AI Adoption Fast-Tracked, Say 46% Procurement Pros in SIG Survey

The adoption of artificial intelligence (AI) is fast transforming procurement and supply chain operations. But as procurement organizations and professionals prepare to embrace this technology, they are also likely to face many challenges.

Let’s first look at how they are reacting to rapid developments in AI.

Up to 19% of procurement professionals are still exploring the potential benefits of AI, shows a recent SIG research commissioned by GEP.

Another 28% are actively engaging in pilot testing of AI technologies in small-scale projects within procurement. Nearly 24% have gone beyond pilot testing by partially integrating AI into specific areas of their procurement processes.

Whatever phase of AI adoption they are in, procurement teams are aware of the huge impact AI can make on daily operations as well as their medium and long-term goals.

AI enables smarter decision-making and optimizes supplier relationships, says an interviewee in the research. Another interviewee believes the ability to foresee market conditions and optimize strategies with predictive analytics will be key to securing a competitive edge.

Challenges of AI Implementation in Procurement

The adoption of AI has been fast-tracked compared to other IT investments, say 46% of study respondents. This shows organizations recognize this technology as a catalyst for change and competitive advantage.

But the full-scale implementation of AI poses several challenges for procurement teams.

To begin with, there is a dearth of talent that specializes in technology implementation. Nearly 36% of study respondents have identified talent acquisition as a significant challenge in AI-based procurement transformation. Cultural resistance within organizations is also not easy to overcome, say another 36% of respondents.

The biggest challenge, however, is data management, with 41% of respondents stressing the need to invest in robust data management strategies. Maintaining data quality and privacy are top priorities for procurement. Harmonizing old and new data, achieving real-time analysis and secure vendor data sharing also pose challenges.

Navigating legal and regulatory concerns in AI adoption presents another challenge for procurement, as suggested by 27% of respondents.

Talking about cultural shifts, technical challenges and adapting to new ways of working, an interviewee emphasized the need for training, change management and gradual integration into existing practices.

Another interviewee believes human interaction is irreplaceable in certain facets of procurement. The coexistence of human and AI intelligence is therefore a concern.

Adopting a Phased Approach to AI Implementation

Organizations should undertake AI implementation in procurement in a phased manner, focusing on key areas or functionalities at a time while ensuring compatibility with existing systems. Such an approach can allow a systematic and controlled transition to AI-powered tools, say 27% of respondents.

However, 25% of respondents prefer a more radical approach and plan to completely replace their existing system with an entirely new digital procurement system in a single instance. Another 23% plan to take an incremental approach by gradually enhancing specific components or modules of their existing system while keeping the overall architecture intact.

The choice of approach in AI implementation ultimately depends on an organization’s specific needs, workforce readiness and goals. While some may prefer an incremental or phased approach, others may be more prepared and willing to embrace comprehensive change.

Also Watch: Adopting an AI-First Approach in Procurement: What, Why and How

When to Expect Return on Investment

Experts have varied opinions on when procurement can expect return on investment with AI adoption.

While 16% respondents anticipate short-term gains and significant returns within the first year of AI implementation, 24% expect gradual returns, with ROI realized over several years. The latter group of respondents foresees benefits to accrue steadily over a period as the technology matures and becomes more integrated.

26% respondents believe AI is a long-term investment and benefits can be realized in the long run. ROI can vary depending on the specific AI solution and its application, say 19% of respondents.

Yet 14% of respondents are uncertain about ROI at this time, considering the challenges involved in AI adoption.

Ultimately, the ROI timeline can depend on organizational readiness, strategy and dynamic interplay between technology and business goals.

For organizations, it is important to invest in continuous learning by conducting training programs, workshops and collaborations. This will help the team acquire key skills and get well-versed in the latest AI technologies.

To know more about how procurement can deal with the initial challenges and succeed in AI-first digital transformation, read the GEP white paper.