Why digitization must set the foundation of Gen AI in procurement

Date:
Wed, 23 Oct 2024 14:32:06 +0000

Description:
To adopt GenAI, organizations cant run before they can walk - they must have the right foundations first.

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The procurement function hasnt traditionally been seen as leading the way in technological advancement. Most often it is sales and marketing that experiments and adopts emerging tech such as Generative AI . Many even expected Gen AI to pass the department by without much impact.

But, as Gen AI continues to influence business performance in all industries, procurement has taken notice and teams are embracing its adoption. Research found that almost a quarter (24%) of UK businesses have deployed Gen AI in procurement and supplier management in the last 12 months, with 55% planning on implementing Gen AI.

So whats different this time? Gen AI is providing enormous efficiency gains. Organizations that have adopted Gen AI tools have seen a 44% reduction in manual processes across the procurement and supply chain function.

As early adopters reap its benefits, organizations that cant implement Gen AI and use it effectively risk being at a competitive disadvantage.

But organizations cant run before they can walk. Instead, they need to ensure they have the right foundations in place by digitizing their procurement processes. The road to gen AI is paved with poor digitization

When it comes to Gen AI use, a clear innovation gap is appearing and digital laggards have a long way to go to close the gap. Digital transformation has stalled in the last five years: UK organizations now say they have digitized just 48% of their procurement processes in the past year on average, compared to 45% in 2019.

Procurement and supply chain functions with poor digitization are still subjecting employees to onerous manual tasks, stunting efficiency and
limiting the organization's ability to make quick, informed decisions regarding their suppliers and spend.

Crucially, the lack of digitized processes in the procurement function leads to subpar data quality, limiting the accuracy and consistency of the data,
and muddying the waters of clear decision-making in supplier risk or performance management, for instance. This is critical for firms looking to adopt Gen AI as a lack of quality data can be a limiting factor that can substantially impact the effectiveness of Gen AI insights in procurement and supplier management. The smart use of data

Organizations looking to capitalize on the productivity gains Gen AI offers must put in the hard yards. This means taking a smarter approach to procurement, digitizing their processes from source to pay. This includes building a solid foundation of data from the unification of multiple systems across an enterprise.

Data is the lifeblood of AI, and without quality data, organizations wont see valuable outputs from Gen AI. Using a single source-to-pay platform that unifies and cleanses your data and combines it with information generated
from various sources will be critical for the success of businesses. Organizations that can ensure data is accessible, high quality, and accurate are spending less time on tactical issues (e.g., building reports, syncing data, etc) and more time on building intelligent processes. Access is
critical as if data is dispersed, systems will struggle to access it and
match relevant information, which can exacerbate data accuracy problems.

With more accurate information at its disposal, Gen AI can allow procurement leaders to bridge the technological and data gaps that they previously risked succumbing to. The AI end-game in procurement

With digitization across the source-to-pay process, organizations have the foundations in place to establish a single source of truth for supplier and spend data. This allows Gen AI to have an immediate impact on organizations' efficiency and their decision making capabilities.

As organizations fully digitize their processes, Gen AI can produce instant contract analysis and summarization in multiple languages, supplier and category research assistance, and supplier performance SWOT, RFX generation and more. With Gen AI built on fully digitized processes, organizations can also speed up risk assessments and mitigation plans and allow employees to effectively chat with your data, allowing users to instantly find information about suppliers, spending, contracts and transactions.

Think of Gen AI as having numerous assistants in various parts of the source-to-pay process. Traditionally, a member of the procurement team would have to take time to summarize a contract, research a category, write a report, draft an improvement plan and create a questionnaire on a new regulation. All of these manual steps can be removed with Gen AI, ultimately giving teams back time to focus on high value, strategic activities.

In fact, of the 44% of organizations that have adopted Gen AI tools, 69% of efficiency savings have been seen in task automation, 67% in internet research, 59% in document analysis and 48% in content creation. When
processes are digitized and Gen AI has good quality data to pull from, procurement teams can create first drafts of RFPs quicker, or collate more comprehensive and accurate market intelligence reports. The path to procurement transformation

Slow digitization poses an existential roadblock to businesses seeking to leverage Gen AI for productivity gains and resource unlock. Organizations
must have the right data foundation in place and the buy-in of user trust to ensure Gen AI solutions are embedded seamlessly within existing procurement technologies.

Gen AI is already proving to be a catalyst for procurement transformation,
but a technological and data gap needs to be bridged before organizations can make full use of Gen AI.

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