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Why AI Matters to the CPO: How Procurement Leaders Are Transforming Expectations

By Keith Hausmann
July 09, 2020
Why AI Matters to the CPO: How Procurement Leaders Are Transforming Expectations

This is the final part of a three-part series about Why AI Matters to the CPO. To read part 1, What’s Real and What’s Not, click here, and to read part 2, Simple Facts about Complexity, click here.

We have already discussed the ways in which AI-enabled strategic sourcing helps procurement and internal stakeholders address current complexities and challenges, but, as every CPO knows, it is critical to have a bold vision for the future as well.

The more we allow technology to transform our processes, the larger procurement’s value proposition will be. Procurement’s willingness to focus its talent in strategic relational areas while pushing the limits of available technology will determine the slope of its evolutionary path.

Beyond increased speed and facilitated simplicity, AI-enabled strategic sourcing can radically alter capabilities and mind-sets around demand management, self-service sourcing, and supplier management.

Demand Management

Demand management allows companies to reduce costs—not by sacrificing quality or solely driving the price lever but by questioning whether purchases need to be made in their requested form. Most simply, demand management reduces the breadth of effort and or ambiguity associated with contracts, but this is only the beginning. With improved insight, demand management can eliminate overlapping or redundant suppliers to improve economies of scale or rationalize specifications and requirements to ensure they match the actual need. Flagging these opportunities is yet another value-add associated with AI. Identifying supplier overlaps and validating specifications are easy fixes for technology, and yet the return can be significant.

Self-Service Sourcing

The increasingly digitally savvy workforce has high expectations for the online buying experience. Non-transformed strategic sourcing is too slow, too cumbersome, and too constricted to be their preferred channel for meeting service and supply needs. They want to handle the sourcing themselves, and, as long as the proper guide rails are in place, procurement should encourage, empower, and reward this desire. AI-enabled strategic sourcing can facilitate this process through scoping, curated supplier short lists, and instant supplier proposal comparisons. And yet, providing the functionality is not the same as delivering an “experience.” Buyers want to see proposals in an elegant side-by-side comparison without having to rely on a team of people to handle data normalization or copying and pasting before they can look at the options and make decisions. 

Supplier Management

The majority of our discussions about why AI matters to CPOs has been internally focused, but procurement has to consider the supplier experience as well. Suppliers have been vocal about their frustration with the traditional RFP process, and not just because it is costly and time consuming. They often point out that the rigid structure of RFPs prevents them from putting the best proposal—and the best solutions—in front of buyers. If procurement can resolve this issue, the enterprise stands to gain in the form of closer supplier collaboration and increased innovative potential. With AI, suppliers can easily define the scope of work, key milestones, deliverables, project costs, expenses, and supporting materials in response to proposal requests. If buyers request more information, then suppliers can dynamically revise their proposals until agreement is reached, removing ballooning budgets and scope creep.

The strongest case for why AI matters to CPOs is understanding how they want to spend their time and what value the enterprise realizes through that time. Without AI-enabled strategic sourcing, CPOs will continue dealing with the foundational cracks in legacy procurement technology that continue to fall short of services spend and complex intent. They will be stuck haggling about project scope or settling for subpar results because resource constraints prevent them from doing better.

With AI, the CPO’s focus completely changes, shifting them to a trusted advisory role that positions them to lead the most effective spend management projects. Every part of the procurement value proposition becomes better if it is part of something bigger. Buyers get the experience they are looking for through a streamlined process that leads them to the most diverse, innovative, and cost-effective service providers. Suppliers are empowered to put forward the best, most creative proposals, and procurement achieves the professional fulfillment it desires.

AI matters to CPOs because the transformation it enables opens the door to the next level of procurement achievement.

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Keith Hausmann is Chief Revenue Officer at Globality.