businessinfomag.uk magazine 26 PROCUREMENT By Simon Thompson, VP Sales Northern Europe at JAGGAER AI spells a bold new future for procurement collaboration to the next level within a company, facilitating knowledge and data-sharing between functions, and with suppliers and the market, and helping with the management of defects and non-conformities, for example, or warehouse and inventory optimisation amongst many other areas. Leveraging AI in procurement When integrating Generative AI within procurement, it is vital to take an analytical approach that prioritises the technology’s potential to deliver hyperautomation, especially in areas where there is a clear and urgent need for improvement. Key elements include: n the creation of a well-defined strategy aligned with business objectives; n identification of the steps procurement teams should consider before implementing AI, such as data integration, change management processes, cost and ROI evaluation and the definition of risk tolerances; n the appointment of an internal AI team lead as a point of reference early on in the process; and n definition of data requirements and selection of the AI system. Once the system is up and running, monitoring and refining outcomes on an ongoing basis is key. AI is only as good as its data input and it may emerge over time that to identify specific trends and risks or to achieve specific outcomes, data sources have to be tweaked. In this context, businesses will need to identify which data sources are sensitive and how to handle them. They will also need to be wary of AI ‘hallucinations’ – incorrect outcomes proposed by AI based on insufficient training data, incorrect assumptions or biases in the data used to train the model. Four areas of AI application in procurement Investing time in these preparatory steps will produce dividends when implementing AI to improve efficiency in four main areas: q AI-enabled supplier sourcing Selecting the best suppliers is paramount for a company's resilience and delivery capability. Opting for a supplier solely based on cost competitiveness is pointless if they cannot fulfil the necessary services. Procurement software should give users access to a vast global network of verified suppliers, while aiding decision-making through AIdriven recommendations. These recommendations are fine-tuned using historical performance data, risk analysis, cost considerations, service levels and other pertinent factors. Moreover, the software should offer alternative suggestions aligned with user preferences and continuously refine its recommendations through ML. This way, users will benefit from more tailored suggestions and substantial time savings compared to manually scouring the entire supplier network. w Streamlined automation for intelligent contract management Supplier contracts play a pivotal role in defining collaboration terms and conditions. Yet, handling the many documents involved can be a daunting task, particularly for companies that are still reliant on manual processes and/or have a sizeable supplier base. Adopting advanced software solutions empowered by AI and ML and capable of capturing and analysing contract information from diverse sources produces substantial In this era of rapid AI development, companies are increasingly turning to AI-powered solutions for their procurement needs. To date, AI has mainly been used for specific tasks based on predefined algorithms, but Generative AI enables a much broader range of applications. Within procurement specifically, it can be leveraged across the entire Source-to-Pay chain, enabling better decision-making, thanks to more accurate insights and greater collaboration, leading to faster turn-around times and accelerated business outcomes. To maximise the benefits of introducing AI into procurement processes, it is wise to structure interventions around three main areas where AI has been proven to bring major benefits: q Insights By drawing on an unparalleled breadth of internal and external data, AI can support real-time analysis to improve procurement strategy, speed up decisionmaking and support category managers with key insights. For example, AI can be leveraged to identify risk, manage supplier performance and predict potential disruptions to the supply chain more accurately and more quickly. w Documentation The power of AI in procurement is not limited to automating manual, time-consuming processes, such as bid comparisons and summaries. It can also actively support the creation of RFIs, RFQs and SOWs, help identify new suppliers and even co-pilot on negotiations with key insights and recommendations. e Collaboration Gen AI can play a key role in taking Simon Thompson
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