Intelligent Procurement: The Final Frontier or a Step Towards Something Greater?
I’ve been writing a lot about the idea of autonomous procurement lately, something that I am very passionate about. People often misinterpret autonomous procurement to be ‘machines and robots taking jobs’, ultimately leading to the death of human procurement jobs. This could not be further from the truth.
For a more in-depth analysis, you can read this blog on the subject, but in short, autonomous procurement is all about the collaboration of humans and technology, using the power of AI to cut out routine tasks and open the doors to a more strategic and value-adding procurement function.
In a word, it will help technology leaders prove that people are the most valuable asset of the ‘Golden Triangle’ (People, Process, Technology).
It will mean a transformation of the procurement industry, shifting the focus from cost to value, and demanding procurement professionals to become strategic instead of tactical, and comfortable with making data-driven decisions.
For more on the journey to autonomous procurement and what your team should be doing now to prepare: read our white paper with Spend Matters
Procurement’s Digital Transformation
There are four main steps to reaching autonomous procurement. Each stage will combine new technologies, capabilities, and build off one another before reaching the pinnacle of procurement technology, autonomous procurement.
Many experts predict that it will most likely be 2025 or after before we reach that, but it’s important to understand both what stage procurement as a whole is at, but also what stage your procurement function falls into. This way you can get the most value out of your solutions and continue laying the groundwork for future transformation.
I’ve written a guide on each stage so far to give you better insight on where you are on the journey:
- Automated Procurement
- “The first level of digital procurement is automation, which is built on assistive intelligence — a type of system that can automate repetitive and standardized tasks performed by humans. This first level of digital procurement is capable of automating simple tasks using RPA (robotic process automation) that can be customized to the organizational process and reconfigured over time as processes, or data streams, evolve.” The main goal in phase one is to increase visibility, build on intelligence, and reduce procurement’s mundane and repetitive tasks.
- Augmented Procurement
- “The second level of digital procurement is augmented intelligence — defined as a system that can learn from human feedback and provide better insights and recommendations over time on one or more specific tasks. The tasks are typically specific, and the capability limited, but if the task is one that humans have difficulty with, it’s still immensely valuable. Whereas an automation solution will guide a user through a process, an augmented solution will guide a user to a decision. This guidance will be based upon encoded historical knowledge and best practices.” Many of today’s cutting-edge technologies fall in phase two. Take the new IPhone for example, their FaceID is constantly being updated to recognize you even if you get a haircut, grow a beard, or wear glasses.
- Intelligent Procurement, (More on this later)
- Autonomous Procurement
- The pinnacle of procurement’s future technologies “The fourth level of digital procurement uses autonomous intelligence. An autonomous intelligence system can not only learn from humans and adapt its behavior using cognitive abilities but also learn and adapt to new tasks and situations like an expert would without having to kick up an exception for human review.” While the machines may not need humans in order to learn, there will always be room for human guidance, and strategic operation, meaning that procurement jobs are not at risk.
What is Intelligent Procurement?
Intelligent procurement is built on cognitive intelligence which is a system that learns from human interaction and then can formulate recommendations and behaviors over time to mirror what a human expert would do.
This phase of the journey is coming, and it’s coming soon. Many companies and providers may claim to already be at this stage, claiming to offer cognitive solutions, however, this is categorically untrue. While trending in the right direction towards cognitive ability, most of these vendors have a strong augmented intelligence foundation that is compounded with RPA capabilities.
In other words, a human still has to make the decision to automate a process. While being very powerful and useful, and may fulfill an organization’s needs, this still falls under augmented procurement.
The key here is the system’s ability to learn from the past and react in the future without needing a human along to guide. This is what sets it apart from past technologies and what makes it so revolutionary. Instead of being guided to a decision and best practice as with the augmented phase, intelligent procurement systems will be able to learn from past behavior over time, analyze historical and current data, and make a decision based on that data. Eventually, instead of needing a human to make the change, the system will automatically implement this change and flag administrators to alert them of the decision.
Of course, these systems will need plenty of data in order to effectively recommend and implement changes, but it will be able to learn and get smarter over time to truly drive ROI for the organization. This will also free up procurement professionals to be able to focus on other value-adding and strategic activities as opposed to a long and complex sourcing event or approving routine invoices.
Is Intelligent Procurement the Holy Grail or the Bridge to Autonomy?
As quoted in our white paper “For some technology providers, this is the Holy Grail, as it’s as close as we can currently expect to get to true artificial intelligence-powered digital procurement in the near term.” The key phrase here is “near term”. Cognitive, intelligent procurement is the holy grail of the short term, but at JAGGAER we think of it as a very important step in the larger journey towards autonomous procurement, almost a bridge between where we are and where we are going.
It offers a glimpse of what can be achieved by procurement when we embrace cutting-edge technologies like artificial intelligence (AI) and machine learning (ML). Some experts say that true autonomous procurement is still five years away, some say even more, the bottom line is that it’s a journey.
It’s important to recognize where your organization lands on the autonomous spectrum. Each stage builds on one another, and without adopting these technologies as they come and building a data baseline you can fall years behind the competition. Intelligent procurement is right around the corner, and it will change how procurement is thought of – but the true ‘holy grail’ of procurement technology is autonomous procurement, and it’s still just out of reach.