AI-powered solutions turn procurement into a catalyst for company value

In today’s fast-paced global economy, there is little doubt about the necessity for procurement’s digital transformation. However, many multinational companies are just starting their implementation journey, and they are realizing the benefits of having a digital business beyond just digitizing their processes. Regardless of what is being sourced, procurement teams need the ability to quickly draw from complex, compounding data pools, as well as process and analyze relevant information to mine insights. They also need to package findings into sharable, understandable recommendations. This enables business stakeholders to make fast, accurate decisions whether they are working to complete a one-off project or manage a long-term contract for complex services.

Until recently, technology solutions for procurement did little more than automate manual processes. This provided some gains but didn’t allow procurement teams to move into a more strategic role where they could partner with business stakeholders to make the most of outside services and deliver greater value to their company, customers and partners.

Procurement leaders from around the world are seeing that adopting digital technology, including artificial intelligence (AI), is the best way to meet overarching business demands while creating efficient, effective operations. In a recent survey by Globality and Digital Procurement World (DPW), 96% of procurement leaders surveyed see digitization giving them the opportunity to “accelerate their corporate goals,” including improved operations, reduced costs and increased efficiencies.

One of the biggest addressable areas for procurement leaders is complex services spend, which continues to grow at a rapid pace. The sectors where companies tend to spend the most include IT, consulting, marketing, HR and legal services. Research from McKinsey and Company shows that global services spend is growing 60% faster than spend for goods. Globality and DPW’s survey found that 31% of respondents allocate more than 50% of their procurement spend for services; an additional 40% reported services spend between 21% and 50%, which further highlights the need for a digital solution to optimize results.

Sourcing services requires different capabilities, and companies need the ability to dynamically identify and compare multiple factors that are often difficult to quantify. The implementation and integration of AI and machine learning bridges that gap, providing the advanced analytics and complex data-processing required to strategize and react dynamically for the shifting needs of the business.

The global coronavirus crisis underscores how dependent we all are on the service economy — and how critical it is to have adaptable ways to source any type of service at any time. The COVID-19 disruption has become a catalyst for change for many companies, pushing them to accelerate their digitization and be more willing to accept digital solutions that scale to new operating models and ways of working. That flexibility allows them to continue to provide essential services around the globe with minor disruption.

In addition to their baseline sourcing functions, procurement teams are now being asked to mine and analyze huge amounts of data, then provide actionable strategies across multiple business functions. For those teams to be successful, finding the right technology for every department’s application is critical. The technology should be intuitive and user-friendly, with minimal training, and must span needs at an enterprise level. Available solutions that mirror e-commerce platforms like Uber and Amazon tend to provide the sought-after user experience while delivering necessary sophistication. Tools that can be accessed from anywhere and at any time are also increasingly becoming non-negotiable.

For procurement leaders, digitization is a unique opportunity to uncover new ways to gain visibility into services spend across different departments, while reducing costs, increasing efficiencies and minimizing risk. A 2018 Deloitte study found that companies using AI-based technologies in procurement are already seeing positive outcomes. Of respondents using intelligent and advanced analytics, about 50% reported finding success using advanced analytics to optimize costs, and 48% saw improvement in process efficiency.

Procurement leaders can become corporate drivers for strategies and practices, including improving spend management and visibility, social responsibility and supplier collaboration — all built on data that was previously untapped. Today’s AI and machine learning technologies provide insights into the intent of user requests, guiding their ultimate selections based on complex criteria. Some platforms are able to guide users through what used to be a time-consuming RFP process, generating options and outcomes based on responses to guided questions. Resulting supplier matches are higher in quality, relevance and capability because the data is parsed for each individual request, tailoring the results to specific needs.

AI-based procurement solutions allow users to shift their perspectives and look at procurement and sourcing from a business stakeholder perspective. Procurement and supplier experiences can be optimized, which makes companies more competitive and more likely to grow.

Making the leap to a digital procurement solution powered by AI creates a higher-level roadmap for services sourcing, which makes procurement a valued and important factor in a company’s success.

This Brand Studio post was written with Globality.