Member Article

Why AI-driven procurement is the future of business intelligence

by Konstantin von Bueren, CEO & Co-Founder of Procure Ai

In 2023, AI is more than just a buzzword; it’s an influential player in enhancing procurement processes and shaping business intelligence. Integrating AI into procurement transforms data into actionable feedback efficiently, offering insights that extend beyond merely reacting to trends and allowing for the analysis and forecasting of future market movements. This complexity underscores the importance of the intersection between business intelligence and AI in procurement, paving the way for a more agile approach but requiring careful consideration and implementation.

The Era of Traditional Business Intelligence Tools Is Over

Once, Power BI and Tableau reigned supreme in the world of business intelligence. They became particularly significant in areas like procurement and supply chain, where the essentials of sourcing and pricing are paramount. However, the game is changing. New regulations, notably the German and European supply chain acts, compel businesses to delve deeply into their supply chains. This is not a behind-the-scenes act, but rather a political measure forcing companies to focus on their triple-bottom-line. More specifically, along the entire supply chain, social and environmental risks need to be identified, analysed, countered effectively, and communicated publicly.

The accuracy of forecasting in AI is not guaranteed, and this complexity underscores the importance of the interaction between business intelligence and AI in procurement and supply chain; it can depend on factors like the quality of data and algorithms used. However, with the shift in regulations and demands, there are new champions on the horizon: intelligence platforms. These aren’t just revamped versions of older systems; they’re specialised powerhouses, targeting areas like sales, procurement, HR, and R&D. These platforms are arising as a response to the evolving needs and complexities of modern business intelligence.

Revolutionising Traditional Procurement with AI

Traditional procurement processes often grappled with the challenges of dispersed data and an over-reliance on manual efforts. With the introduction of AI, there’s an opportunity for a more streamlined and intelligent system. The scales seem tipped towards purchasing ready-made platforms. Why is this so?

These focused platforms offer a deep understanding of their respective sectors, combining both procurement expertise and technical know-how in data engineering and AI. This holistic solution presents enterprises with a buy-or-build decision dilemma. Building such platforms in-house often doesn’t make financial or logistical sense for many corporations. While they may possess the subject matter expertise, they typically lack the technical and monetary resources to develop these solutions internally. Even if they were to attempt recruiting the necessary technical talent, the reality is that top-notch professionals prefer joining tech companies over traditional enterprises in fields like manufacturing or utilities. These specialised platforms deliver extremely high value and can implement this value up to six times faster than an in-house solution could.

AI: The Next Generation of Business Intelligence

AI’s introduction to business intelligence offers a different dimension compared to traditional tools. Its capacity to process vast amounts of data grants a more profound understanding of trends and risks. Advancements like Large Language Models (LLMs) enhance this by allowing detailed reports through simple natural language queries, facilitating prompt and well-informed decision-making. AI aims to mitigate traditional procurement challenges like manual errors by offering quicker data processing and analytical approaches.

However, the utility and accuracy of AI hinge significantly on the quality of the data input and the design of its algorithms. Data is fundamental to AI’s operations. If this data is erroneous, lacking, or biased, the resulting AI output could reflect, or even exaggerate, these inaccuracies. Additionally, the algorithms, that guide AI in data processing and decision-making, are not immune to biases. If crafted from biased data or uninformed human perspectives, they can churn out decisions that are skewed or, worse, detrimental. In critical sectors like healthcare or finance, such errors could have far-reaching consequences. It’s paramount for businesses to ensure the quality of both their data and the algorithms they use has a non-negotiable benchmark; this isn’t just a preference but an essential step for the responsible and precise implementation of AI.

Steering Towards a Strategic Future

The emergence of AI in procurement signifies a notable shift in how businesses approach supplier relationships in today’s bustling marketplace. As businesses strive to solidify and adapt their ties in this dynamic environment, AI’s proficiency in data analysis offers a robust support system. This extends from ensuring compliance with regulations, to more competitive pricing strategies, and even forecasting market trends.

Ultimately, this translates to significant cost savings; a report by McKinsey reveals that 64% of respondents saw a cost reduction in the manufacturing space, while 61% saw a reduction in supply chain planning costs after implementing AI. Such findings underscore the tangible benefits of AI, not just in theory but in real-world applications. Its role in enhancing supplier interactions not only makes processes more efficient but also facilitates more in-depth discussions and negotiations that can lead to mutual benefits. For stakeholders, the advantage comes in the form of automated, previously time-consuming tasks, allowing them to focus on strategic planning and implementation. Suppliers too can appreciate smoother and swifter transactions.

As we contemplate the future, the potential of AI’s role in procurement is promising. With tools like decision intelligence at the forefront, procurement departments have the potential to evolve into genuine centres of intelligence. While we are just at the dawn of this transformation, the continued development of AI suggests a future where procurement becomes even more strategic and nimble. It’s a pivot in business operations and a reimagining of strategic planning, leaving traditional business intelligence tools behind.

This was posted in Bdaily's Members' News section by Procure Ai .