Artificial intelligence (AI) is bursting onto the scene and disrupting entire industries. In procurement, AI is widening the amount of spend data professionals can see, driving down workloads, and helping leaders make quicker, smarter spending decisions.
Here is a look at the latest AI technology in procurement, along with four ways AI is changing procurement processes for the better.
Manual work is holding up procurement processes.
AI and automation are filling in the gaps in procurement processes that have been widening for years. Here are a few reasons traditional procure-to-pay (P2P) processes waste time, slow down productivity, and cause headaches:
- Errors: When employees create purchase orders (POs) or input data manually, errors are common. And if mistakes are peppered throughout your procure-to-pay (P2P) process, it corrupts your spend data, making it hard to make confident strategic decisions.
- Payment delays: Every time an employee has to fix an error manually, update documents, or track down a coworker for approvals, it slows down the payment process. That leads to order delays, backlogs, unavailable products, and other procurement headaches.
- Task-heavy work: Too often, traditional P2P processes force procurement leaders to drop what they’re doing and work on manual tasks. For instance, a procurement professional may spend an afternoon updating or creating POs. Every second procurement spends on repetitive tasks steals time and attention away from more strategic work.
- Procurement fraud: Most procurement professionals don’t have time to comb through every PO and invoice to find suspicious activity. Even if you do, scammers make it difficult to spot fraud on your own. When procurement teams use manual processes, it’s easier for criminals to commit procurement fraud or suppliers to accidentally charge for items your company didn’t order.
- Long lead times: Sluggish P2P processes draw out delivery times. That means your company may not complete projects or deliver products as quickly as desired, leading customers to move on to competitors.
- Inaccurate orders: People make mistakes. With manual processes, it’s easy for employees to purchase the wrong part at the wrong price, leaving procurement to clean up the mess.
- Inaccurate accounting: When employees make manual input errors, it throws off accounting. That can lead to extra work, make it difficult to strategize, and slam the breaks on your growth plans.
- Inaccurate spend classification: When employees track spend manually, they might label items in the wrong category or file them in a generic “999-Misc” selection . That throws off your spend data and makes it hard to know where money is actually going.
How does AI in procurement work?
In procurement, AI exists within advanced P2P solutions. These systems are driven by an AI engine that digitizes and automates the full P2P process. AI will analyze patterns in the P2P process, identify errors, auto-match documents, and eliminate unnecessary tasks. It can also improve over time and locate opportunities to boost efficiency.
AI can supercharge procurement teams.
AI can help procurement teams accomplish more at a faster rate. Here are a few ways AI can improve work for procurement teams:
1. Analyze spend and make smarter decisions.
Advanced P2P solutions use AI to separate spending into clear categories and increase spend visibility. AI will automatically organize spending, generate spend reports, and fix errors. Ultimately, it hands procurement leaders the information they need to make smarter strategic decisions.
AI can also simplify services spend management—a notoriously complicated part of spend control. The technology will help to define the scope and duration, and estimate the appropriate rates . AI can also let you know what skill sets to expect for a given rate.
2. Identify and reduce errors.
AI reduces the number of human touches throughout the P2P process, driving down errors. For instance, AI will automatically conduct two-way and three-way matches. By paving the way to straight-through processing, AI increases on-time payments and prevents delays.
3. Eliminate procurement fraud.
AI can identify duplicate POs or invoices, flag suspicious purchases, and alert your teams when errors occur. That way, you can see procurement fraud right away and act before it eats at your company’s bottom line.
4. Automate procurement processes.
AI automates P2P processes and makes it easy for procurement to make fast, agile decisions. For instance, AI can track the status of orders and send you an alert when shipments are running slow or stock runs out. That allows procurement to switch to a new supplier to avoid business disruptions.
AI also automates day-to-day tasks, such as creating POs, matching up documents, and coding purchase requisitions. Eliminating tasks carves out more time to focus on mastering your procurement strategy.
Secure buy-in for your department’s AI improvements.
AI can boost productivity, clarify spend visibility, and make it easier to map out decisions that save the company money. Still, before you sign up for a P2P solution, you’ll need to get support from other stakeholders. Read our free e-book, How to Make a Business Case for Procure-to-Pay Automation, to see why P2P solutions pay off in the long run for both procurement and the whole operation.
