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GenAI: the catalyst for a new era of procurement?
Why the technology promises procurement’s leap forward – on the scale of the Wright Brothers one day, the Starship Enterprise the next.
For as long as there’s been commerce, there’s been procurement. From antiquity to the modern day, successfully selling Earth’s finest widgets or gizmos has always required careful sourcing and managing of goods and services from suppliers to keep spend under control.
Through the years, procurement has grown in both commercial significance and complexity as globalization widened the business landscape. Procurement teams have evolved from small-scale, cost-saving back-office operations to the cornerstone of a multinational supply chain. But it has often been a bumpy transformation.
Turning to tech to lighten the load
Demands on procurement teams’ time have multiplied exponentially. They’ve had to wade through volumes of manual processes. They’ve had to manage armies of suppliers and scramble to prevent maverick buying across international teams – all while shaping the most effective, cost-efficient procurement operation possible.
Very often, new technologies have helped overcome these kinds of procurement challenges (or at least reduce their pain levels) – be it digitization, automation, or more recently generative artificial intelligence (GenAI).
But GenAI is different. It’s not simply a means to accelerate and optimize procurement processes. It has the realistic potential to change the nature of procurement itself. Never mind automated procurement, we’re talking autonomous procurement – a genuine evolutionary jump.
Let’s trace procurement’s story so far before taking a look at the new frontiers GenAI is making reachable.
Chapter One: The unlamented past (AKA The Manual Era)
It was a dark time to be a procurement leader. Procurement teams were drowning in siloed, unstructured data and too stuck in manual processes to manage spend with any success.
We begin our story in The Manual Era of procurement. The standard day-to-day for a procurement professional was marked by slow, labor-intensive processes requiring high levels of manual intervention from organizations' procurement team. Their day-to-day business was reactive, spending much of their time negotiating payment terms with suppliers, as well as firefighting and fixing payment and contract anomalies, due to:
A lack of transparency into available contracts
Little standardization of PR-PO processing
A lack of consolidated supplier master data insights
Information buried in unstructured data formats (like pdfs)
Procurement data hidden in departmental / organizational silos
Read: 4 Ways Procurement is Evolving From Reactive to Proactive
This lack of visibility also opened the door to negotiated discounts or contractual obligations being missed, supplier performance not being tightly monitored, and increased procurement cycle time for crucial production resources. The procurement function was at risk of leaving money on the table, legal breaches, inefficient operations, and threats to on-time delivery performance.
Trouble was, as businesses scaled up or diversified geographically, it was increasingly impractical (often impossible) for the procurement organization to keep up with the volume of tasks requiring their attention. As a result, challenges like maverick buying – the purchasing of goods or services off-contract, outside approved supplier agreements, or beyond defined spending policies – were all too commonplace. That meant companies’ spend under management wasn’t always that closely managed.
And we’re not talking ancient history, here. In a Wall Street Journal article, telecoms giant Vodafone painted a vivid picture of the manual procurement burden it had faced as recently as 2015 (prior to engaging with Celonis). It would take 15 people three to four weeks compiling data about the previous months’ purchase orders, approval rates and key trends. By the time this process was completed, there was little or no time for the Vodafone team to draw actionable insights from the data. Not only that, but the data was already weeks out of date, and then it was time to start collecting it again for the next month.
Chapter Two: The rapidly evolving present (The Automation Era)
A new hope: as technology is deployed to automate the manual burden, GenAI begins to emerge as a force to redefine the art of the possible in procurement.
Procurement teams around the world have grabbed opportunities to shed as much of this manual burden as possible.
Process automation solutions such as business process automation (BPA) and robotic process automation (RPA) have been brought into the fold to lighten the load. They excel at processing repetitive, high-volume, rules-based procurement tasks, such as matching POs to invoices and goods receipts, or data extraction and input. This kind of automation deploys bots to take on these tasks at a scale, speed, and level of consistency far beyond the capabilities of human counterparts. At the same time, it enabled organizations to deploy human expertise to higher value, more complex procurement practices such as supplier management.
This automation era really kicked into gear with the arrival of AI technology. Process automations don’t always address the broader process fragmentation and data visibility issues. However, applying artificial intelligence to automation generates something altogether more valuable: intelligent process automation – particularly when powered by process and business data-rich platforms such as Celonis Process Intelligence.
