Although traditional methods of procurement still exist in some organizations, more and more enterprises are turning en masse toward digital procurement — the practice of converting purchasing management processes from analog to digital information-technology-based systems. This transformation couldn’t come at a better time!
Artificial Intelligence (AI ) and machine learning technology can replace most traditional procurement processes offering better results and costs savings for companies. No technology breakthrough offers a stronger capability to transform service procurement than artificial intelligence (AI) and machine learning. These technologies can:
- offer extremely precise project scoping;
- deliver qualified service provider matching;
- provide streamlined proposal submissions;
- eliminate the need for traditional requests for proposals (RFPs);
- give large companies an alternative to the traditional provider “panel” system, which some argue stifles innovation and undermines value;
- take a step further in promoting collaboration among and between businesses to help them work better — something near to the heart of IACCM.
AI is poised to transform the entire services procurement process, successfully performing human tasks at a scale and speed that humans can never achieve. Our human brain is biased, our operational capacity, limited; and our memory, finite. With the power of AI, we get unlimited operational capacity and infinite memory — the machine never gets tired. Plus, AI can make unbiased decisions by analyzing and learning from millions of data points, which is something humans just can’t do.
Traditional methods do not work - Although AI is already being widely adopted in the consumer market -- often without users even realizing it – business-to-business (B2B) adoption has lagged. Until recently, the B2B services marketplace has remained largely untouched by innovative technology, and certainly, the manual RFP model is stuck in the past. This is likely because services are complex, service types vary greatly, and there is no one-size-fits-all solution.
Fraught with errors and high costs - Also, companies have reinvented the RFP wheel many times; very little learning on projects has been harnessed, and mistakes have been repeated many times over. Additionally, indirect procurement spend and processes are often neglected in large, sales-focused organizations.
But now, chief financial officers (CFOs) are increasingly scrutinizing procurement departments focusing on cutting the “fat” out of spending. AI can transform this landscape, not only by introducing enhanced “smartness” into the procurement process but also by learning from data points to affect future outcomes.
Bringing the end-to-end procurement of complex services online is not an easy task and many tech innovators have pulled away from it. However, the ability for the machine to learn from what has previously been done opens up possibilities that were just not there before.
In particular, as mentioned earlier, AI can enable three phases of the services procurement process by:
- facilitating precise project scoping;
- enabling rapid matching of requirements to qualified service providers; and
- selecting the best provider through streamlining proposal submission.
Project scoping - AI enables dynamic scoping by using tools like the automated question and answer (Q&A) application that guides procurement and creates winning project briefs. By reacting in real time to a user’s answers and presenting next-step or alternative questions, AI-based systems can help users get highly precise in defining their requirements by prompting users for details they might not have even considered. This level of automation allows large organizations to decentralize their procurement process and bring it closer to business users, which, in turn, makes procured services more relevant.
At one large global company, where all services procurement is run centrally, an executive said that the distance between the procurement function and business users is a serious block to relevance and fit. Often by the time an RFP process is complete, either the requirements scoping is insufficient or inaccurate, or the business needs have changed. The self-serve capabilities of an AI-driven platform present a transformative opportunity for companies to be more accurate in procuring services that meet precise needs.
Matching - Once requirements are thoroughly scoped, AI can analyze millions of data points to match the user with the right provider for the specific project. Again, this ability is transformative for companies, because it allows them to remove the human bias and relationship elements from provider selection and replace them with a more level playing field -- driving greater competition based on merit and cost.
Streamlining proposals - AI can also guide the matched providers in creating proposals that hit the mark, correlating them with the data points in the project brief and prepopulating many required fields. This also makes proposal submissions uniform enough for a buyer to compare service providers on an apples-to-apples basis. This was not previously possible. And by facilitating collaboration between providers and clients, proposals are finalized far more quickly than before.
Who’s Using AI for Procurement Now?
Across industries — from financial services and telecom to pharmaceuticals — today’s general counsels (GCs) and procurement specialists span the spectrum when it comes to digital transformation. Some are just starting out, whereas others are rapidly leveraging AI for things like sourcing, paying suppliers, and managing supplier relationships.
One multinational organization was delighted with how using the Globality1 platform enabled them to drive down costs with their incumbents. Another liked the enhanced user experience of comparing provider proposals, eliminating the tedious and time-consuming practice of trawling through hundreds of spreadsheets.
According to the Hackett Group’s 2019 CPO Agenda: Building Next-Generation Capabilities study,2 procurement professionals understand that their success hinges on integrating existing practices with new digital tools and technologies. Their research shows that 60% of respondents believe digital transformation will have a major impact on their companies within two or three years.
Be cautious and patient when managing change
As with any other technology, when introducing an AI tool into your organization, it’s very important to pay attention to managing change. For example, suppose a General Counsel (GC) of a large company is very excited about what AI technology can do for them. They have a vision for revolutionizing their sourcing process, and so, the core leadership team decides to implement an AI-based solution. Although that’s great, it’s not enough.
It’s never about just deployment: it’s about institutionalizing and delivering results. And that can only be achieved with a unified communications strategy, and most importantly, by empathizing with those who weren’t part of the decision to introduce new technology into their daily practices. Those users need to understand the what, why, how, and the implications of not making the change. The right communication, retraining, and a bit of patience will help everyone adapt and benefit from this inevitable new wave.
Although AI has made great strides in the past couple of years, we have only really touched the surface. For one, AI is changing the art of the possible. It’s being used to create applications that allow companies to do cognitive procurement (i.e., going far beyond automating manual tasks by using millions of data points generated from past procurement across jurisdictions to optimize decision-making). This function is still quite nascent, but it is evolving rapidly.
It also makes sense for future AI to learn from sourcing and services experiences to guide companies on what services they need and how projects can be improved for better outcomes.
Additionally, the combination of AI and technologies such as the Internet of Things will transform the procurement user experience, making it simpler and more intuitive. More and more business units will do their own sourcing, freeing up procurement personnel to be more strategic. Five years from now, we’ll be reflecting on how far B2B services sourcing has really come.
- Hackett Group’s 2019 CPO Agenda: Building Next Generation Capabilities study ã2019 All rights reserved
ABOUT THE AUTHOR
Paula Doyle is a member of the Globality leadership team, helping to develop and drive its technology powered Platform to build the world's leading premium services marketplace. Paula is a dynamic and inspiring leader with a keen interest in disrupting the status quo to introduce greater efficiencies and inclusiveness into economies. She has a reputation in business for "just getting the job done!" Paula understands the importance of people for every organization to flourish and is particularly skilled at developing and motivating those she manages. She cares passionately about injustice and has recently been a key player in successfully lobbying the UK government to ensure complete parity in the education system for children adopted from abroad.
Globality’s stated mission is to “give all companies an opportunity to compete and win based on the merits of proven performance, expertise, and passion.”