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Making a Business Case for AI in Procurement

Here’s how to sell the idea of an investment in artificial intelligence to the powers-that-be.

Defined as the technology that emulates human performance by learning, coming to its own conclusions, appearing to understand complex content, engaging in natural dialogs with people, enhancing human cognitive performance, or replacing people on the execution of non-routine tasks, artificial intelligence (AI) is impacting all links of the supply chain right now.

According to Gartner, current AI applications include autonomous vehicles, automatic speech recognition and generation, and detecting novel concepts and abstractions—the latter of which are useful for detecting potential new risks and aiding humans in quickly understanding very large bodies of ever-changing information.

Unfortunately, selling some of these nebulous concepts to the powers-that-be isn’t always easy. Even if the signs are pointing to a procurement department that would benefit greatly from such an investment, CPOs often have to stand in a long line of other department heads who are waiting for similar commitments from their companies.

Anyone who is unconvinced about AI’s current and future impact on traditional procurement processes has a right to be dubious. After all, procurement is already a blending of “human” decision-making and automated processes that come together to create a streamlined process for organizations of all sizes. What could AI possibly add to this combination?

Here are four answers to that question. Use them to create a business case for your own AI initiative:

It will save us money. This will be music to your CFO’s ears, so put it at the top of your list. “New digital technologies and advanced data analytics equip procurement with unprecedented ammunition for identifying opportunities to deliver bottom-line impact,” Shamli Prakash writes in The Profound Benefits of AI Adoption in Procurement.” “The more $$$ procurement is able to save, the greater its value to the overall business.” She points out that up until recently, gaining accurate visibility into an organization’s total spend was difficult for procurement.

However, thanks to AI, this is a problem of the past. “Advanced analytical methodologies are leveraged to build a solid data foundation,” Prakash writes, noting that analytics spend solutions can help ferret out 15% to 25% savings on addressable spend, “which in turn can be analyzed through multiple algorithms to find hidden opportunities across multiple levers.”

It helps buyers whittle down their choices. This is important in today’s global business world, where supply chains stretch to all ends of the earth and buyers have a plethora of suppliers (and products) to choose from. Winnowing down those choices takes time, but what if the options could be run through an AI “machine” which, in turn, would only spit out the top 2-3 absolute best choices?

This is already happening, according to Spend Matters. When buying online, for example, AI can tell buyers what they should buy next based on what other users bought together. This used to be too labor- and administrative-intensive, Spend Matters notes, because to work out the relationship between products meant configuring catalogues to link items together. “But AI enables this, not replacing us but making us more efficient,” it concludes.

It leverages tools like chatbots to streamline procurement-related tasks. A computer program that simulates human conversation through voice commands or text chats (or both), chatbot is an AI feature that can be embedded and used through any major messaging application. According to Medium, in operational procurement, chatbots can be used to:  

  • Speak to suppliers during trivial conversations.
  • Set and send actions to suppliers regarding governance and compliance materials.
  • Place purchasing requests.
  • Research and answer internal questions regarding procurement functionalities or a supplier/supplier set.
  • Receiving/filing/documentation of invoices and payments/order requests.

It doesn’t replace us, but it does augment some of our best skills and qualities. At its core, AI augments human capabilities and then turns around and helps those individuals get their hands on the right information and make the best possible decisions. Using virtual assistants, data analysis, and software solutions, for example, procurement departments are already leveraging AI to reduce errors, make better selections, and free up their teams to work on more important tasks.

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