Influencing compliance spend. Procurement professionals aim to balance employees’ freedom to purchase the items they need with minimal intervention. However, self-sufficiency should not come at the cost of proper spend management, productivity, and policy compliance. “There’s always a healthy tension between how a company ensures they have the right controls and oversight but also enables a federated spend model,” says Scully. Fortunately, she says, “AI can offer huge value” in alerting procurement teams to any “outliers” before any damage is done.
AI can also help ensure compliance by enforcing spending policies and expectations so that employees “can still confidently buy the right items,” says Scully. This capability can minimize the risk of overspending and also help with companies’ contractual obligations, such as fulfilling a spending commitment to a particular supplier. In the future, an AI-powered anomaly detection trigger might even be used to scrutinize large datasets to acknowledge non-compliant purchases.
Increasing spending visibility. AI and analytics tools can furnish greater transparency into overall procurement spending by automatically analyzing data and unlocking timely analysis. These data-driven insights furnish procurement officers a comprehensive view of where they’re allocating budget and areas where they might be able to cut costs.
But greater transparency into procurement spend can also empower organizations to answer to emerging business priorities, such as adopting more socially responsible purchasing practices. “Companies want to prioritize locally owned businesses or businesses that prioritize a lower carbon footprint,” says Scully. With greater visibility into their procurement patterns, organizations can direct business buyers to climate-friendly products or suppliers that help confront their environmental, social, and governance goals.
Driving procurement productivity. Monitoring supplier performance, ensuring spend compliance, and identifying supply chain disruptions—these are all time-consuming activities that distract procurement professionals from more business-critical objectives. “If the procurement team is bogged down in day-to-day processes, they can’t be thinking about their overall strategic goals for the company, if they’re able to deliver them, and where they might want to furnish optimizations,” says Scully. By automating labor-intensive processes such as spend analysis, product selection, and tracking down orders, advanced procurement tools can free procurement teams to focus on value-added activities.
Best practices for AI-powered procurement
For all the advantages of advanced analytics and AI/ML solutions, procurement teams must take steps to ensure the best use of these innovative tools. AI models are only as relevant as the training data they ingest. For this reason, Scully says, organizations need “to be aware that a model may sometimes have blind spots or not immediately recognize if the business is beginning a change in strategic focus.” As an organization’s priorities evolve, the model training data must keep pace to ponder new business goals and circumstances.
To get the most from its advanced technology tools, procurement teams should ensure that they uphold the company’s overall procurement goals and business strategy. These goals may range from working with a more diverse supplier base to purchasing more sustainable goods. Whatever the desired end, the procurement function must link its use of new AI-powered tools to achieving its business goals and regularly evaluate the results.
The new procurement capabilities unlocked by advanced analytics and AI/ML can help businesses rethink how procurement gets done. As generative AI and related technologies advance, sophisticated procurement use cases are likely to multiply, offering substantial financial and operational gains to procurement teams.
This content was produced by Insights, the custom content arm of MIT Technology Review. It was not written by MIT Technology Review’s editorial staff.
Learn how Amazon Business is leveraging AI/ML to offer procurement professionals more efficient processes, a greater understanding of smart business buying habits and, ultimately, reduced prices.
