Jumpstart Your Digital Procurement: How AI Can Deliver New Sources of Value for Companies
In the latest of our series of CPO Catalyst roundtables, we gathered some of the top leaders in procurement to discuss the impact of AI and examine how it can help unlock new sources of value for companies across all industries. Our virtual discussion focused on the key challenges facing procurement as CPOs consider how to best utilise AI to drive new sources of value and innovation at their companies. The highly interactive session with BCG managing director and partner Daniel Weise as the featured guest provided valuable insights as leaders grapple with how to define AI and how to fully utilise its potential in both the short and long term.
Here are our key takeaways:
#1: Alignment around the definition and scope of AI is important
One of the challenges with AI is that, despite its known benefits, its scope and definition are not always understood. Thus, bringing clarity to what AI can and cannot do is essential. The definition the group discussed was AI as a system of algorithms that automates tasks on behalf of people using cognitive suggestions or predictions that increase the accuracy, precision, and quality of human work and ultimately result in better, more effective outcomes.
As one CPO put it, ‘The biggest problem with AI is the word, because it has artificial in it. Artificial seems far away. It’s hard to understand what the real impact is’. That’s a viewpoint that’s hard to contest — and it creates an imperative to turn AI into something more tangible, something that those working in procurement organisations and their stakeholders can experience and witness working in practice.
#2: Today’s building blocks are different from the past
With the immediate benefits that AI has to offer, leaders have quickly realised that many of the building blocks that were important in the past are no longer relevant today. While having the right people and stakeholder relationships will always be critical, today’s CPO is skipping straight to the requirements for the future, letting go of archaic processes and tools and investing in new building blocks for the future. The benchmarks that procurement uses to measure success have also changed. As one CPO noted, ‘You have to optimise the relationships you have and get the most value and performance out of those relationships. That brings a lot more value than saving a dollar or two’.
As with AI itself, data science seemed like an abstract notion not too long ago — and now it is viewed as fundamental to the way in which many businesses operate. It’s little wonder that data scientists find themselves in high demand around the globe. Companies are investing in internal and external resources with this specialised expertise, underscoring the perceived value and potential of AI to reinvent how businesses operate in the future.
#3: AI is here to augment, not remove people from the process
A major fear for some is that the encroachment of AI into functions such as procurement will lead to a reduction in jobs, causing a negative impact on the workforce. That’s a misperception that one of our key speakers was keen to address: ‘I think the most important thing is to think of AI as augmenting and enhancing what the people in procurement or business are doing, not replacing it’, he said. ‘It’s about making it better. It’s about changing the way we do things, uplifting the skill, uplifting the impact, to things that are truly human’.
#4: It’s about pushing the boundaries — not reinventing the wheel
Financial services is an example of an industry that has evolved enormously over the past decade, with AI playing a key role in ensuring that the companies within it are prepared for whatever comes next, whether that’s in terms of regulation or economic disruption. Companies are increasingly looking to their suppliers to provide them with the innovation they need to grow and thrive. ‘There’s no point in inventing the wheel again’, said one leading procurement executive. ‘So, there’s stuff that’s out there, it’s leading, best-in-class, and we look for innovative partners. We’re constantly testing new solutions to upgrade our platforms’.
#5: The brilliance of resilience
The group brought up several examples of how AI is already improving efficiencies, outcome effectiveness, and the stakeholder experience, which is a trifecta not frequently seen in traditional procurement business cases. Beyond cost savings, AI’s quantifiable impact is already being realised across the value chain, such as risk management for goods and services.
We’re just beginning to see the benefits of AI as more companies are starting to utilise it for procurement. ‘I think there’s a very long way to go in terms of truly applying AI across the full sourcing life cycle or the overall supply chain’, said one CPO. Organisations are ‘very keen on applying AI in areas like supply chain resilience, adding some oomph, if you will, to analytics compliance’. As more procurement teams experience the benefits of AI, utilisation will grow exponentially, enabling CPOs and their organizations to be more strategic by providing long term resiliency and driving growth and innovation for their companies.