In our many conversations with procurement professionals and leaders across the sector, a consistent problem is the various ways in which procurement sometimes lags behind other parts of any given business. The upside to this is the innovative companies that spring up to solve these issues.
Arkestro was spawned due to the ongoing issue of how long it takes to collect and compare supplier quotes. As a predictive procurement orchestration solution, Arkestro sits in the quoting process between companies and their suppliers. It leverages behavioural science and game theory to create much faster procurement cycles and better cost outcomes at scale. It does this in a radically simple way, enabling procurement to use predictive AI to act first in the negotiation, or generate counter-offers based on data.
“By using predictive AI to be proactive, procurement is in the driver’s seat with the supplier from the get-go,” explains Edmund Zagorin, Arkestro’s Founder and Chief Strategy Officer. “It allows you to unlock areas of value that the more reactive procurement process can’t do.”
We caught up with Zagorin at DPW NYC in June to discuss the state of procurement and how AI relates to it, as well as the current roadblocks stopping procurement from being the best it can be. One of the main issues discussed across the event was the talent shortage.
Addressing the talent shortage
According to Zagorin, that challenge shortage isn’t going anywhere – not without a serious overhaul to make procurement look much more appealing, at least.
“There’s a talent shortage in a lot of back office roles, not just procurement,” he explains. “The one in supply chain, though, is expected to get worse. It’s most acute in developed countries where jobs in warehouses, tracking, and admin jobs come with low pay. They’re very stressful and don’t have great options for career advancement. This creates challenges with hiring and retaining talent.”
One of the many great things AI is doing for procurement is to make roles more attractive. AI is becoming an increasingly integral part of the future workforce and is creating new job opportunities for people. AI also allows people to focus on being more strategic in their jobs rather than pushing papers all day and other admin tasks that can be automated.
“I think we’re going to see AI orchestration that runs across multiple embedded platforms,” says Zagorin. “That has the potential to dramatically improve the quality of day-to-day procurement work. In the short term, this will help address the talent shortage by making it more appealing.”
AI as a strategy
Adopting these kinds of AI solutions across procurement is the biggest trend in the sector right now, according to Zagorin. AI as a procurement partner was discussed extensively at DPW NYC, but one of the takeaways from several speakers was that AI is not just a tool – it’s part of the strategy.
“There was a survey done recently about the biggest problems businesses are using AI and procurement to solve,” says Zagorin. “Number one for many companies is something called ‘inflation clawback’. During the pandemic, most suppliers raised their prices across categories, and they haven’t subsequently decreased those prices. Companies that have cost reduction programs know they need to be asking for reductions systematically and competitively. They need to be benchmarking themselves against their peers, and assessing whether they’re leaving money and value on the table.”
“The second problem is the talent shortage. Some businesses are being motivated to leverage AI to make the job more attractive to new recruits. But there are some jobs which are particularly difficult to hire for. As technology matures, AI is increasingly becoming a core skill that humans must learn how to use successfully. Failure to learn how to utilise the likes of generative AI correctly could prove costly as AI models continue to develop and companies adopt new processes at speed.
Solving decarbonisation
“The third biggest issue AI is helping to solve is decarbonisation. This is a big deal in Europe especially, with some of the world’s largest logistics companies having decarbonisation programs in place, and/or an internal carbon tax. “This carbon tax is implemented through procurement,” says Zagorin. “If you spend money on something that increases emissions, you pay for the cost of those emissions out of your budget. That money goes into a slush fund and gets redistributed to people who reduce carbon. So, this is affecting headcount plans, budgeting processes, and it’s creating real behaviour change.
“As that becomes the norm more and more in Europe, it’ll begin to cross the Atlantic and you’ll see US corporations begin to adopt that as well,” Zagorin continues. In order to do that, businesses need to be able to measure the carbon cost of a gallon of fuel per mile travelled for the mode of transport in a lane of logistics. And here, AI is able to step in once more.
“This is a data-intensive taste. So that’s something else where we’re seeing AI playing a role. It’s helping compute, track, and forecast the carbon cost of various logistics, footprints, networks of freight, and procurement activities.”
