Artificial Intelligence: How does it benefit procurement?

Artificial Intelligence benefit in procurement
April 23th, 2019
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With the Fourth Industrial Revolution now under way, new technologies have great potential to boost company performance. However, some will play a greater or lesser role than others in the digital transformation of procurement. Two technologies stand out in particular: RPA[1] and Artificial Intelligence. However, while RPA can be clearly defined, Artificial Intelligence encompasses diverse and varied technologies, so much so that it can sometimes be a bit of a maze. In a recent study, GEP[2] looked at applying Artificial Intelligence to procurement and logistics. A definition and six key benefits from this study are detailed below.

Artificial Intelligence: Definition

The term "Artificial Intelligence" encompasses a set of applications that can act "intelligently" such as Machine Learning (ML) and Natural Language Processing (NLP). This implies that machines can perform tasks that require capabilities specific to the human brain, including reasoning, autonomy, searching for information and learning.

In the psychological sense of the term, it is this cognitive aspect that sets Artificial Intelligence apart from traditional programming, or in other words, the resources and processes that are used to acquire knowledge.

Artificial Intelligence technologies are able to handle unstructured environments and develop a continuous learning process.

Artificial Intelligence: Six key benefits for procurement

Artificial Intelligence (AI) has concrete advantages when used in a procurement context, that can be arranged into six categories in line with the study:

  • Information

AI provides more real-time information, which facilitates and improves decision-making within procurement teams.

  • Productivity

AI reduces the average time required to complete purchasing processes by 25% to 60%, as it can run 24 hours a day, 7 days a week.

  • Implementation

AI is profitable approximately eight weeks after it is implemented (provided that the data is correctly defined and organised).

  • Savings

Additional savings of between 5% and 40% can be made with AI thanks to spend analyses and the supplier base.

  • Quality

AI ensures consistent quality by reducing manual tasks.

  • Costs

AI reduces processing costs by between 30% and 40%. For example, simple tasks such as tier 1–2 technical support can be performed by chatbots.

As with other major technologies (RPA, Internet of Things, chatbots, Blockchain), Artificial Intelligence gives us a glimpse of a new future for procurement services, with a strategic shift and high value-added tasks that rely on purely human knowledge (interpersonal knowledge, influence, creativity etc.).



[1] Editor's note: "[Robotic process automation solutions] can process any input data by running a series of pre-programmed actions, like a macro, and following predefined business rules".   

[2] Global leader in digital procurement & supply chain solutions