The Importance of Automation, AI and Emerging Technology for Procurement
Most procurement and supply chain leaders are aware of the pivotal role technology-driven strategies can play in driving efficiencies across all sides of the supply chain, including sourcing, purchasing, production, distribution and payment.
As the drumbeat of digitisation grows louder, the question is not whether or even when to digitalise but rather how to do so efficiently and optimally.
In this blog, we dive into some of the latest technology advancements transforming procurement and how they can be put to work, making procurement faster, more efficient and better equipped to navigate the complexities of global supply chains.
Digitisation has already led businesses to replace human-oriented tasks with automation with an eye on bridging skills gaps, improving quality and reducing errors.
One common example is the automation of purchase order processing. In this case, software systems validate and process orders to minimise manual intervention and expedite the procurement cycle. But plenty of other ways exist to remove human input and gain meaningful process improvements moving towards better utilising procurement technology.
For example, invoice management has long created bottlenecks, consumed plenty of time, and attracted its fair share of errors. At scale, the problem only worsens.
Automation digitises paper invoices and centralises vendor and purchase data so invoices can be automatically checked and reconciled against the database. This means no delayed payments, late fines, compliance issues and a far smaller chance of inaccuracies and errors throughout the process.
Vendor management as a whole can be largely automated too. With automation, procurement teams can improve the supplier onboarding process, monitor performance metrics, or initiate replenishment orders based on predefined thresholds.
By liberating procurement professionals from these highly-repetitive tasks team expertise can be refocused. This includes cultivating strategic vendor partnerships, negotiating more favourable terms, and undertaking higher-level analysis and decision support.
In short, there are almost unlimited automation use cases to streamline complicated procurement processes, enable new services and capabilities and expand procurement’s influence and value.
Then there’s automation’s close cousin – artificial intelligence.
With procurement data snowballing, supply chain professionals’ ability to make sense of it is becoming an almost impossible challenge. Enter artificial intelligence and its ability to turn information overload into a competitive advantage.
Utilising machine learning, natural language processing, and robotic process automation, AI sifts through mountains of data in microseconds to generate accessible insights that can be leveraged to streamline and align internal procurement operations.
By analysing supplier data, market trends, and historical performance AI can identify patterns, trends, and correlations within the data. This allows procurement to use intelligent sourcing to pinpoint, for example, suppliers that meet exact requirements or find top-performing suppliers that meet delivery, quality, cost, and customer satisfaction metrics.
Similarly, predictive analytics uses AI algorithms to peer into historical data and forecast demand and supply trends to minimise excesses and shortages.
When it comes to the enterprise, blockchain has been simmering in the background for several years. More recently, it’s been making strides into the enterprise and cementing its place as a potentially disruptive force – particularly for supply chain management.
At its simplest, blockchain is a decentralised and distributed ledger operating on a network of nodes to enable secure and transparent transactions.
Most often discussed in the context of finance and cryptocurrencies, blockchain also has the capabilities needed to streamline supply chains and make procurement more secure, traceable, transparent and efficient.
In fact, there is plenty of buzz around its potential for completely overhauling supply chain management as we know it.
Let’s dig into blockchain’s advantages a little deeper.
- Greater transparency – provides complete transaction history and data visibility to all parties, enabling accurate product tracking from start to finish.
- Cost savings – by enabling all parties to transact directly with each other, there is no need for intermediaries and third-party providers, resulting in significant cost savings.
- Faster transactions – traditional procurement transactions can take several days or weeks to complete, blockchain enables nearly instantaneous data verification and execution of smart contracts to greatly expedite transactions.
- Improved security – data stored on the blockchain cannot be changed or removed without agreement from all participants. This prevents data tampering and fraudulent actions to guarantee the security of supply chain records.
- Sustainability – blockchain validates the origins and production processes of goods, ensuring product authenticity at the source.
- Smart contracts – allows organisations to create tamper-proof smart contracts that automatically implement terms of multi party agreements.
While blockchain isn’t going to solve every problem supply chain professionals face, it does offer some promising avenues for addressing some of the most pressing challenges in supply chain management. Namely, its ability to completely change the flow of information, finance, security, and materials through the supply chain.
From offloading manual tasks to understanding large and complex data sets, procurement professionals and their employers have a lot to gain from understanding and applying emerging solutions.
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