5 Ways Companies Are Using Artificial Intelligence in Procurement

Source: manutan.com

Living in the modern age comes with a lot of benefits that our older colleagues could only dream of. Thanks to the advanced technology we have today, almost all areas of most industries have seen unprecedented changes over the last two decades or so. What was once science-fiction is now a reality as our tools and solutions are using smart hardware and software giving us more time to focus on bigger problems at hand. Human interaction is always crucial, but our minds and bodies should be used elsewhere and not on mundane tasks that can now be automated. One of the widest used examples uses of modern tech is certainly artificial intelligence (AI) that has been taking the world by storm for years now.

The ability of software and then hardware to lean on its own, adapt and overcome new problems after being programmed once is revolutionary. Minor tweaks along the way and an occasional fix, update, or patch, and the rest is done without the need of a human. It is capable of doing so much in the 21st century that it is actively replacing workers in certain positions. One area where it is extremely popular and useful for companies is procurement. In this article, we talk about the most common ways companies use artificial intelligence in their procurement processes. To find out more about AI software for procurement management, make sure to check out Softengi.

What Is Procurement?

Source: midwestworld.com

Before talking about ways AI has changed this field, let us dive a little bit deeper into the subject matter and flesh it out more. What is procurement, what does imply and why is AI good for it? This process is the act of obtaining services or goods, usually for commercial and business purposes. No matter the company and the industry it is in, there is some need for goods and services without which they would not be able to work. The scales tend to range from small to quite large, but procurement is equally important no matter the market you belong to.

It is the final act of purchasing that the term ‘procurement’ usually implies. However, it is also an umbrella term for any and all processes that make up the whole purchasing process. There is a lot leading up to the decision to buy something for a business. From decisions inside the business to negotiations and planning, it tends to be time-consuming and difficult to deal with on a regular basis. This is where AI can help. From preparation and planning to solicitation and payment and everything in between, the help from managing software is of great help.

Technologies at Play

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Artificial intelligence comes in a wide variety of examples and it is not always the same concept that does the work. While it does imply algorithms that exhibit smart behavior capable of advancing and learning new things, there are other things at play. Machine Learning (ML) is a big part of it, a different set of algorithms that detects patterns and uses them for more accurate decision-making and predictions. Natural Language Processing (NLP) algorithms interpret, transform, and generate human language making it more ‘readable’ and ‘usable’ by the software. Robotic Process Automation (RPA) is another set of algorithms, ones that can mimic human actions. This reduces the repetitiveness and the mundane nature of simple tasks. There is a lot that goes on behind closed doors, and it is the combination of these four technologies that make procurement easier and faster for companies.

1. Spend Classification (Categorization)

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Through machine learning, categorization is done automatically without the need for anyone being present. Categorization in categories and different sub-categories usually means spending a lot of time reviewing a ton of data and paperwork. ML comes into play and does this on its own, learning as it goes and doing things faster and more accurate the more information it is being fed.

2. Vendor Matching

Source: statementmatching.com

Connecting suppliers and their data to the purchase orders have been done the old-school way for generations. Paperwork was in abundance and the employees had their hands (and desks) full. The logistics alone that are involved in this are very difficult to deal with no matter how frequently a business does it. AI takes things to new levels as it learns how to connect suppliers from the invoices and purchase orders, making a vendor hierarchy that is accurate every time.

3. Detection of Anomalies

Source: goalprofit.com

One of the biggest advantages of any modern software is the security and awareness that you get when you get it. Nobody wants anomalies, at least when they are of the bad kind. The worse thing is when you never find out about them because there was nobody paying attention to everything at once. With AI and ML, you have algorithms that will always automatically show you unexpected changes in the purchasing prices, delivery times, contents of shipments, etc. Such ability to detect problems and have an insight into every aspect of procurement guarantees you will never be surprised when it is too late.

4. Risk Management

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Every business needs to have a good risk management strategy. Without one, there is no saying what can go wrong when you ultimately proceed with a purchase. Identifying potential risks across the supply chains is what AI is great at. Through the screening of millions of data sources, the software alerts the business if there is a potential risk to be evaluated.

5. So Much More

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There are plenty of other ways a good artificial intelligence software can help a company’s cause. From the automation of accounts to be paid to analytics, to new supplier identification and evaluation, there is always something new it can help with. Strategic sourcing and contract management software are two very important things in procurement, and it can help with both of them. To make better decisions, identify new opportunities for your company, improve across the board, and automate dull manual tasks, AI is there. It frees time for your employees, helps elevate businesses through precision and awareness, and offers real-time scouring of the markets and suppliers. What else does a 21st-century company need?

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