It is very beneficial to have a clear understanding of how artificial intelligence fits into the procurement process. This expertise is critical, especially as technology continues to advance.
Although the use of artificial intelligence in procurement is still in its infancy, there are several examples of its use in procurement. Some of the most common uses you'll encounter include:
Enhancing Data Analytics for Electronic Strategic Sourcing
AI can be applied to strategic sourcing, using natural language processing (NLP) to gather critical data such as supplier lists. Artificial intelligence uses data and spend analytics to change the way procurement works.
One of the main functions of artificial intelligence in procurement is to simplify the procurement process. This enables businesses to identify procurement issues such as:
● Uncompetitive or unprofitable payment terms
● Duplicate suppliers
● Wrong purchases
These issues could take several man-hours to identify without the use of artificial intelligence.
Another way to use AI in procurement is to enter the specific market you want to expand into. The software will forecast market prices, analyze and identify potential suppliers, and also help you evaluate any existing suppliers. By having a comprehensive understanding of these processes, your contract negotiations may become easier and more effective as you have easy access to all essential data.
Finally, AI can be used to collect real-time automation data, whether weekly, daily, or hourly. This enables procurement managers to make faster and more accurate decisions.
Spend Analysis
If there's one area of headache for procurement professionals, it's spend analysis. Ensuring your business manages risk and optimizes its buying power is critical to your bottom line.
AI can help businesses become proactive rather than reactive when it comes to spotting cost-saving opportunities. Detailed spend analysis data forms the basis for effective procurement, category and spend management strategies. Machine learning algorithms can be used to classify spending data into functional, structured, and normalized classes.
AI-generated data can provide a clearer and more detailed view of an organization's spend. In fact, Deloitte reports that AI-created spending classifications are 97 percent accurate. This is very good news for the procurement industry.
Contract Management
Contract management is an important part of the procurement process and needs to be done right. Managing contracts from all the key partners in your business can be time consuming.
According to a Harvard Business Review report, disorganized contracts can lead to a loss of up to 40% of enterprise value. This is due to issues such as:
● navigating through a large number of contracts
● differences in wording
● different levels of compliance and expectations of value across the enterprise
Although contract management has been digitized in some form over the years, The process still requires human input and analysis. This negates all of the value the approach was designed to provide businesses.
Using NLP can simplify the process, allowing businesses to automatically manage terms and conditions, deadlines, and anything else that needs to be monitored. AI systems can go a step further, with procurement management software providers providing you with automated contract management solutions where businesses have more visibility into contracts.
Error Detection
Humans inevitably miss some errors. AI can automatically detect errors or anomalies, such as market price changes, compliance violations, or even fraud.
Automation of Manual Tasks
There are countless time-consuming tasks in the procurement process. AI can automate remedial manual tasks such as invoice processing, where time is spent receiving, reviewing and paying invoices. AI can also assist in the procure-to-pay (p2p) process, which takes an average of nearly a month to process manually.
Managing Supplier Risk
One important application of AI in procurement is supplier risk management. AI can accurately and quickly identify sudden changes in suppliers or suppliers, and then identify whether such changes increase or decrease risk.
Traditionally, this process has been reactive, but with AI, the system can help you weed out high-risk suppliers with ease. You can easily avoid the hassle that comes with maintaining an ongoing relationship with these vendors or suppliers. This makes artificial intelligence an integral part of e-procurement strategies in the modern world.
inventory management
Managing inventory is an essential part of the purchasing business. Traditional methods are often time-consuming, require a lot of human resources, and are costly. AI is able to determine which inventory practices are right for your business so you can make the most of your available storage space.
8Manage AI Procurement Management Software
By now you may be aware of the power of artificial intelligence technology in procurement. With so many options in the market, it can be difficult to choose the right software for your business.
The modern procurement management software SRM closely tracks and manages every aspect of procurement, helping you realize end-to-end P2P process automation, control and collaboration, while providing real-time visibility.
Easy-to-use software gives you the tools you need for your procurement process to post new project opportunities to your supplier list, source and interact with suppliers in real-time, customize your project requirements, tender messages, and even submit requests to your Suppliers are evaluated for performance. It can all be automated and managed from the same platform.
From managing budgets to optimizing spending plans, SRM procurement management software also simplifies orders and ensures flexible transaction models. Improve efficiency by automating purchase orders, authorizations, and other business process management operations, allowing procurement organization personnel to complete more work in less time, achieving the efficiency, productivity, and savings you expect.