Artificial intelligence (AI) is already altering procurement, and because it can assist with data analytics, it is a crucial tool as companies look to their datasets for insight to help them make better decisions.
Data is considered a valuable resource for businesses including procurement because the absence of precise or sufficient data will result in the procurement team encountering challenges concerning spending and supplier relations.
Furthermore, most procurement teams make purchasing decisions in an inadequate environment. AI algorithms help the teams to decide better from their data by providing insights into data. According to a Deloitte survey, 51 percent of CPOS use advanced analytics, and 25 percent have piloted an AI solution for the procurement process, a 19 percent increase from the previous year.
According to Harvard Business Review and Deloitte research, while each organization has its own set of challenges and successes, there are some key trends with AI and procurement that highlight the way the technology can add value:
- Making better choices
- Finding new opportunities
- Enhancing operations
- Manual task automation
- Making time available
- Acquiring or applying limited knowledge
- Discovering new suppliers or markets
- Improving Supplier Relationships
AI technology can resolve various challenges faced in procurement, and below are three applications where this technology is used.
- Enhancing strategic sourcing with AI
AI is used in procurement to maintain and automate sourcing. Cognitive sourcing can assist buyers and procurement teams in identifying new opportunities as well as automating non-strategic sourcing activities. A good example of cognitive sourcing is a chatbot.
AI can help sourcing and procurement teams validate or analyze their assumptions, inform decisions, and chart the latest paths to better and more strategic sourcing plans by highlighting the hidden insights in data.
- Using AI to automate manual tasks and detect errors in the procurement
It is quite possible for some errors to escape from human eyes, but with AI nothing of this sort happens. AI can guarantee that these errors are identified in the procurement process. AI can automatically identify errors, or irregularities like price variations in markets, compliance deformities, and fraud.
Machine learning algorithms are critical for ensuring that errors are not overlooked, and they can also assist in surfacing any relevant insights to better inform teams. Automation, on the other hand, can do more than just alert teams to errors and irregularities; it can also automate monotonous manual tasks, freeing up team members’ time.
The technology can automate many tedious tasks in the procurement process including invoice processing and the procure-to-pay process which can save the team a remarkable amount of time.
- Using AI to manage risk and interruptions in procurement
AI plays a vital role in managing supplier risk in procurement. AI can precisely and swiftly recognize unexpected changes with a supplier or a vendor and subsequently alert the procurement teams regarding the impacts of the risk associated with the change (i.e. the change will increase or minimize the risk).
Because it is traditionally a reactive process, AI assists teams as they strive to eliminate any high-risk suppliers – with AI, procurement teams can evade issues with suppliers who bring challenges by maintaining a longer-than-necessary relationship.
Furthermore, because AI can process large volumes of transactions without errors, it can reduce interruptions caused by one-time purchases. A one-time purchase can typically disrupt a procurement process, but AI can ensure that the process continues to run smoothly despite the one-time purchase.
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