Key Insights on AI in Procurement from Amazon Business Exchange 2024

Amazon Business Exchange 2024 featured an insightful panel discussion on the use of artificial intelligence (AI) in procurement. Panellists included: Scott Hein, Director, Source to Pay at Meta, Fraser Woodhouse, Digital Procurement Lead at Deloitte and Suraj Naik, Chief Procurement Officer at Capita who discussed the promise of AI in procurement, the challenges to consider and the practical implementation advice they offered the audience of procurement professionals.

Here are the key takeaways:

The Promise of AI in Procurement

AI has shown potential to transform many functions across industries, and the procurement function is no exception. From automating routine tasks, enhancing decision-making and providing valuable insights for strategic sourcing to analysing supplier data, market trends and, predicting future demand.

Enhancing data analysis and decision-making

Panellists highlighted AI's ability to process large datasets and extract meaningful insights. As Fraser Woodhouse from Deloitte noted, AI is "very good at now taking unstructured data and bringing structure to it." He added that AI can go beyond basic analysis: "Rather than just helping you do your own analysis, [AI is] actually answering that question for you."

Automating routine tasks

AI shows great potential for automating repetitive procurement processes, freeing up teams to focus on more strategic work. Suraj, Chief Procurement Officer at Capita, shared a concrete example: "In the next three to four months, we are going to overlay AI to be smart enough to provide zero touch on invoices coming in."

Challenges to consider

With great potential often comes unforeseen challenges, which is definitely true of AI. The panellists discussed the following challenges they had personally encountered and those they are yet to tackle.

Data quality and integration

The effectiveness of AI solutions depends heavily on having clean, comprehensive data. Fraser emphasised this point: "Content data is absolutely the number one challenge... You can't do that properly unless you have all of your contracts correctly in the right database."

Organisational change management

Introducing AI may face resistance from employees concerned about job security. Fraser highlighted this challenge: "You're going to find these pockets of resistance, people who are very used to doing things a certain way, be reluctant to adopt some of these new and more efficient tools for fear of making themselves obsolete."

Ethical considerations

As AI takes on more decision-making roles, organisations need to establish clear guidelines around its use. Suraj mentioned, "We've gone through a lot of ethical questions... looking at AI solutions."

Improving user experience

Natural Language Processing capabilities are making procurement systems more intuitive and user-friendly. Scott Hein from Meta envisioned AI "to assist people in the work that they're doing today," adding that "if you can do your job just a little bit better because you have access to that tool, I think that's something that we're really excited about."

Practical implementation advice

The panellists shared their top three pieces of advice for implementing AI in your procurement function.

Start with clear use cases

Scott advised: "Get your teams to engage on what are the possibilities for AI within your organisations, and then sit down and have like deep conversations with the partners that can help you, the internal teams that can help you."

Focus on data foundations

Fraser stressed the importance of understanding current processes before implementing AI: "You can't train an AI to guide a user through this landscape unless you first understand it and have made a conscious decision."

Upskill your team

Suraj emphasised the need for new skills: "We need to have the skill sets around data-driven analytics to couple that as well. Getting up to speed on AI and leading the business is probably the recommendation."

Embrace experimentation

Scott shared Meta's approach: "The way we're looking at it is thoughtfully trying to find those opportunities for us to apply this technology to augment the work that we're doing, test it, get confident in the results, and then slowly start to kind of lower those guardrails a little bit."

The future of AI in procurement

While still evolving, AI is poised to dramatically transform procurement in the coming years. Suraj painted an exciting picture of future possibilities:

"Imagine having a prompt and just asking your procurement AI, you know, tell me everything about a supplier. I want a full 360 view of a supplier. And then the AI can go out and in terms of ESG, you know, go to Walk Free and look at the Global Slavery Index, go to EcoVadis, pull out environmental and social variables, go to Creditsafe, LexisNexis, Gartner, benchmark that supplier, look at pricing trends, et cetera."

The key to success will be thoughtful implementation that augments human expertise rather than trying to fully automate procurement decisions. As Suraj summarised: "AI is not to replace the team... it really is an enabler and advisor to help us be more strategic, have all the information up front, and have that preparedness we need."

By embracing AI's potential while carefully navigating its challenges, procurement teams can position themselves at the forefront of this exciting technological revolution. As Doug Gray, CTO of Amazon Business, concluded: "We have to be really crisp on what it is that we want AI to do. We need to understand what is the data that we want it to act on, and then we need to operationalise it by understanding what do we actually expect success to look like."