When you consider procurement 10 years ago, and compare it to how procurement performs now, you can really appreciate just how much the industry has changed.
From paper forms to Excel spreadsheets, email, and eventually fully-fledged procurement software suites, it has been a long road to get to where we are now. Having worked on the software side of things for over two decades now, it has been fascinating to watch procurement react and respond to each new development as it arose. I have witnessed firsthand the evolution of procurement into something more than administrational purse-string guardianship. Procurement is now strategic, powerful, and seated at the heart of organisations.
It’s clear that people are realising now more than ever the true potential of procurement, it’s scope and influence within each different organisation, and its recognition is well-deserved.
It makes sense, then, that only something like AI could disrupt such a stalwart industry so thoroughly. Let’s explore how AI is reshaping and influencing procurement.
Elimination of Tedious Tasks and Increased Efficiency
Procurement can be an exciting department to work in, but for a long time it has been burdened by repetitive, time-consuming tasks. Tasks like chasing approvals, onboarding suppliers, and performing due diligence around approved suppliers are necessary, but easily become time-sponges. AI is changing that by handling these tasks automatically, greasing the wheels and increasing pace across procurement processes. The result? Faster progress in sourcing projects through smarter technologies, meaning less and less manual intervention required to drive better results.
Smarter Decision-Making and Accurate Data Insights
Procurement has moved past its archaic image of just ‘buying’ – now, it’s more about buying strategically. AI aids strategy by giving teams more accurate data-driven insights to make informed decisions instead of relying solely on gut feelings. It has the ability to perform other data-related tasks, too, like monitoring supplier compliance and flagging potential issues before they become real problems, and fostering easier communication between departments involved in the procurement process. Combined with APIs to forge connections with trusted third-party databases, AI can maintain data integrity and accuracy with only limited human involvement.
Easier Supplier Evaluation and Stronger Relationships
Managing supplier relationships is a crucial aspect of procurement. There are a few branches which fall under this umbrella term, and all of them can be positively influenced by AI. Performance is an obvious one, heavily influenced by having accurate supplier data, an area wherein AI can help enhance precision. Supplier contracts are another, where the complexities of negotiation, expiry or renewal reminders, and legal approval workflows present several levels of risk. AI can simplify this process, automating reminders and introducing a structured process to reduce wasted time and opportunities through mismanagement.
Reasons for Caution
In the interest of giving a fair and balanced appraisal of the ways AI is shaping procurement, it only seems right for me to be honest about the risks which adopting AI can uncover.
For one, AI isn’t perfect, for all that it is certainly an improvement in many ways. Generative AI can ‘hallucinate’, producing incorrect or nonsensical data, and does it confidently. It invites doubt regarding data protection compliance, especially when using free generative AI models trained on publicly available data for insights into suppliers, for example.
However, while it is worth bearing these risks in mind, there is no need to abandon AI entirely. It’s right to treat public AI tools with caution, but you can safely assume that a tool you are paying for, or even a tool which is upfront about its limitations using AI, is going to be more trustworthy, and bring more value to your strategy.
If you’re curious about AI tools in procurement, and the different applications AI can have within procurement, I invite you to explore the Trade Interchange website to discover our integrations and AI-related resources for yourself!