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How does AI affect procurement?

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Louise Gapp Procurement & Supply Chain, Public Sector, Not for Profit...

Following our last article, leading us into the subject of AI and recruitment in general, today I am looking at the ways in which AI will affect the world of procurement.

There is some evidence that procurement is an area that has been slower than others in adopting AI. Yet the advantages of using AI in procurement ought to be obvious.  The overall value of AI to the global economy is now recognised by the World Economic Forum (WEF) and last September the WEF’s Centre for the Fourth Industrial Revolution unveiled a plan to develop the first AI procurement policy. This is to be carried out in conjunction with the UK government’s Department for Digital, Culture, Media and Sport. A pilot of Guidelines started in Autumn last year.

It’s clear that artificial intelligence will have a substantial impact on the sector. Fundamentally, AI is about efficiency and productivity. The increasing digitisation and automation of the purchasing process has, for many years now, increased efficiency and reduced costs (often, it must be noted, by cutting humans out) and it is going to become increasingly important in the years ahead.

More generally, there are two main areas where AI will help procurement professionals. One, obviously, is in the automation of tasks. For example, in end-of-month purchase order (PO) matching, rather than a human being doing this manually, AI software can review and match POs to Goods Receipt Notes and pay suppliers automatically, flagging up any issues as it goes. We can already see machine learning in demand planning processes and warehouse management: IoT-enabled (Internet-of-Things) storage will provide data and orders directly from your office to suppliers and fully autonomous vehicles with no limit on working hours will then distribute products quickly and efficiently. Skilful use of data will reduce the time spent on basic tasks such as paper-based checks, audits, fixing purchase orders and (good news!) compliance.

The second area where AI will be of increasing importance is in the way it should allow procurement to become increasingly valued by the rest of the business as a provider of strategic insight and planning. Given the occasionally chequered relationship between procurement and some other areas of business (I’ve heard of procurement being referred to as a “business-prevention device”), the opportunities here are really quite exciting.  In particular, the potential for procurement to use AI to predict future trends, deploying computer programs to monitor stocks and buying trends for consumers and business customers alike and generally monitoring behaviour and market sentiment, could lead to a much more fruitful relationship with sales and marketing teams.  The ability to spot buying trends in particular will help businesses plan and direct their products and services where customers want them in the future.

In practical terms, we’ll see procurement making more use of AI in a wide variety of areas.  For example, chatbots are now being used instead of completing lengthy requests on ERP systems.  Turkcell, a Turkish telecoms company, has implemented a procurement chatbot, which learns continuously and simulates interactive procurement professionals’ conversations with business partners and vendors by using key pre-calculated user phrases and auditory or text-based signals. The chatbot has an interface with the company’s ERP system and as a result has help cut out non-value-added activities and allowed procurement professionals allocate their time to more strategic topics.

What does this mean for recruitment? 

In reality, procurement is no different from almost any other sector in that there are old school and new school people who may agree in theory but not in practice. Some firms will be more old school than others, but for everyone the key will be managing the transition from current ways of working to newer, more AI-dominated ones. 

To put it simply, those who “get” where the industry is going are going to be in far greater demand in the future than those who still prefer the “tried and trusted” ways of doing things. As noted above, said “tried and trusted” ways are not “prehistoric,” paper-based ones: they already involve a considerable amount of computerisation, but AI will bring a new set of challenges, especially as it begins to displace more people from jobs.

As with AI in general, technological unemployment is going to happen.  Yet some humans are still going to be involved. Trudy Salandiak of the Chartered Institute of Procurement & Supply is quoted (June 2019) as saying: “Unlike many professionals, we think procurement will be future-proofed from being completely taken over by technology due to the human interaction and relationship management required.”  This is true, but the human interaction will need humans who understand the technology and what it does, not just in the present but what it might do better in the future.  Our advice to procurement professionals out there is, a) don’t panic, this change will be gradual, and b) because of this you have time to ensure you are up-to-date in your knowledge of both the practical, data-driven benefits of AI and the strategic dimension it can bring to your company.  But whatever you do, don’t think that you can ignore this.  AI isn’t just coming to procurement, it’s here now and it’s only going to get more important. 

LOUISE GAPP, CEDAR RECRUITMENT