelligence and advanced analytics is what makes AI-powered procurement so valuable.
Leveraging AI for Strategic Planning
Traditionally, evaluating procurement data and developing strategic insights required significant investment in experts and complex analytic models. However, with ML technologies, organizations can analyze large datasets rapidly and gain valuable insights to inform their strategic planning. This democratizes AI-powered procurement, allowing managers without extensive expertise to make data-driven decisions.
Automating Processes and Optimizing Spend
AI and ML can automate routine and repetitive procurement processes, enabling professionals to focus on strategic sourcing and high-value activities. For strategically sourced items, AI can automate competitive bidding, increasing sourcing speed and securing better pricing. On the other hand, ML can help identify cost-effective alternatives for commonly purchased, non-strategic supplies. By reducing the time required to identify, purchase, and reorder supplies, organizations can optimize their spend and achieve significant cost savings.
Supplier Selection and Compliance Management
AI and ML technologies play a crucial role in supplier evaluation and selection. These technologies can analyze vast amounts of data to identify potential disruptions in the supply chain and recognize compliance issues among potential suppliers. By automating the evaluation process, organizations can minimize disruptions, save time, and ensure compliance with company spending policies.
Improving Search and Product Discoverability
AI and ML have revolutionized personal shopping experiences, and now these capabilities are transforming business purchasing as well. Machine learning algorithms gather data from individuals’ onsite behavior and order history to present curated search results and relevant recommendations. This personalized user experience improves over time, driving process efficiencies and enhancing employee satisfaction.
Gaining Control Over Tail Spend
Unmanaged tail spend can account for a significant portion of total procurement spending and pose challenges for large organizations. AI and ML technologies are reducing rogue spending and increasing control over tail spend by providing a user-friendly experience. When management shifts tail-spend purchasing to approved channels that offer AI-powered, personalized user experiences, employees are more likely to purchase from approved suppliers, allowing for better visibility and control over spending.
2. The Benefits of AI and ML in Procurement
Implementing AI and ML in the procurement function offers numerous benefits for organizations. Let’s go deeper into some of the advantages:
Strategic Insights and Planning
AI-powered analytics provide organizations with strategic insights based on data analysis. By analyzing large datasets quickly, AI and ML technologies can identify trends, patterns, and opportunities that would be challenging for humans to discover manually. These insights enable organizations to make informed decisions and develop effective procurement strategies.
Time and Cost Savings
Automating routine and repetitive procurement processes with AI and ML technologies saves time and reduces the need for manual intervention. This improved productivity enables procurement experts to concentrate on key responsibilities like supplier relationship management and negotiations. Additionally, AI-powered procurement can optimize spend and identify cost-saving opportunities, resulting in significant cost savings for organizations.
Improved Supplier Management and Compliance
Managing a large number of suppliers and ensuring compliance with company policies can be time-consuming and challenging. AI and ML technologies streamline supplier management processes by automating supplier evaluation and selection. These technologies can also flag potential compliance issues and ensure that employees adhere to spending policies, reducing the risk of non-compliance and improving overall supplier management.
Enhanced User Experience
AI and ML technologies provide a personalized user experience for procurement professionals. By analyzing individual preferences, previous purchases, and industry-specific parameters, these technologies can present curated search results, relevant recommendations, and alternative product options. This enhanced user experience improves efficiency, reduces the time spent searching for products, and increases employee satisfaction.
Increased Visibility and Control Over Spend
Managing tail spend has traditionally been a challenge for organizations, as it often involves unapproved purchases and rogue spending. By implementing AI and ML technologies, organizations can gain better visibility and control over tail spend. AI-powered procurement systems can guide employees toward approved suppliers and products, ensuring compliance with procurement policies and reducing the risk of non-compliant purchases.
In general, it is anticipated that the incorporation of AI and ML into the procurement function would make procurement professionals more data-driven, strategic, and adaptable to evolving market conditions, which will result in cost savings, enhanced supplier relations, and increased operational efficiency.