The procurement sector is changing. CPOs face increased demand for strategic innovation, sustainability leadership, and risk mitigation—in addition to traditional requirements valuing cost-containment.
As the role and nature of procurement shifts, however, procurement teams are finding themselves faced with a problem. Despite rising budgets, procurement teams are still facing the need to complete more work with fewer resources. This state of affairs is leading many CPOs to explore the opportunities presented by automation. In Conjunction with artificial intelligence (AI), and machine learning, automation has the potential to drive efficiencies in procurement. Not only that, but the technology also has potential to mitigate skill shortages in their workforces.
Alan Holland is an optimization, game theory, and algorithmic mechanism design specialist who heads up AI procurement company Keelvar. He believes that 2024 will be the year that “autonomous sourcing goes mainstream.” He adds that “This year will see the first enterprises conducting >50% of their sourcing events in fully automated processes. Tailored workflows for Indirect and Direct categories will automate sourcing for goods and services across all major industries.”
Automation in the procurement process
Leveraging AI and machine learning to build behavioural foundations built on advanced analytics, automated automated sourcing supposedly simplifies procedures, eradicates inefficiencies, promotes fairness, and identifies avenues for generating additional value throughout the procurement process.
Allegedly, the software framework that can handle up to “90% of the event tactical workload”. This means eliminating manual data management and identify patterns in previous procurement interactions. One of the leading causes of procurement disruption is human error across repetitive, low skill manual input tasks, which automation could alleviate. The result is that procurement teams better understand their operations with more time to focus on less repetitive tasks.
Procurement remains highly manual
While procurement teams have made promising initial steps towards implementing much-needed automation, truly impactful adoption remains a long way off. Recently, a KPMG report found that, although there has been significant automation of many elements of procurement in recent years, “many activities that can best be described as ‘transactional’ or even ‘swivel chair’ remain.” Also, jobs that involve advanced analytics suffer from “data gaps, system gaps, and resource gaps.”
The report’s authors argue for more autonomous forms of automation. Entities like bots could benefit procurement with the ability to fully or partially take over more strategic roles.
“More advanced bots can execute complex cognitive tasks that mimic human behaviour. In its most advanced form, bots can interpret vast amounts of data from multiple structured and unstructured sources, including text, voice, images, and video,” add the report’s authors.
“These bots can evaluate information and use specific algorithms and ontologies to simulate reasoning— make decisions based on a mix of evidence and probability—in a way that would mimic human actions. These bots can work alongside procurement professionals to streamline and improve some of the organisation’s most strategic activities, such as category management and supplier management. They can spot patterns in spend and operations, proactively seek market intelligence on suppliers and categories, and even provide coaching to both procurement and business users on the ins and outs of process and policies.”
