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The re-rise of conversational AI for procurement efficiency and how to integrate it into your processes

02/13/2024 By

Iyyappan Chandramouleeswaran

Neither oral nor text-based conversational AI (also known as conversational user experience [CUX] and conversational interfaces [CUI] the latter of which include chatbots) is by no means new, despite the relatively recent prolific uptake by procurement solution vendors.

CUIs and CUXs were hot topics 10 years ago due to the popularization of Siri (Apple), Cortana (Microsoft), Alexa (Amazon), Google Assistant and Facebook’s M. They posed a large opportunity not just for individuals in their daily lives but also in B2C and B2B. However, the tech of the day wasn’t as powerful as it is now; it led to certain limitations, errors and frustrations.

Several other factors affected the adoption of this first generation of chatbots, which you can read more about in ‘AI in Procurement and ‘Autogmentation’ Part 4 — Procurement use cases of AI and Generative AI.’ GenAI has addressed some of these issues and explains to some extent the revival and advancement of this new generation of chatbot.

The rapid growth of AI technology among businesses globally has been transforming the way they operate,” says Iyyappan Chandramouleeswaran, source-to-pay transformation specialist, VP of procurement transformation at Standard Chartered and ex-management consultant with Accenture. “Conversational AI is re-emerging as a crucial tool for organizations seeking innovative methods to save costs and boost productivity. As we delve into 2024, the integration of conversational AI into procurement processes is becoming increasingly essential.”

We asked him a few questions about this surge in conversational AI and what practitioners wishing to integrate it can expect.

In your view, why is Conversational AI becoming increasingly essential for procurement processes?

“Despite the maturity of e-procurement solutions,” he explains, “in my observation, manual and repetitive tasks still dominate the daily efforts of procurement professionals. Existing software solutions, while effective in delivering on their promises, often fall short in automating all aspects of procurement workflows. This is where conversational AI can be a great option to bridge the gaps, offering a super-advanced chatbot experience capable of simulating human-like conversations. Unlike rules-based chatbots, conversational AI brings a human touch to interactions, enhancing user experience.

What are the specific challenges that Conversational AI addresses in the procurement landscape, and how does it differ from the first generation of chatbots?

“The first generation of chatbots faced challenges due to limitations in technology, leading to errors and frustrations,” he said. “Conversational AI, especially the new generation (2.0), addresses these challenges effectively by bringing a human touch to interactions, which significantly reduces errors in manual work. Unlike rules-based chatbots, conversational AI offers a more intuitive and human-friendly experience, contributing to a transformative impact on procurement workflows.”

Can you elaborate on the benefits of conversational AI that procurement practitioners can expect?

“There are almost limitless use case for conversational AI in procurement,” says Iyyappan, “but if we wish to highlight the main benefits it brings, we should mention:

  • The automation of routine tasks: it significantly reduces the errors that often arise from manual work.
  • Filling the gaps left by digital procurement software: because conversational AI seamlessly integrates into procurement workflows, it addresses the limitations of existing software solutions and automates tasks that would otherwise require manual intervention, like supplier queries, quotation analysis and order processing.
  • Streamlining real-time communication: enabling procurement teams to interact with suppliers, stakeholders and internal teams more efficiently.
  • Data analysis and insights: conversational AI systems can analyze large datasets to provide valuable insights into market conditions, supplier performance and procurement trends, and it can help optimize supplier selection, invoice management and basically enhance buying decisions.
  • Cost savings: the automation of routine processes leads to reduced labor expenses and eliminates errors associated with manual data entry, contributing to overall cost savings.
  • Improved user experience: driven by language processing (NLP), its interfaces offer a user-friendly experience and enhance overall satisfaction.”

For organizations considering the integration of conversational AI into procurement processes, what strategic steps do you recommend?

“Integrating conversational AI into procurement processes requires a measured approach,” he advises, “the following 10 steps are a guideline to doing so successfully.”

