The benefits of AI for procurement is a question currently under constant exploration.
You can’t get very far without hearing the term ‘Artificial Intelligence,’ or ‘AI.’ In the past few years, the number of AI applications has skyrocketed. This has caused thought-leaders and experts alike to theorise how this development will impact industries moving forward.
Procurement is a role which will be impacted by continuous developments in Artificial Intelligence. Ultimately, procurement processes have the potential to be optimised by these technologies.
AI has largely become a blanket term for technologies which simulate human behaviour and learning in some form. This allows them to perform a variety of advanced, complicated tasks.
This could be extracting information from documentation, analysing data, predicting data trends, generating answers to specific queries and more. According to a poll run by Forbes, 79% of respondents have used AI at work in some form. This is signalling a shift in how businesses and departments operate.
But how can you use AI for Procurement?
This is what we will explore throughout this article.
Types of AI for Procurement
Firstly, it would be beneficial to delve into the types of AI that can be applied to procurement.
Natural Language Processing:
Natural Language processing refers to the interactions between humans and computers through natural language. AI can take and analyse large amounts of data and communicate it back. It's framed as a conversation, which helps improve user experience.
Robotic Process Automation:
Robotic process automation uses rule-based processes and programming to execute specific tasks without manual prompts. This essentially automates them for the user. Repetitive administration in the workplace which consume time can be eliminated using robotic process automation.
Machine Learning:
This refers to the use of computer systems or software which have been specifically built to continuously learn from data. The system can perform a task, then make predictions or analyse data based on this period of learning. These systems can also continually improve as they are continually exposed to information.
By applying these three AI-based technologies to procurement, you could find that you’re able to add additional value.
How to use AI in Procurement Effectively.
AI for Risk Management
AI offers you the ability to better manage risk across your supply base. Firstly, it can be utilised to more easily identify supplier risk and provide the opportunity to mitigate it. Though there are genuine security risks when using public LLMs, such as Chat GPT, using an in-house tool, such as ARCUS® lessens the concern with security.
For example, ARCUS® AI operates according to a framework configured to your specific needs, which effectively means it behaves according to your own policies and procedures.
AI is particularly relevant to supplier risk management. Via machine learning, it has the potential to detect anomalies in a data-set or in supplier documentation.
This can be used to validate supplier documentation, checking expiry dates and whether the correct document type has been uploaded.
This eliminates risks posed by human error by flagging any discrepancies in supplier documentation during onboarding, or even at the supplier tender stage of source-to-contract.
You can discover more information on AI for risk management here.
Compliance Management
As well as mitigating risk, AI can be used when managing supplier compliance. More specifically, AI can be used to identify instances of non-compliance within your supply base without having to complete manual searches, or track dates through cumbersome spreadsheets.
Instead, AI Assistants, such as ARCUS® AI can summarise this information for you.
Cost-savings
By standardising AI across source-to-contract there’s potential for significant time-savings. This can be achieved by automating repetitive administration. By relieving capacity in the team, time can be redirected back to the strategic procurement functions, such as supplier negotiations or market analysis, which helps procurement achieve their vital cost-saving targets for the year.
Enhanced Efficiency
AI can shorten and simplify tasks that bloat procurement capacity simply because manual processes are more difficult to execute. Finding and checking specific terms in one contract in a database of hundreds will consume time because of the sheer quantity of information available.
With AI, the terms can be found and summarised for you in seconds, and its application can be expanded beyond this. Data can be extracted from documentation and populated elsewhere, specific information can be summarised during the onboarding period, and much more.
Strategic Procurement
AI provides procurement teams with the opportunity to utilise trends in data to inform strategic procurement functions and maximise data value.
This allows procurement to demonstrate to key stakeholders that strategic decisions are backed up and informed by patterns in supplier data.
You can see our full article on using AI in procurement effectively here.
How can you implement AI?
AI can be implemented and standardised in your procurement department if the correct software is implemented.
Many professionals already believe that it will have a beneficial impact on procurement. According to a study conducted by The Hackett Group 63% of procurement respondents are investigating, piloting or have already implement AI for contract lifecycle management. This is followed by 54% for eSourcing and 51% for supplier risk management.
At Trade Interchange, we streamline source-to-contract for our clients through our ARCUS® Supplier Management Software, which utilises AI to enhance efficiency and mitigate supplier risk.
ARCUS® and AI for Procurement
With ARCUS® Smart Technology functionality, you will benefit from AI functionality built into source-to-contract, optimising processes, enhancing efficiency and saving you time.
The built-in AI optimises sourcing, contract management and supplier risk management whilst allowing users to gain data-driven supply base insights that can inform strategic procurement decisions.
How does ARCUS® AI benefit procurement professionals?
AI-Document Scanning
During the supplier tender and onboarding stages of source-to-contract, AI scans uploaded documentation to confirm their validity. Policies and certifications are scanned at the point of upload with 99% accuracy, and checked for any discrepancies, so you can be sure your supplier documentation is accurate, and up to date.
AI Assistant
With ARCUS® AI, you can gain the benefits of an AI assistant in your tendering, or supplier information management solutions. This allows users to rapidly analyse large volumes of data and gain further insight into the state of your supply base and make data-driven decisions regarding procurement strategy.
AI Document Insights
With AI-powered document insights you can generate answers to queries based on specific supplier documentation, such as payment terms, risks and contractual obligations.
Data Visualisation
ARCUS® Analytics, our data visualisation solution, has AI-driven query commands, allowing users ask questions about the data, and the system can generate answers.
This allows users to identify trends in their supply base, make decisions based on robust, accurate supplier insights, and build a data-driven procurement strategy.
AI in Supplier Tenders
Our AI functionality can automatically generate summarises upon tender completion, overing a concise overview of all tender participants, and how they compare against a tailored criterion.
Not only does this speed up the tender process, but it gives you a key summary the differentiators between your potential suppliers, allowing you to select the one which best meets your needs.
Our AI assistant within ARCUS® eRFX offers further insights into tender submissions, providing the means to make the data-driven decisions which improve tender outcomes.
AI in Supplier Information Management
Our AI has several applications within supplier information management. Chiefly, it allows users to accelerate the retrieval of key information, such as document expiry dates. Searching an entire database for a small piece of information from a certain supplier record takes time. By using AI to retrieve it, that time is saved.
The benefits of fast data retrieval can be pushed even further. By generating a supplier synopsis with AI, users can gain a full summary of their supplier record, highlighting potential compliance and risk factors, so risk can be managed proactively, rather than reactively.
AI in Supplier Contract Management
Our software makes extensive use of automation, whether it is kicking-off a certain workflow, or sending reminders.
Additionally, AI also has several applicable uses in supplier contract lifecycle management. Our article on Artificial Intelligence in contract management, examines this subject in more detail.
ARCUS® uses natural language processing to identify and summarise information in our ARCUS® Supplier Contract Management (SCM) module.
This could be specific terms and conditions, expiratory dates, or even general summaries of the contract contents. It much easier to review contracts swiftly and locate information.
In summary, there are many applications for AI in procurement, and the number of organisations that are implementing AI are only growing. As the technology continues to develop, other use cases will emerge.
Key Takeaways:
- There are many ways AI can be applied to procurement to streamline processes, gain additional insights and reduce supplier risk.
- Use cases such as AI-document scanning, AI assistants and information extraction, allow procurement professionals to save time in supplier management
- ARCUS® AI can be added to ARCUS® Supplier Management Software to gain the benefits of AI-driven supplier management.
Contact us at Trade Interchange today to learn how our software supports procurement professionals.