There was a time when it would have been pretty difficult to envision a procurement professional utilizing artificial intelligence (AI) in his or her line of work. Autonomous cars, interactive robots, and IBM’s Watson computer, after all, were just far-out examples of how computers could be taught to think, act, and operate like humans.
Fast-forward to 2018 and it looks as if AI—defined as technology that makes it possible for machines to learn from experience, adjust to new inputs, and perform human-like tasks—is making its way into the procurement department. In Investors bet on AI in procurement, Rich Weissman explains how companies like Suplari, IndustryBuying, and Power2SME are utilizing AI to transform various aspects of the supply chain, including procurement.
Take Suplari, for example. An AI-driven insights platform for procurement, the firm recently attracted $10.3 million in funding to develop its cloud-based platform. That platform “enables procurement and finance teams to find hidden cost savings and unidentified supplier risk by analyzing millions of enterprise data points and interactions across disparate enterprise systems,” James Henderson writes in AI-driven procurement platform, Suplari, attracts $10.3mn in funding.
Those data points include contracts, purchasing, product usage, accounts payable, travel and expense, and corporate card accounts, Henderson writes. “Suplari uses advanced AI on top of existing enterprise systems to proactively uncover the highest-value opportunities and empower CFOs or chief procurement officers to unlock savings and increase profit, which can then be invested in growth, innovation, and their people,” Nikesh Parekh, CEO, told Supply Chain Digital.
AI Adoption at an All-Time High
According to Alan Holland, CEO at Keelvar, the pace of AI adoption in procurement is at an all-time high, with the potential benefits exceeding the automation of simple downstream functions. “Strategic sourcing is a concept that most large organizations have struggled to master,” he points out in Spend Matters’ The Rise of AI in Procurement: Separating Hype from Reality. “The importance of game theory, mechanism design, and optimization are only fully understood by a tiny minority of companies that have been using sourcing optimization for several years now to gain a significant competitive advantage in their industry.”
Specific to procurement, Holland notes that AI is good at automatically conducting simple repetitive tasks. (e.g., factory automation and back office processing); detecting patterns in large data sets (e.g., dermatology and spend analytics); and strategic reasoning in large and complex decision spaces (e.g. chess, poker, and strategic sourcing).
Expanding their Digital Horizons
With procurement executives expected to expand their use of data management and analysis tools over the next two to three years, according to The Hackett Group, expect the use of AI to grow exponentially over the same time period. Broad adoption of master data management is expected to grow by a rate that is 3.8 times more than the current adoption level.
The Hackett Group notes that data visualization adoption will more than double over the next two to three years, and that companies will also be augmenting those technologies with AI. In fact, 30% of survey respondents said they are conducting pilots in AI areas such as cognitive computing and virtual assistant technology, SupplyChainQuarterly reports.
Combined, these trends foreshadow a time when AI is commonplace in procurement departments worldwide. “AI is transforming the way we work, and procurement is ripe for change,” Henderson concludes. “Strategic sourcing is where the most significant change lies ahead because the core data can be captured in structured tables and used to build a corpus of knowledge.”