December 06, 2023 | Procurement Software
Nothing perhaps has made more news in the world of business in 2023 than the breakthroughs in artificial intelligence.
In particular, the rapid evolution of generative AI has sparked tremendous interest, suggests a recent survey conducted by Foundry for GEP to discover enterprises’ supply chain technology modernization plans.
Despite some initial reluctance and concerns over ethics and security, business leaders today unanimously agree that AI is going to make a huge impact on all functions.
Not surprisingly, businesses of all sizes have accelerated technology adoption across different verticals.
How will this affect procurement?
Like other functions, the adoption of AI can transform several processes in procurement.
Sourcing and supplier selection, for example, can become more strategic by aligning the process with larger business objectives. Contract management can become simplified and risk-free.
Likewise, procurement can leverage technology and insights generated to effectively manage suppliers and make informed, data-driven decisions.
The AI-first approach to procurement enables the function to leverage data and technology at every stage of the source-to-pay process. Market analysis, supplier selection, contract management, vendor management and invoice processing – technology can automate several stages of the procurement cycle.
From a function that traditionally focused on manual, time-consuming and transactional tasks, the AI-first approach aims to transform procurement into a strategic function that can go beyond its usual responsibilities and deliver more value to the business.
In this process, it can focus on higher value projects across different functions of the source-to-pay process – risk mitigation, opportunity identification, value creation and strategic transformation.
The AI-first approach to procurement lends the function:
There are several benefits of deploying AI-powered technology in procurement. At the outset, the AI-first approach expands the overall scope of the function. It allows procurement to shift its focus from low-value, manual tasks to strategic tasks that can add more value.
The key factor driving this transformation is the easy access to data and intelligence.
“AI will change the access to intelligence and radically reduce the effort required to reach the correct information. What it does is remove the need for analytical skills and information retrieval routines between the requester and the data source,” says Paul Blake, senior director of product marketing at GEP in a recent GEP and Procurement Leaders webinar, Adopting an AI-First Approach in Procurement: What, Why and How.
Easy access to data and intelligence can simplify many procurement processes. Procurement can look through the data to quickly identify the most suitable suppliers based on pricing, quality, sustainability and other criteria.
Beyond supplier selection, AI can provide insightful recommendations to optimize supplier performance. It can also identify risks associated with suppliers and trading partners and suggest proactive steps to mitigate their impact. It can even recommend alternative suppliers to respond swiftly to unforeseen disruptions.
Generative AI tools have further simplified the process of extracting data and intelligence. By asking questions in natural language, procurement can get credible, data-backed answers for accurate spend analysis. They can derive useful insights from spend data and identify savings in different categories.
The Ai-first approach offers many benefits for procurement as well as the larger organization. Blake lists three main benefits of deploying AI in procurement.
Procurement can identify potential projects, suppliers and targets faster.
Teams can make better decisions by replacing subjective opinions with objective measurement and intelligence.
Procurement can reduce costs by automating repetitive tasks and eliminating errors.
Given the speed at which technology is evolving, the AI-first approach is no longer an option but a must-have for procurement. It can help procurement do more with less and achieve its objectives quickly and diligently.
AI can transform procurement from a backend routine function to one that can become truly strategic. And it can help to identify potential risks and navigate a period of growing uncertainty with ease.
Learn more about GEP’s AI-first approach to procurement.