Common procurement myths about the use of AI in procurement are widespread today in the age of AI and automation.
According to a Hackett group report, 46% of procurement leaders plan major investments in AI to improve their procurement processes.
Moreover, 32% Of procurement organizations believe digital transformation has a high or very high impact on meeting enterprise objectives.
AI is one of the most discussed topics today across boardrooms globally. We took a look at the current landscape of AI in procurement in our insightful webinar “Future of Procurement with AI” with our in-house industry veteran Richard Waugh – VP for Corporate Development. In this blog, we note discussion points during the webinar elaborated upon by Richard. He covers the most common questions around AI and the common procurement myths surrounding the same.
While organizations in North America are ahead of the curve in terms of tech adoption, we find procurement organizations in other parts of the world such as Asia are not too far behind with the rising interest in AI.
In a recent study conducted by ISM and Zycus, it was observed that among the companies surveyed (USA centric), about 22% had deployed AI, and most organizations had projects running for less than one year.
Across organizations in Asia, there is increasingly a trend to have an AI unit or a digital team focused on onboarding solutions and leveraging autonomous procurement. However, for those organizations who are currently in the early adopter stage, just beginning to start on their AI journey, or still on the fence about AI – especially in Asia where AI is in the spotlight for a while now, we find that there may be some common misconceptions around the subject that we have decided to dispel with this piece referencing Richard Waugh’s insights and debunk 5 common procurement myths, such as:
Myth#1 – AI will reduce human resource requirement/Bots will replace humans
By taking away mundane tasks, AI will put more time back on to the plate of procurement professionals. This makes room for strategic thinking, data-driven decision making, and taking on roles that will both enrich and challenge them as professionals, enabling job enrichment. Although we will see a reduction in some tactical roles, this will be offset by increased resources deployed in strategic areas – relationship management, statistical, and data analysis. In the long run, AI will increase the number of resources required by the procurement function.
AI can do many things efficiently, but it doesn’t have the human ability to develop interpersonal relationships. Having people who can manage internal stakeholder’s requirements and expectations or external relationships with strategic suppliers is essential in a procurement role. With the AI data, analytics, and intelligence on hand, there will be a premium on strategic thinking, creating a requirement of people who can interpret data and use it in decision making.
Myth#2 – AI will involve a Big Learning curve
A technology change often does, by default. This includes letting go of old ways of doing things and making way for newer, smarter processes to take over. Especially if the procurement function is making the jump from archaic processes to streamlining the entire operation. The learning curve, big or small, will differ from organization to organization, depending on their existing processes.
However, the overall result is that AI will deeply enhance the learning and understanding of procurement professionals’ function. Thus, AI makes procurement one of the most exciting places to be in business and driving strategic direction.
Myth#3 – AI usage will be Time consuming and Expensive in nature
It is quite the opposite. AI has proven to cut down significantly on time taken for procurement tasks overall. It is a significant enabler for faster decision-making. The job of parsing through high volumes of data and extraction of key facts and figures, analysis, predictions, number-crunching, and more can be accomplished. All of these can be achieved without having to spend countless man-hours, which without automation would have been unavoidable. This results in immediate direct savings in terms of time and cost. There is, of course, an increase in productivity for the team and freeing up time for more value added tasks. This ultimately causes a higher ROI derived from the procurement platform and the human capital.
The insights provided by AI are more than just a dump of data. They go several steps ahead to showcase and highlight key facts and figures, find patterns, spot anomalies, and provide a trend. This greatly helps the manager leverage the analysis. Procurement managers can achieve this without investing time to do the leg work that bots have taken care of.
Myth#4 – It is best to wait and watch rather than to jump on to the AI Bandwagon
In 2020 due to COVID-19, many procurement organizations have seen a complete overhaul of the way things are being done now v/s in the pre-pandemic era. The organizations that already had implemented futuristic technologies such as AI have seen the benefits. Hence, they are better prepared to combat changes and disruptions in the future. It is the right time for forward-thinking organizations to shift from existing processes to AI-driven processes. This will ensure the organization has a competitive edge.
Myth#5 – AI will cause a rip and replace of all existing procurement technology in use
AI can blend in seamlessly with your existing platforms. Also, it does not require to do away with existing infrastructure or create new processes from scratch. AI bots can add to current technologies in use and hence can be tagged on to the existing platform.
According to Richard, Bot technology is especially compelling because it can implement it quickly with minimal impact on the organization or the existing infrastructure and produce an immediate benefit.
‘How do we digitize business with AI capabilities?’ is an often asked question in the board room today.
According to Gartner, in the next four years, 69% of what a manager currently does will be automated.
While the AI focus will have an impact across the entire enterprise, the potential for realizing significant benefits is much higher for the Procurement function when compared to other functional areas. In Richard’s words, the reason for this is simply ‘due to the high volume and value that exists in procurement is second to none.’
We have now busted the most common procurement myths. In the COVID age, technological investments have to show a rapid return on investments to impact the bottom line positively. Hence solving business problems with cutting-edge solutions is the way to go forward. Moreover, 2020 alone has been proof that failing proofing your processes by integrating AI into your procurement strategy is crucial to businesses. This is especially true in today’s disruptive environment.
Read our white paper Revolutionizing Procurement with AI to get started with your journey.
Zycus 2019 Research Paper: https://www.zycus.com/knowledge-hub/whitepapers/digital-destination-charting-your-digital-procurement-journey.html
Hackett Group 2019 Key Issues Study & Gartner Research
Webinar Recording: The Future Of Procurement with AI – Richard Waugh: https://video.zycus.com/watch/cxuU7pJ1N8qU3EFj37cEiS?