Cogniture Procurement Technologies will Change Your World
Today I spent an hour speaking with Zycus CEO Richard Waugh and expert Purvee Kondal, discussing key insights from my recent book “Cognitive Procurement: Discover How to Embark on your AI Journey“. In this webinar, I pulled some recent excerpts from the book, and we discussed how the world of procurement is changing rapidly and how Artificial Intelligence will become part of this transformation.
Artificial intelligence is growing rapidly across many organizational applications, and nowhere is this impact greater than in procurement. AI applications will become increasingly important especially in buyer-seller transaction systems, to enable improved efficiency of transaction flows. Initially, we expect to see many procurement applications of AI in spend analysis, accounts payable, and source to pay applications, but this will become more important as we observe AI applications in areas such as supply risk management, buyer-seller relationships (including email exchanges), and improved supply base management. AI has a bright future, but organizations can begin to prepare for this by focusing on data quality and standardization, to establish a solid foundation for the application of these emerging AI technologies.
Given the recent rapid inflationary pressure and the challenges of significant material shortages in 2022, there is growing pressure on procurement to continue to deliver value, as never before. The need to drive efficiencies through digital transformation is also on-going.
An unprecedented increase in use of digital devices is causing massive amounts of data to be generated, which businesses are trying to capture for better decision-making. According to one expert interviewed, 90% of world’s data was generated in the last two years and the data generated is doubling every two years. We aren’t really leveraging the power of this data, especially when we’re trapped in world of manually reviewing requisitions, PO’s, and Excel spread sheets.
Artificial intelligence employs machine-based learning, and other technologies to employ both unstructured and structured forms of data and grapple with technical issues involved in combining both forms of data. Unstructured data includes multiple forms of data produced both by internal company sources (emails, tweets, reports, etc.) and external sources (social media, company reports, blogs, newsfeeds, etc.).
As we discussed, implementing AI requires organizational learning. It requires individuals who are willing to learn, experiment, and make mistakes. AI is not about simple automation – it requires human interaction to approve and work with the technology.
A good example of how AI can improve procurement productivity is the Merlin AI Studio by Zycus. Our research shows that over 35% of a procurement analyst’s time is spent on transactional work, and much of this is consumed by responding to supplier emails regarding accounts payable emails. Suppliers typically contact purchasing regarding the status of their payment, corrections in pricing, delivery terms, payment terms, accuracy of orders, inventory updates, expediting requests, and transportation queries. Responding to these types of emails, consumes a significant portion of every buyer’s day, and prevents them from working on other more strategic issues. This type of activity is particularly prevalent in the Account Payable function. Unsorted emails will flood a buyer’s inbox with supplier inquiries. Zycus’ solution is able to understand the purpose of inbound supplier emails, attached reports and assigned owner of the category. It will then retrieve detailed information from the procure-to-pay system, and suggests appropriate email responses that can be edited or approved by buyers. The system is unique, in that it employs AI to read the message and extract key information, which then sorts emails into owner boxes, and highlights the type of inquiry being made by the supplier. It will provide automatic checks and extract information. This can be used to read emails and suggest appropriate responses, reviews attachment, and provides a confidence score on what it believes is being asked. This can help organize work and give back precious hours to workers.
The webinar provides some great insights into other aspects of how AI will radically change procurement activities in the not so distant future.