Ops Digest #11: The Role of AI in Procurement (Plus, the Future of Intake)
July 26, 2023
July 25, 2023
This is a preview of Ops Digest, our monthly newsletter for operations teams. This month, we're talking about the role of AI in procurement, with an eye towards intake. Subscribe and receive this newsletter in your inbox every month!
The pressure on procurement teams to create strategic business value for their organizations has never been higher.
Yet old problems persist. Most modern procurement processes are complex, which is one reason few employees actually follow procurement processes as they’re designed. Accounting for the sheer number of moving parts in the supply chain remains incredibly difficult, as well. And there are always additional variables to contend with, like legacy databases and layers of approvals from disparate stakeholders.
So how can procurement professionals succeed?
One way is to embrace innovative technology. The modern procurement tech stack is full of new tools—and many of them are empowered by AI.
We went in-depth about how to use AI safely and effectively in procurement in this blog post, but here are the bulleted highlights you need to know:
Get smart about cognitive procurement. At a high level, that means using AI and machine learning to streamline, automate, and improve the P2P process.
Learn how AI actually works and what its limitations are. AI is just a set of tools. Become aware of its limitations and liabilities as well as its capabilities, and parse the use cases where AI can actually be effective versus those that require a human. And understand that although generative AI, such as LLMs like ChatGPT, can feel almost magical, that’s just because it’s new technology.
Understand how generative AI fits in. Generative AI has created a frenzied race in the SaaS world. It feels so powerful because of its immediacy–average people can mess with it, and the results are clear and nearly instantaneous. You have to learn how to harness it to enable your organization’s digital transformation.
Remember the necessity of people. Ironically, as technology like AI continues to get more powerful and can automate away many tasks previously performed by humans, the need for people has never been greater. People with expertise have to be able to check their accuracy and veracity, and they need to be able to step in and take over when necessary.
Know what to automate and what not to. Let AI do tasks that it can perform faster and better than humans, keep humans in control of output from AI tools, and leave the truly human tasks to people.
Use AI in procurement safely while mitigating risks. It’s unwise to treat any AI, or any new technology, with careless excitement. The key with these waves of technological advancement is to adapt—and to embrace regulations as they’re put in place and when there is a need.
AI holds a great deal of promise, but it’s just a set of tools. However, in the right hands—procurement professionals with knowledge, vision, and a strategic mandate—these technologies can help you make a huge impact on your procurement processes.
Read this blog to go deep on AI in procurement. And check out Tonkean’s ProcurementWorks to get a hands-on understanding of the ways AI-powered procurement tools can make an impact for your organization!
Up next in this newsletter: the latest news about the industry.
AI expert panel: Pentagon’s procurement process is one of several major obstacles hampering efforts to develop and apply artificial intelligence technology. | C4ISRNET
Hungryroot CDO: AI procurement can help improve eGrocery’s profitability, consumer loyalty, and operational efficiency. | PYMNTS
A Deloitte study reveals the top priorities of top procurement leaders | Deloitte
“I'm increasingly feeling that intake and orchestration will consume its source-to-pay host over the next decade,” says Spend Matters CEO | LinkedIn
Intake management solutions (including Tonkean) are on the rise in Gartner’s 2023 Procurement & Sourcing Solutions Hype Cycle report | Gartner
If you have some insightful news or knowledge about the world of Ops to share, let us know!
Ops in the Field
The role of the chief procurement officer (CPO) has never been more important. The pandemic highlighted how volatile the supply chain can be and how critical it is to predict and navigate disruptions. As is usually the case, though, those difficult times were an opportunity for leading CPOs to learn, adapt, and ultimately thrive.
According to the latest edition of Deloitte’s Annual Global Chief Procurement Officer Survey, leading CPOs are seizing that opportunity in three primary ways: prioritizing talent management, rethinking their operating models, and embracing process orchestration as a pillar for digitization.
Deloitte calls these successful procurement leaders “Orchestrators of Value.”
These are people who look beyond achieving short-term financial wins in favor of making a broader, longer-term impact on their organizations—and they get everyone else on board, too.
It’s not just about tactically scoring the best prices anymore; the new world of procurement is chess, not checkers. What these “orchestrators” do aligns with process orchestration (and more specifically, procurement orchestration) and how it’s playing a prominent role in today’s procurement tech stack.
Here’s how Deloitte laid out these priorities:
Operating model design
Optimize operational models by standardizing and consolidating processes and policies
Create purposeful teams that focus on efficiently and effectively executing common tasks in shared services or centers of excellence (CoEs)
Use outside intelligence to inform their highest priority opportunities
Source capabilities more widely
Invest in sophisticated talent development strategies
Close capability gaps
Optimize for demand fluctuations, quality, and cost
Accurately define the value proposition that technology is intended to solve for
Accurately define the capacity for the broader procurement team to engage digitization programs in meaningful ways
Technology is necessary and central to all of the above. Fortunately, the modern procurement tech stack is full of a growing spate of powerful tools, especially process orchestration tools that pull them all together.
It also means that more than ever, procurement requires exceptional human talent. Today’s procurement requires strategic thinking, creativity, holistic views into processes and how people use and adopt them, and more. Technology’s role is to empower those people by automating tasks and processes that AI can handle and by providing intelligence that humans can interpret and act upon.
In this month’s Tonkean release notes, we’ve improved the Enable Display Conditions option with a new field, Condition Evaluation Method, which lets you set display conditions to evaluate continuously, allowing you to build interfaces that progressively display widgets as they're filled in and submitted. You can also now mention someone in the Comments widget, and they’ll get a notification email about any item.
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