Daily Archives: October 6, 2023

The Seven Patterns of Artificial Idiocy … in Procurement

AI proponents, who keep telling us it stands for Artificial Intelligence which does not exist, keep pushing the benefits of AI while sweeping all of the detriments under the rug so you’ll sign that multi-year deal now (and they’ll have the money to keep researching the technology in the hopes that their continued efforts will prevent the bad from happening again). (And while the tech will get better and the success rates will improve, the very nature of the technology they are deploying is such that it is impossible to prevent the bad because the technology is not intelligent and not deterministic, as per our many previous posts on the subject. The best will eventually get success rates up to 99%, but that’s still a 1% failure rate and, in Procurement, it only takes one catastrophic failure to wipe out all of the successes made in the rest of the year. It only takes one bad decision that shuts down a multi-million production line, results in class action lawsuits for the release of unsafe products in to the market, or results in seizures and destruction of millions of dollars of inventory when the products violate import restrictions, etc. to deliver masses losses.)

And the benefits they push typically fall into one of the seven patterns of AI that the AI proponents keep telling us AI will deliver. To help you better classify the false promises, we’ve decided to cover the seven patterns, example promises, and realities you will encounter if you implement current iterations of technology that employ Artificial Idiocy.

Promise: The system will adapt and evolve over time so that when you log in, you see exactly what you need to see, in priority order for you.
Reality: The system comes with a set of widgets, and all the AI does is reorder the alerts/notifications/tasks/reporting views in each widget based on a priority weighting where the weights are recalculated based on recency in access so, at the end of the day, it just keeps showing you what you just looked at and truly important alerts, because you haven’t regularly looked at them, are at the bottom of the widget and off the screen since you never scroll down inside the widget. Classic rule based systems work better.

Promise: 100% effective automated invoice processing, routing, and approval
Reality: it only recognizes invoices from suppliers who invoice regularly in a format that never changes; and only if the line item descriptions are never abbreviated; and only matches properly if the PO number is included; 10%+ of invoices have to be manually processed, and abbreviation errors cause misclassifications of units that sometimes don’t get caught until after payment is issued

Conversation and Human Interaction
Promise: natural language interaction, including voice to text
Reality: due to the ambiguous nature of the English language, the number of follow on questions the AI has to ask just to produce a simple report requires the user to spend five minutes giving clarifications and specifying parameters that could be point-and-click selected in 30 seconds; efficiency is flushed down the virtual toilet

Predictive Analytics & Decisions
Promise: what the price will be when, and why
Reality: works really well 95% of the time, with price accuracy often within 2% to 3% and demand predictions (outside F&B and other highly unpredictable industries) within 3% to 5% at the macro/rollup level, but when a trader illegally tries to run up the market with excessive trades, and prices start to skyrocket and the algorithm doesn’t know this is unusual/short-term, it may predict extreme price increases at contract expiry in 6 months, and automatically early renew the contract for you at rates 30% to 130% higher than it should (before the costs become unaffordable)

Goal-Driven Systems
Promise: Sustainable Buys with Cost Savings
Reality: Unsustainable buys as cost is overweighted and over-prioritized in all situations; ’nuff said

Autonomous Systems
Promise: They will procure automatically and do better than humans
Reality: They procure automatically and occasionally do better than humans, usually do on par, and occasionally make such disastrous decisions that the company does well to avoid bankruptcy …

Patterns & Anomalies
Promise: They will detect unusual spending patterns and detect the best opportunities for savings and the most likely instances of fraud
Reality: Unusual spending patterns don’t mean savings, and usual spending patterns don’t mean absence of fraud, and you get all kinds of “priority alerts” with no savings opportunities while the largest opportunities go unidentified and collusion frauds are never detected

At the end of the day, as we’ve said again and again, Procurement Automation: Good, (AI) Automated Procurement: Bad. Only you, dear reader, are intelligent and, thus, only you should do the thinking and only use technology for what it’s good at, the thunking.