Defence Online

Make procurement smarter with artificial intelligence

Homeland September 17, 2019

Peter Kinder, CTO at Wax Digital, looks at the potentially significant advantages of successfully integrating artificial intelligence and machine learning within the world of procurement – and the challenges in doing so.

According to IT analyst IDC, spending on artificial intelligence (AI) systems will reach $77.6 billion by 2022. Many organisations are already automating tasks to be intelligent, and it’s getting more advanced as adoption increases. Some businesses use AI to detect fraud in online transactions, while others use it to segment customers for marketing purposes, and there’s scope for so much more. The rise in popularity of AI-controlled voice assistants is also playing a key role in the technology’s growth. This market alone, including the likes of Amazon Alexa and Google Assistant, is set to reach $7.8 billion by 2023.

But rather than rushing to implement AI, organisations should first consider if and where there’s value in doing so. Procurement is one function where the benefits of AI and machine learning are potentially huge.

Using AI to understand and sort data

For a long time, procurement has been focused on data collection. Every day, the function generates information on areas such as expenditure and suppliers, and only through rigorous analysis of this data can processes improve. For example, if procurement identifies that IT equipment budgets have been exceeded in one quarter, it can investigate the reasons why and take action; perhaps changing suppliers.

AI-enabled procurement systems have the power to spot worrying trends and alert the team automatically, removing the need for staff to spend time analysing data.

If AI is integrated with voice technology, organisations can also access key insights through a simple voice command. Just asking the system “How much did we spend on stationery in Q3?” can give a procurement professional the information they need instantly; quicker than sifting through order history.

Making payments seamless and accurate

Managing supplier invoices is difficult when an organisation uses hundreds of suppliers with different payment terms. An intelligent procurement system ensures that invoices are processed automatically when they’re received in different formats. It will match the supplier reference to the supplier data in the system to determine when payment should be made. It can then manage the process of approvals, forwarding the invoice to the person who has the power to do that, or approving it automatically by matching it to the agreed purchase order.

With the company’s policies, procedures and regulations programmed into it, the system can ensure that all actions carried out are in line with the organisation’s buying guidelines, and any errors in invoices can be identified automatically; taking away the need for employees to manually intervene.

Behaviour-driven AI, that learns as you do things

Procurement AI can also act as an intelligent advisor to team members. Rather than responding to what a human instructs or asks of it, AI can use machine learning to spot cost and efficiency savings. For instance, when new stock is required, the process typically relies on someone identifying a need for it and making a purchase requisition. The buying team then researches the best product based on several factors before placing an order. But, AI can utilise big data analytics and automate the buying process for employees. It can inform procurement when stock runs low based on previous buying patterns, and automatically find the best price before making the purchase.

We’re seeing vendors in the procurement software space developing AI to go beyond pure product suggestions, and have the ability to prompt employees to make orders when they probably need to do so. The platform has a procurement bot that tracks actions employees take and tailors interactions according to different user requirements. When an employee orders some new stationery every Friday, the system will ask that employee whether they want to place the same order every week on the same day, eliminating the need for them to remember.

Overcoming the obstacles

AI offers exciting prospects to improve procurement. However, organisations shouldn’t underestimate the challenge of equipping procurement systems with intelligent capabilities.

While voice-enabled apps that use AI such as Siri and Cortana are popular, these apps need to be able to turn what would normally be a few mouse clicks, keyboard types or touches into a single voice interaction. But a voice interaction should give the same response to a single question, without the user having to provide further clarity, as that’s what the technology promises. For example, a user might need to make ten separate mouse clicks on a procurement platform to answer a specific question such as “How much did each department spend on IT in Q1 2019 compared to budget?” The voice technology platform will need to be developed to know what actions should be performed to get this answer from this one question. Multiply this by the number of questions that it could be asked, and this illustrates the level of work required. eProcurement providers developing voice technology should focus on making this aspect possible.

Compared to consumer-based apps, developing voice and AI-enabled systems for business is challenging. Consumer systems generally don’t require the same depth of functionality. But, an AI solution in a business environment such as procurement needs to feature complex functionality such as PO approval, invoice processing or big data analytics to assess the cost-effectiveness of the products or services purchased. Providers of these platforms have challenges to overcome before it’s integrated into their offerings.

AI is set to transform the way we do procurement

AI doesn’t have to be a replacement for jobs when rolled out in procurement organisations. It can be an asset that makes day-to-day tasks more efficient and seamless, allowing employees to spend more time carrying out strategic activities. Procurement has scope to be enhanced by the rollout of AI, helping not only the department itself but also employees across the business. The journey begins with an innovative eProcurement solution that can take buying activities to the next level.

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Post written by: Matt Brown