18 Must-Have Negotiation Skills For Procurement Professionals

AI in ProcurementThe Ultimate Guide of 2023

AI in procurement is growing in popularity due to the advancements in technology. But how does it change the procurement industry?

For this article, we will discuss how AI helps the procurement process. We will explore how it develops the procurement process in this modern age.

After reading this article, you will understand the huge role that AI plays in the field of procurement. You will know its importance and why many businesses utilize it in their procurement process.

What isAI? 

Artificial intelligence is integrated into every device that is available today. But what is it? Artificial intelligence (AI) is the ability of a digital computer to simulate or mimic human intelligence processes. 

Artificial intelligence systems work by learning and analyzing the data for correlations and patterns to make predictions of future states. AI programming focuses on three skills which are reasoning, learning, and self-correction. 

AI is intended to help enhance human capabilities and to make tasks simple and fast to process. It does not intend to replace humans like what people think due to its integration into everything we use nowadays.

What is AI in Procurement?

When we think of AI today, we first think of robots that are capable of doing human tasks. We even think of Siri and Alexa when we talk about AI. However, this is just a part of the large scope of AI. 

Artificial Intelligence (AI) is always used in every aspect of our lives. Almost everything that we use is AI-driven and AI-based. 

The following are some of the examples where AI is used today:

  • Self-driving cars
  • Manufacturing robots
  • Virtual Assistants
  • Chatbots
  • Natural language Processing tools
  • Facial Recognition
  • Navigation Apps
  • Media Recommendation 
  • Online Banking
  • Smart Appliances
  • 3D Photography

AI is changing procurement. It automates many time-consuming tasks that improve the procurement process. AI also gives additional insights to procurement professionals based on complex sets of data. 

AI in procurement is a software solution that intends to resolve tasks in the procurement process. Because AI is software, it has a huge potential to improve and adapt any work practices no matter the size of an organization.

Many people misunderstood AI. In terms of procurement, AI is not a sentient being that is capable of replicating human movements like what you see in movies. 

AI should not be considered as a replacement for human expertise but a thing to help the procurement process. Many AI software still requires the active assistance of a procurement expert. 

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    Typesof AI in Procurement

    1. Machine Learning (ML)

    Machine learning is an algorithm that detects patterns. The detected patterns are used for prediction or decision-making in the procurement process.

    2. Robotic Process Automation (RPA)

    This algorithm copies human actions to reduce repetitive simple tasks. Although RPA offers many opportunities for procurement to improve, it should not be considered AI.

    Think of RPA as a software robot that copies human behavior while AI is the simulation of human intelligence.

    3. Natural Language Processing (NLP)

    Natural language processing is an algorithm that interprets, generates, and transforms human language. It can also analyze and understand the human language. 

    How Does AI Fit in the World of Procurement?

    We all know that in the past, many processes in procurement were done manually. The integration of AI in procurement has simplified the tasks in procurement. AI allowed procurement to comprehend complex data and solve issues using computer software.

    You can embed tasks like strategic sourcing, spending analysis, and contract management into an algorithm to do it efficiently and produce the actionable insights you desire. 

    AI has helped many professionals to interpret data faster than ever. This allows them to gain an insight to fix the problems in the procurement process. This is something that humans cannot replicate due to its complexity. 

    How Does AI Help Procurement?

    1. Better decision-making

    Artificial intelligence provides data-driven insights to allow procurement professionals to make better decisions. 

    2. Identify new opportunities

    Artificial intelligence can uncover new opportunities by searching through the vast amount of its gathered data. 

    3. Enhance business operation

    With the help of artificial intelligence, the process in every business is streamlined and it also aligns the procurement plan to the business objectives.

    4. Automate manual tasks

    AI can automate repetitive menial tasks that consume too much time in the procurement process.

    5. Saves time

    AI takes care of the repetitive tasks in the procurement process. This can make the procurement team focus more on other strategic tasks such as supplier relationship management.

    6. Identify new potential suppliers

    AI has access to a vast amount of external data. Through this, AI can help every business to search for new suppliers in the market.

    7. Improve supplier relationships

    AI improves supplier relationships by allowing your supplier to be more data-informed. This will allow your supplier to do his part thoroughly and help you in critical times. 

    Procurement AISoftware

    1. Keelvar

    Keelvar uses machine learning to recognize bid sheets. It also has specialized category-specific e-sourcing bots. It is the ideal software for enterprise-level clients that want to remove complexity in supplier sourcing. 

    2. Seal Software

    Seal Software is now acquired by DocuSign. It can automatically scan and interpret lengthy and complex legal documents.

    3. Tealbook

    Tealbook unifies your system and optimizes your suppliers by delivering a supplier data foundation. It uses machine learning to discover new suppliers found on the internet. 

    4. ChatGPT

    ChatGPT is a large language model chatbot that was created by OpenAI. It is a trained model which interacts in a conversational way. The dialogue format makes it possible for ChatGPT to answer follow-up questions and reject inappropriate requests. 

    Procurement professionals may use ChatGPT to generate responses that you can use for your customers when they are buying your products. Additionally, ChatGPT can help you write purchase requests to your suppliers without the risk of human errors.

    Best Practices of AI in Procurement

    1. Start it on existing processes

    AI is not some kind of magic that can automatically grant your desires in the procurement process. 

    The value of AI in your process will not come to new applications but by integrating it into your menial tasks that consume too much of your time. 

    You can also embed it into your spending analysis and contract management to improve these processes. 

    2. Capture all procurement data you can gather

    You should start collecting data even if your data quality is not yet perfect. The key is to gather data as much as possible because AI can help you interpret the data you have collected.

    3. Experiment with it

    AI has improved in a lot of ways in the procurement process. But, there are still many things that have not yet improved. 

    Allow your AI technology specialist to experiment with ways to help your procurement processes. Make allowance for mistakes. After all, that is when you will learn. 

    4. Enable collaboration

    You must know that AI in procurement demands the active support and guidance of a procurement professional. 

    You should plan for human and machine collaboration. Do not replace your team with AI. Instead, use AI to increase the expertise and productivity of your team. 

    Mythssurrounding AI in Procurement

    1. AI will replace human

    Many people fear that they will lose their jobs when AI is implemented. This fear is genuine and understandable but this is far from the truth.

    Many people fear that they will lose their jobs when AI is implemented. This fear is genuine and understandable but this is far from the truth.. However, it can be offset by redirecting these people into other sectors that will contribute more to the organization. 

    AI can perform many things but it cannot replace the cognitive and emotional intelligence of a human.

    2. AI requires great effort to adapt

    We know that letting go of something that you are used to is so hard because we have been there. But you must remember that all new things you will pursue require great effort to master which is also true in procurement.

    No one can deny that the initial step is hard. But once it has been employed, over time you will adapt it and you will see AI’s efficiency in the procurement process. 

    3. AI is time-consuming and expensive

    AI can be expensive but over time you can see how it can reduce costs in the procurement by streamlining the procurement process. 

    To answer if AI is time-consuming, it is with great confidence that we can say no. As a matter of fact, one of the benefits of AI is to eliminate time-consuming tasks in your procurement procedure.

    Frequentlyasked questions

    + What is AI in procurement?

    AI in procurement bridges the gaps between systems and technologies to provide solutions in the procurement process.

    + Is AI important in procurement?

    Yes. Modern procurement needs to have AI to ensure its efficiency and effectiveness.

    + Who uses AI in procurement?

    Most businesses nowadays utilize AI in procurement to help them with their daily operations.

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