AI in procurement: Projecting practical benefits

Artificial intelligence has had an eventful past few years. In that time, it has gone from sounding like a science-fiction concept to finding itself at the heart of some of the business world's hottest new tech deployments. There is an obvious appeal to this advanced form of analytics, as decisions made quickly based on highly accurate digital data can become sources of great efficiency across industries and functions. The supply chain is one of the verticals watching AI's development with great interest.

The dynamic nature of modern sourcing and procurement, with considerations that go beyond price negotiations, creates a potentially valuable use case for AI and other analytics approaches. While digitization in the supply chain hasn't become universally accepted yet, the potential use of advanced decision-making technologies is a compelling reason to forge ahead with this process. Supply chains that are stuck in too many legacy processes may have trouble reaping the benefits of effective data access.

Moving at industrial speed
In a Supply & Demand Chain Executive column, industry thinker Rajesh Kalidindi gave a few of the concrete improvements that could result from increased AI use in procurement and sourcing functions. These are valuable ideas to take in, as sometimes advanced technologies are accompanied by vague promises and generic ideas. Thinking about actual ways in which everyday functions could become better is a more direct way to get supply chain professionals excited about a new solution type.

"The speed and accuracy inspired by AI can revolutionize the contract negotiation process."

Kalidindi pointed out that the current engine of value creation in procurement involves using static data to try and make inferences about market conditions, then employing that insight to get ideal rates in contact negotiations. This is a time-tested form of value creation, but the speed and accuracy inspired by AI can revolutionize the whole process. Taking in constantly updated streams of raw data is a way to generate insights and alert leaders to opportunities, and the human brain can't process quickly enough to do it: Algorithms crunching the numbers can pick up on opportunities people would miss.

Such valuable insights coming from the procurement department can change the way the team is viewed in the rest of the company. Strategic sourcing, the increased presence of supply chain professionals in high-level business discussions, is closely tied to the technology procurement leaders have to work with. When high-impact analytics become a trademark of the supply chain, executives in other departments will sit up and take notice.

A diverse topic
The general concept behind AI - using digital data to make better decisions - has many granular applications in the supply chain and beyond. A 2017 SCM World article by Pierfrancesco Manenti noted the term encompasses everything from self-improving chat software to programs designed to give speech recognition and vision to digital systems. The current use cases, however, are largely based in making data processing better in fields that already process plenty of information regularly. Manenti stated this is why the supply chain is such a likely and valuable testing bed for the technology as it grows. The evolution of AI will play out in public, in departments including procurement.