StepProcess DescriptionTimeline*
1Define the objective and use cases for your organization: outline the key requirements of what you want to achieve and identify the use cases applicable for your business.1-2 weeks
2Understand the gaps: learn from the key stakeholders, including internal teams, vendors and other relevant parties involved in the process flow, about what is the right platform and how it can be tailored to the solution.~1 week
3Platform selection: conduct proper research and identify the right conversational AI platform that best aligns with your organization’s needs. A few key factors to consider are the integration option, the capabilities of the natural language and scalability. 2-4 weeks
4Designing the flow: design the conversational flows that best align with the identified use cases, develop conversation scripts and use prompts to guide the interaction effectively. 2-3 weeks
5Integrate with existing systems: to enable real-time data exchange, integrate the AI system with your existing procurement systems, such as ERP, e-procurement platforms and supply chain management tools. 3-6 weeks
6Train the model: using the historical data and relevant procurement documents, train the AI model. This helps the system to respond more accurately to queries. Leverage NLP capabilities to enable users to interact with the AI systems in a conversational manner. This helps to enhance the user experience and make the tool more intuitive.4-6 weeks
7Deploy: implement the conversational AI system within your procurement workflow and provide user access.~2 weeks
8Monitor and Optimize: Regularly monitor and get frequent feedback from users. Continuously optimize the system based on the feedback.Ongoing
9Promote training and adoption: promote the use among the procurement stakeholders and provide dedicated training sessions and support to help them understand how to effectively use the platform. 2-4 weeks
10Measure the ROI and scale as needed: regularly assess the return on investment (ROI) of the conversational AI implementation. Measure key performance indicators, such as response times, user satisfaction and efficiency gains. As the organization’s procurement needs evolve, scale the conversational AI solution to accommodate increased usage and additional use cases.Ongoing

* Timelines are approximated

“It’s important to note that these are general estimates,” he notes, “and the actual timeline may vary based on the specific circumstances of your organization. Additionally, organizations often choose to implement conversational AI in phases, starting with a pilot deployment before scaling up to full production. This iterative approach allows for adjustments based on real-world usage and feedback.”

If you are in the process of selecting the right procurement solution for your organization, TechMatch is a free-to-use tech-selection engine that helps procurement and finance technology buyers hone requirements, explore the market and identify best-fit solutions.

Are expectations from the practitioner world changing?

“There is undoubtedly a growing expectation among procurement practitioners for tech providers to embrace advanced technologies, including generative AI,” he confirms. “And the tech providers are responding by delivering solutions that leverage advanced technologies like generative AI to bring efficiency, adaptability and enhanced user experiences to the forefront of procurement processes. The demand for conversational AI in procurement is notable across various disciplines and functions within an organization, but its primary impetus seems to originate from practitioners actively engaged in procurement processes. CPOs themselves, in my opinion, actively care about the adoption of new technologies, as they see it as a strategic enabler, contributing to operational efficiency, competitive advantage and an improved user experience in the realm of procurement.

“So, I believe conversational AI presents a transformative opportunity for procurement processes, offering a solution to longstanding challenges and significantly improving efficiency. By embracing this technology, organizations can unlock productivity, reduce costs and empower procurement professionals to make more strategic decisions. Those who do not will find themselves at a competitive disadvantage in terms of operational inefficiencies, increased costs, suboptimal user experience and, importantly, missed opportunities to enhance overall procurement effectiveness in a rapidly evolving business environment. As we navigate the evolving landscape of 2024, I see integrating conversational AI into procurement workflows as not just a technological advancement, but a strategic imperative.”

Many thanks to Iyyappan for contributing his insights to our AI conversation. To read our extensive material on artificial intelligence in Procurement, visit our dedicated ‘Investigate AI’ page.

As always, contact us to discuss any opportunities or to contribute your own thoughts and experiences to the discussion.

Series
AI in Procurement and 'Autogmentation'
Topics
AI - Artificial Intelligence