AI in procurement

What is AI in procurement?

AI in procurement helps organisations solve complex problems using computer algorithms, minimising the need for manual intervention. AI can be incorporated into many software applications to help with procurement and supply processes such as contract management and sourcing. AI stands for artificial intelligence, and it has the ability to learn and adapt behaviours over time and automates time-consuming tasks.

Types of AI in procurement

There are many type of AI in procurement but typically fall into the following categories.

Machine Learning

This type of AI uses machine learning algorithms to detect patterns to help predict and make decisions, that the human brain cannot. For example, machine learning can look at historical purchasing data and market trends to predict demand, which helps organisations optimise inventory.

Natural Language Processing

This AI interprets, generates and transforms the human language. It can understand how we speak and write and therefore can extract information from contracts such as terms and conditions, proposals and any customer feedback more quickly.

Robotic Process Automation

This type of AI mimics human actions to cut out repetitive tasks. For example, it helps to automate invoice processing and purchase orders, resulting in less processing times and less human errors.

Benefits of AI in procurement

AI can bring value to procurement and supply teams to make better decisions using analytics and data-driven insights. It’s able to work through vast amounts of data, meaning it can help teams to uncover cost savings or opportunities that they may be missing.

It also helps to improve manual operations such as reporting, meaning procurement and supply teams can focus their resources on creative and strategic tasks. AI has access to vast amounts of data, meaning it can help teams to identify new suppliers from external data sources like the internet. It can also help to detect patterns of financial instability which could lead to supply chain disruptions, which helps organisation to act and mitigate risks before they occur.

Choosing the rise AI is important and by using it to its full advantage, organisations can gain a competitive edge and drive value throughout the whole supply chain.

Risks and challenges of AI in procurement

Whilst AI in procurement has many benefits, there are challenges too. Organisations must be prepared to implement security measures, so confidential information is kept away from hackers and to ensure there are no privacy concerns when using AI to collect data.

Organisations also ensure they are complying with relevant laws and regulations. There is also the concern of suppliers being selected with the use of AI and the accuracy and fairness of this as technology can easily be manipulated.

Achieve your potential by becoming a member today. Whether you want to become a studying member or want to upgrade your membership to MCIPS, you’ll receive support and guidance whatever career level you’re at.

Accelerate your learning and keep your knowledge and expertise up to date with our procurement for beginners training courses.