Daily Archives: November 15, 2018

AI in Procurement Today

As per yesterday’s post, there is no true AI in procurement, at least with respect to the traditional definition of AI as artificial intelligence, but there is AI out there if you interpret AI as assisted intelligence, and some of it is pretty good.

What is there? If you check the doctor‘s 2-part in-depth piece over on Spend Matters on AI in Procurement Today (Part I and Part II) [membership required], you’ll see there are six areas where at least on one or two providers add a lot of value. They are:

  • True Automation
  • Smart Auto-Reorder of MRO / retail stock
  • Enhanced Mobile Support
  • Guided (and sometimes Guilted) Buying
  • M-Way Match And Error Prevention
  • Smart (Automatic) Approvals

And, in some cases, a system will integrate its automation, m-way match, and smart approvals to determine when an invoice with a small fluctuation can be automatically paid and when it can’t. For example, when an invoice comes in for services at a rate 10% higher than the last invoice, most m-way match systems would block it and bubble it up to the lead buyer / requisitioner. But a smarter system with integrated checks, behavioural analysis, and a history of override decisions might do the following:

  • check the PO and see it referenced a master contract with an evergreen clause where the original term had expired and the supplier had the right to increase rates up to 15%
  • check the user’s past overrides and see that they generally approve rate increases of 10% or less
  • check the user’s approval authority and see that they have the ability to make that approval
  • calculate the probability of automatic approval by the buyer and if it’s 90% or greater, queue the invoice for automatic payment, with a notification to the user that they may want to explicitly renegotiate the contract as the next invoice from the supplier might be at a 15% increase

Now, this is not going to help you in all cases, but every time you waste time investigating an overage you can’t do anything about, it’s a waste of time and, thus, any assisted intelligence solution that can prevent a waste of your time is valuable.

For more details on what the best systems can do today, if you have a Pro membership, the doctor strongly encourages you to check out AI in Procurement Today (Part I and Part II) and find out what your Procurement system should be doing for you.