Intelligent automation offers procurement teams proactive, business-wide solutions, greater depth of analysis, real-time insights, and intuitive means to amend process anomalies. Thanks to GenAI, teams can use automations to:
Design and deliver procurement process solutions via conversational, natural language interfaces or copilots
Drive PR-PO standardization through the creation of validated, templated documentation
Reduce maverick buying via intelligent enforcement of purchasing policy – ensuring correct contract terms are applied to PRs, directing teams to preferred suppliers, or flagging beneficial rates or supplier obligation at a systems level
Collate, analyze, and report business-wide procurement insights (such as supplier performance and master data) enabling faster, data-validated decision making
Access and analyze procurement data bound up in unstructured data formats (no more manual reviews)
In short, GenAI is helping procurement teams amplify the impact of automation – enabling them to drive productivity, accelerate cycle times, and keep a tighter rein on spending.
Chapter Three: The likely future (The Autonomous Procurement Era)
Sounds like science fiction, but with the right data to power AI, machines will be able to manage many entire procurement processes on their own. Generative AI's procurement journey is entering its most autonomy phase.
Systems are doing it for themselves – or at least they will be as organizations evolve towards autonomous procurement operations. GenAI can do more for procurement teams than simply automate and expedite data-heavy processes. With AI procurement, entire workflows can be orchestrated dynamically, with little or no requirement for human interaction.
In time, there’s no reason to think that an AI system’s powerful predictive analytics and decision-making capabilities couldn’t be put into the driving seat of bigger, more complex, and higher-value procurement processes. We’re talking about AI that could:
Proactively enforce compliance or optimize spend in real time
Identify ideal vendors through real-time market analysis
Negotiate supplier terms based on past prices and contractual trends
Predict risk and procurement pinch points based on multi-source, historical and real-time data analysis – suggesting and/or implementing corrective actions
Oversee contract management, monitoring supplier performance, on-time delivery performance, and lead-time master data – flagging any non-compliance
Maintain and develop each supplier relationship, communicating with vendors directly
Place orders based on demand forecasts and inventory management data
This type of autonomous decision making being used to drive operational efficiency isn’t science fiction, it’s already underway. In fact, we’re helping to make it happen for our customers.
The key is feeding GenAI with the right data. The Celonis Process Intelligence Platform collates process and business data from across the tech stack and layers in standardized process knowledge and business context. This is the ideal diet to ensure AI can flex its generative muscles.
Our customers can build out decision-making Action Flows to trigger task automation based upon different procurement scenarios (such as forwarding non-compliant documentation to appropriate teams according to their type, value, or error). On a similar but broader scale, our AI-driven Orchestration Engine enables customers to coordinate end-to-end procurement processes intelligently across multiple systems.
All of which enhances procurement efficiency, cost optimization, and compliance while minimizing risk and maverick buying. And this is just the beginning of a GenAI-powered era for procurement, which has limitless potential.
Procurement’s next chapter: An unfolding frontier
Generative AI has pressed fast forward on the evolution of procurement - so what happens next?
The procurement landscape has changed a lot since its practitioners were faced with managing an impossible mountain of manual tasks. Technology, and in particular GenAI, has transformed (and continues to transform) procurement workflows. And while you can scarcely scan a newsfeed without tripping over a ‘Generative AI revolutionizes X’ story, its impact on procurement could be genuinely paradigm-shifting. To go from teams drowning in a sea of siloed pdfs to autonomous systems negotiating with suppliers, is like going from the Model-T Ford to Doc Brown’s Delorean in a few short years.
New approaches and use cases for GenAI implementation are emerging daily – it’s a new frontier promising a wealth of business benefits. What’s clear is the importance of a comprehensive, accurate, and real-time data foundation – such as Process Intelligence – to fuel AI capabilities, ensuring they work effectively for the enterprise.
Procurement strategy and AI strategy are converging. Before we know it will be table stakes for an organization's procurement system to be rooted in, and dependent on, its generative AI framework. It's a daunting, intriguing future – make sure your data is in shape for the journey to come.
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