ForeStreet: AI & automation a procurement 'force multiplier'
AI and automation can add a huge amount of value to all facets of an organisation's procurement process, not least how it acts as a "force multiplier", shortening sourcing cycles and freeing up time to accelerate other activities.
These are the views of David Doyle, CEO and co-founder of Forestreet, whose AI-driven SaaS platform enables real-time market and vendor discovery across geographies and languages.
He adds: “Utilising AI can also broaden the supply base, scanning and analysing more potential suppliers in a fraction of the time. This boosts innovation by surfacing more pioneering vendors. Commensurately, leveraging AI for supplier identification can increase supply chain diversity. Using such a broad dataset can remove proximity bias by including a wider range of options, and removes the need to rely on the opinion of a single group of experts.
“The ability to rapidly identify and onboard an alternative vendor also provides the best defence against continuing disruptions. AI also helps de-risk the supply chain, by surfacing anomalies and problems with vendors earlier in the process, before time has been invested researching these options or before supply challenges occur.”
Of course, all of this leads to better, data-driven decisions made at pace, reduced inefficiencies and boosted innovation.
Some procurement AI home truths
Most people construe AI and automation in terms of either Hollywood renditions or through the narrow windows of their proximate experiences. Doyle reminds us AI is an umbrella term, which includes a wide variety of different software and algorithms.
He says: “Maybe when we think of AI, we jump to images of self-driving cars or virtual assistants, like Alexa and Siri. But AI is much wider than this. Talking about AI in procurement really refers to any software that has the capacity to learn specific tasks.
“These technologies can include machine learning (ML), a type of pattern-recognition AI which uses past behaviour to make decisions or predictions, and Natural Language Processing (NLP), specific algorithms that can analyse, read and understand human language.
“Clumping these different technologies together can cause confusions for operational teams who are not experts in this area.
“Another misrepresentation building on this confusion,” says Doyle, “is that we still often have a tendency to view AI as something highly futuristic. Yes, large amounts of AI technology is incredibly cutting-edge. But AI technologies are already embedded into many procurement processes and are used every day across almost every aspect of our lives.”
According to Deloitte’s 2021 Global Chief Procurement Officer (CPO) Survey, 50% of CPOs say their company is using or piloting an artificial intelligence or cognitive intelligence solution. “There is still a long way to go,” says Doyle.
“But AI is not something in the distant future. It’s an already well-developed technology that many procurement functions have implemented. And any companies not already using AI solutions, really need to think seriously and quickly about how they can start leveraging this technology, or else risk falling behind.”
Barriers to AI adoption in procurement
When asked about what he believes the main barriers to successful AI and automation adoption are, Doyle says: “Likely, it will be many of the same spectres that have haunted digital transformation strategies throughout the decades: poor communication between siloed departments, concerns about costs and complexity, lack of knowledge from the leadership and the reluctance to change ingrained habits, among others.
“Talent-related and cultural issues pose one of the largest challenges for organisations looking to adopt new technologies.”
He adds: “Some of these fears are well founded. Historical patterns can ‘drift’ from reality, so the models need testing and maintenance. New skills are required for this – even if it is just to understand what to watch out for.
“We also need to think of augmentation as well as automation. We often talk about the latter when reducing the headcount amongst your colleagues is an appealing prospect to only a very small number of colleagues. We need to focus instead on how AI can augment the procurement function, giving them the ‘superpowers’ to delight their business customers. This simple shifting of perspective will move the mood-music from trepidation to enthusiasm.”
And don’t be afraid to start small, Doyle advises. “You don’t need to overhaul everything all at once to immediately start gaining significant advantages from using AI in your supply chain. Adopting specific AI tools to supplement different parts of the procurement process can be an effective approach.”
Automation drives productivity and sustainability
Doyle believes that AI will play an important role in driving greater productivity and sustainability. “One immediate advantage,” he says, “is that using AI can ‘supercharge’ and speed-up the procurement process. AI can identify patterns, dramatically cut sourcing cycles and automate mundane tasks, freeing-up time for members of the procurement team to take on a more strategic role.
“In terms of sustainability, AI again will have a big part to play. As Environmental and Social Governance (ESG) become increasingly important, procurement teams will need to be more vigilant about suppliers, and modify the selection criteria to incorporate these concerns. Using AI can assist with this process; enabling companies to prioritise suppliers with strong ESG credentials right from the start; saving time and effort, and ensuring a more ethical portfolio of vendors.”
He adds: "The ready availability of high-quality data means more accurate, strategic decisions can be made internally, and in response to changing business needs. Companies are increasingly going to be demanding up-to-date and even real-time information that they can generate themselves, and it’s likely to become more and more noticeable if procurement teams are basing decisions on outdated, historical data and trust in existing trends. We need to bring this new context into our technology roadmap for procurement.”
Future of AI & automation in procurement
Doyle says: “The future of AI and automation in procurement is exciting. There are likely to be huge steps and advances in the capacities of AI in years to come, from improved decision-making capabilities to AI being able to successfully play negotiating roles.
“New ethical challenges will also arise as AI takes on greater responsibilities in procurement processes, such as questions around AI explainability and transparency. But perhaps the most dramatic change is simply going to be how we view AI in procurement. More and more, AI is just going to become the way that things are done.”
“The procurement function itself is in flux,” says Doyle. “Procurement teams have been dragged into the spotlight as logistics disruptions and production shifts cause supply chain issues and ESG concerns become more pressing, with customers demanding greater transparency and ethical awareness.
“As the pressure bites, AI will be crucial for enabling companies to respond effectively and at pace, and pave the way for a brighter, more sustainable future for procurement.
“Just like choosing whether to focus on ESG and sustainability concerns will not be optional, adopting AI technologies will also become a necessary part of the procurement technology roadmap.”