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Artificial Intelligence is transforming procurement in this new digital age impacting the procurement function of enterprises. McKinsey & Company recently surveyed 3,000 global C-level executives and figured that investment in Artificial Investment is growing by leaps and bounds. This growth, led by technology giants such as Google and Baidu, also includes many automotive and financial services companies of global eminence.
The McKinsey survey also reports that the transformation and adoption of Artificial Intelligence in procurement outside the technology sector is still in its early and experimental stage deployed by only a handful of companies. 20% of the surveyed indicated their usage of AI-enabled technology using artificial intelligence in procurement at scale or as a part of their core businesses. AI can lead to significant cost savings through advanced data analysis and pattern recognition, optimizing operational costs and generating more advantageous terms.
According to McKinsey, the application of AI (Artificial Intelligence in procurement) spans many corporate functions and includes Artificial Intelligence is transforming procurement as well. Starting from improvement in forecasting to optimization and automation of operations, including the development of target-marketing and pricing initiatives, AI is a big boon that can bless user experience tremendously. AI can be integrated into existing procurement systems without a complete overhaul, allowing companies to leverage their current infrastructure and data sources while targeting specific pain points.
In the study, McKinsey made an interesting observation about AI and procurement. The observation highlights how tech-savvy companies that have seriously undertaken digital transformation are yielding the same profits as those heavily invested in artificial intelligence. From this observation, it is fairly conclusive that companies should no longer delay embarking on their digital transformation journey through the adoption of technologies aided by AI and procurement. “Early adopters are already creating competitive advantages, and the gap with the laggards looks set to grow,” McKinsey warns.
Try the power of Artificial intelligence in Procurement with our guided demonstration of the use of the Merlin AI suite for your procurement and contract functions.
AI and procurement have been known to drastically improve the forecasting accuracy of end-customer demand for finished goods and material requirements. The trends and patterns that AI and procurement bring to the table are not evident in traditional forecasting methods relying largely on historical data. The accuracy of demand for as-yet-to-be-ordered finished goods generated by AI, based on the data it is fed, helps procurement organizations satisfy those requisitions in a far more efficient manner.
Accurate and repeatable inventory projections generated by Artificial Intelligence render clear competitive advantage when compared to traditional forecasting unsuitable for processing and analyzing vast quantity of data. And talking about data, product descriptions, inventory mapping, product seasonality, customer brand perception arising of product quality, advertising campaigns, local conflict and labor strikes, media coverages, and a lot more, are all well harnessed by AI technology to the benefit of the entire supply chain.
What is Artificial Intelligence in Procurement Used for?
| IN A NUTSHELL, AI HELPS IN | |
| ENHANCED DELIVERY COMMITMENT | Reduce manual intervention, and processing windows |
| EXPEDITED PROCESSES | Optimize processes, increased data processing, and enhanced productivity |
| ACCELERATED SCALABILITY | Deployment of scalable and flexible virtual workforce at effective pricing |
| IMPROVED REPORTING | Immediate insight with granular visibility through dynamic dashboards |
IMPACT OF AI ACROSS FUNCTIONS
AI supports procurement teams in various tasks, enhancing efficiency and decision-making.
1. Sourcing
Over the years it is noticed that Artificial Intelligence has become more human than ever. It can read your sourcing patterns and behaviors, and connect you with the best suppliers. This saves you time for strategic activities including supplier selection, negotiation, and value assessment for what worth it is. AI also helps in proactive risk management, identifying and mitigating potential risks early. AI can optimize supplier relationships, ensuring mutually beneficial terms and conditions.
2. Contract Management
With Zycus’ AI-based iContract feature known as Smart Assist important contract date(s) can never be missed. Its prompt for renegotiation, uploading multiple contract line items, and viewing of the contract outline without having to download the document, keep supplier performance on check. AI optimizes supplier relationship management, making it more data-informed and strategic. Natural language processing (NLP) can help in interpreting and generating human languages in procurement chatbots and supplier discovery.
3. Purchase Order Processing
Intelligent software that processes your order only when it is aware and you have the permission to order it. This is one simplified click unless in exceptional cases where a professional’s intervention is needed. AI can automate repetitive tasks like invoice processing, streamlining the entire procurement process. Robotic Process Automation (RPA) can further automate repetitive tasks, reducing errors and processing time.
4. Savings
How can procurement prove its worth to the organization? It is only feasible through the measurement of savings in real time. ZYCUS’ intelligent solution helps cut the arguments around ‘percentage realized’ and helps assess every order and invoice against the already agreed upon savings goal. Procurement professionals play a crucial role in leveraging AI technologies to achieve better outcomes and drive operational excellence.
5. Spend Analysis
The industry that is so heavily analytics based because it has to munch so much data from all over, the rescue is an AI-based spend analysis software that can extract real-time, granular insights from enterprise spend data. Machine learning can improve spend analysis and decision-making by identifying patterns and trends in the data. AI also plays a significant role in supply chain management, transforming procurement processes and enhancing strategic value.
We at Zycus have taken the first step towards a new era of AI in procurement processes. If you would like see Zycus AI Merlin Suit in action, we would be happy to set up a one-to-one Demo for you and your colleagues- Request a Free Demo.
Related Reads:
- Blog – Sustainable Procurement For Compliant, Future-Ready Enterprises
- Blog – The Future of Finance: Tackling the Evolving Accounts Payable Challenges in 2023
- Merlin AP automation AI procurement software Solution
- White paper – 6 Essential Reports for Procurement Leaders
- White Paper – Procurement Leadership in the Digital Age: Redefining Technology, Agility and Adaptability
- Responsible AI in Procurement: Building Trust and Efficiency in the Supply Chain
- The Role of AI in eProcurement
- Elevating Procurement: The Strategic Advantage of AI Sourcing Chatbot
- Leveraging Generative AI to Unlock New Procurement Frontiers
