So, you’ve heard of AI, right? That fancy tech that seems to be everywhere from our phones to our fridges. But did you know it’s making waves in the world of procurement? Well, it is. The days of manual data input and lengthy supplier evaluations are being replaced by the precision, efficiency, and intelligence that AI brings to the table.
From the game-changing capabilities of predictive analytics, which foresees market trends and optimizes purchasing decisions, to natural language processing tools that enhance supplier communication and data extraction—AI is revolutionizing how we understand and manage procurement.
In this article, we’ll examine the impact of AI on procurement and how it’s being used to drive business success. So, let’s get to it!
First off, we have to talk about predictive analytics. Predictive analytics uses machine learning algorithms to analyze procurement data and identify patterns and trends. It dives deep into procurement data, fishing out information that us humans might miss. With these insights, businesses can identify potential cost savings opportunities, optimize procurement processes, and make more informed procurement decisions.
So how does it work? It can be used to analyze supplier performance data, for example, identifying patterns of on-time delivery or quality issues. When you identify these patterns, you can work together with suppliers to address these issues and improve their performance, reducing costs and improving efficiency.
Natural Language Processing
Next up, there’s natural language processing (NLP). NPL basically means we can chat with our software to get the information we need, like with voice commands, typing out demands – you name it. And what does this mean for procurement? Fewer boring manual tasks! Using NPL can help streamline procurement processes and reduce the need for manual intervention.
Let’s say you need to whip up a purchase order or sift through invoices. Instead of clicking away for hours, just talk or type your needs, and the software will handle the grunt work, creating or processing the necessary documents for you. That way businesses can reduce the time and resources required for manual procurement activities and improve process efficiency. Neat, huh?
Supplier Relationship Management
AI is also being used in supplier relationship management (SRM) to ensure that suppliers are meeting performance expectations and delivering value to the business. We know managing suppliers can be tricky, and being able to track performance versus value for cost can demand a lot from your team, not to mention the tool of onboarding new suppliers into your systems.
AI can automate those processes, such as verifying information and ensuring that suppliers meet the necessary qualifications. It can also be used analyze data such as on-time delivery, quality, cost, and any other metrics essential to your business. This can help procurement professionals identify potential issues early and take corrective action, improving overall supplier performance and reducing costs.
Another area AI can vastly improve efficiency in is contract management, helping businesses to streamline contract creation, review, and management processes. AI can automate contract review processes, such as analyzing contract terms and identifying potential risks or issues.
Going through suppliers’ contracts line by line with a fine-tooth comb can be extremely cumbersome and time consuming for procurement teams, and so a lot of valuable information that can help correct unused tools, incorrect charges or improve efficiency in supplier services are left on the table. But AI can spot unclear language or contradictory terms, helping us fix problems done in the past and prevent future legal and financial headaches.
Last but not least, we have spend analysis. AI acts like a detective here, providing businesses with greater visibility into spending patterns and identifying potential cost savings opportunities.
AI can be used to analyze procurement data, identifying areas of inefficiency or waste, and
making suggestions for cost efficiency such as grouping suppliers together or striking a better deal elsewhere. By getting a clearer picture, we can make moves that save money and boost efficiency.
To sum it all up, it’s pretty clear how much impact AI is making in the procurement industry, as so many tools now tailored to service the sector include the boost of AI to improve processes. From making predictions to simplifying contract terms and everything in between, AI is being used in a range of applications that are key to maintaining business a step ahead of their competition, guaranteeing cost efficiency, better supplier management and improved contract management. Are you on the AI wagon yet?