The constant disruption of supply and the current climate of geopolitical and economic instability means that procurement has never been a more pressing requirement to become an essential business function. This is driving the rise of AI and machine learning (ML) solutions for automating the more non-serious aspects of purchasing – which, historically, were a time-waster for the industry.
Procurement leaders are expected to oversee the implementation and management of contracts in conjunction with internal stakeholders and suppliers. Their teams are expected to help manage the vendor cycle, including areas like ESG Risk and performance requirements.
There’s now a variety of automated procurement solutions that take on the burden in these areas and more.
Chaplain implements the company’s fundamental technologies and designs decision intelligence workflows for multinational firms. “I am a passionate evangelist for data science and machine learning to enable predictive, self-healing supply chains,” she states. “I guide customers in transformational projects so their systems can react to supply issues autonomously and in real-time, including communication with n-tier suppliers and contract manufacturers.”
Below she shares her experience and knowledge of procurement automation.
Do procurement teams face challenges?
- Teams in procurement are frequently forced to operate reactively instead of proactive.
- They must balance strategy and execution while making day-to-day, and sometimes daily, decisions, responding to the volatility of logistics and supply chain, and ensuring compliance and costs, as well as other duties.
- Oft, teams are forced to make decisions that are not fully based on context, in addition to considering that the amount of decisions to be taken has risen to the point of a team’s capacity to cope with them.
- Additionally, procurement teams often depend on siloed technology systems or business practices that do not offer real-time transparency.
- In many instances, decision-making is delayed due to complicated issues due to the slow speed of human cooperation and the need for alignment.
- The information must be gathered and analyzed from data lakes, spreadsheets, emails, or faxes.
- Traditional methods for capturing knowledge and determining the most effective actions aren’t enough to keep up with the competition. A true digital transformation in procurement requires technology that can enable quicker, more precise decision-making.
What technological innovations will impact the future of procurement?
Decision intelligence – the capacity to digitize, enhance, and even automate decision-making is a rapidly growing trend. We’ve seen it create positive results for supply chain processes and companies using it in procurement, finance, and revenue management.
This is the latest frontier in digital transformation that allows procurement departments to improve the quality of their decisions across various tasks. For instance, procurement professionals typically have to respond rapidly.
But what do you do to a strategic supplier’s primary performance indicators are lowered?
When you use manual processes and lack of transparency, it can take days to determine the problem, then more days of analysis to determine options and decide. Decision-intelligence technologies like AI and ML can identify these issues in real-time. So, procurement teams can quickly analyze the data, anticipate the outcomes of switching suppliers, and then receive recommendations on the best course of action.
Once a decision has been made, the system writes back to the business systems to modify purchase orders and change the records. Problems with supplier performance are solved in just a fraction of the time.
Beyond just automating the repetitive process, it is also possible to save a digital copy of every decision made by the team, preserving valuable knowledge from the institution and enhancing the ability of the team to automate decisions to come.
What is the impact of digital technology on the way we buy?
Teams in procurement rely on information from orders of customers as well as safety stock, the overall cost of ownership (TCO), suppliers’ timely full performance, and many other sources. With so many time-sensitive decisions to be taken and a technology that allows them to collect all the data is changing how teams think and work.
Technology that automates and digitizes decisions can help break down barriers across the company that conceal process gaps. They give you the information needed to make informed decisions and improve quicker decision-making in the procurement department and across the entire business.
This method combines data science and digital technology to help understand business processes, provide recommendations, implement actions, and make better decisions and results.
Thanks to AI and ML continuously analyzing data, teams can consider many more variables when purchasing and supply chain decision-making than ever before. The system can identify patterns humans might overlook and allows teams to react quickly when market conditions change.
By recording the results of their decisions, procurement teams can (for instance) better comprehend the differences between actual and budgeted spending. They can balance the risk, cost, quality, and other aspects while ensuring that the decisions and their outcomes align with the business goals.
What are the advantages of automation for procurement?
With better tools for analyzing data and digitizing and automating procurement decisions, procurement teams are discovering new ways to reduce costs and savings.
One of the most beneficial results is better collaboration, communication, and accountability within the group and throughout the company and its entire ecosystem of suppliers, customers, service providers, and partners.
For example, a major consumer packaged goods firm employs decision intelligence to detect purchase price variance (PPV) in direct material procurement. This allows the company to detect and fix issues caused by inaccurate master data, misalignment of pricing data between different systems, purchase invoices and orders not conforming to contracts, and manual price changes.
Instead of relying on spreadsheets for identifying holes and then communicating with suppliers to make corrections, the business has now identified issues automatically triggered by auto-generated suggestions to make corrections and then automatically deferring to a supplier for closure, removing the requirement for manual intervention.
Not only has the business rapidly streamlined its PPV management and collaboration with vendors and collaboration, but it also discovered practices that aren’t in line with the procurement process across the entire company.
Procurement teams in a variety of industries can achieve these kinds of transformations. And the companies that take this step now will be better prepared to develop new ideas for the future.