Cognitive Procurement - Is It the Final Frontier?
There has been a lot of buzz about disruptive technologies in procurement circles, one being cognitive procurement. But what is it and how can it be leveraged to create efficiencies and economies of scale in the procurement department? This blog will explore these questions, as well as the implications of AI for the future.
Artificial Intelligence (AI) is where we first heard the term cognitive technology. And while AI has its beginnings in gaming, it wasn’t long before technology experts began seeing the benefits of AI among consumer and business applications… Amazon’s Alexa and chatbots are two that come to mind that are now ubiquitous in homes and businesses.
With the prevalence of AI affecting all facets of life, it was only a matter of time before it would reach the world of procurement. The fact is, procurement is a prime candidate to reap the benefits of what AI has to offer—because it is data rich and transaction-heavy.
The thought of artificial intelligence taking over jobs might be a reason some CPOs look over the technology, but fear not—AI is a means to empower procurement professionals to do more—faster, better, smarter—than what they could do before.
What is Cognitive Procurement
Cognitive procurement is a method of using disruptive technologies to aid in the management of the procurement function. It is the process of using self-learning technology to process data in order to aid in the process of acquiring or buying goods and services.
Procurement, being a very data-rich industry, is a prime candidate to reap the benefits of cognitive technologies. For one, there are many data points around raw materials, goods and services, transportation and delivery, and suppliers. It’s also based in transactions—thus, any system that seeks to help procurement professionals find better information faster can only speed up decision making and ultimately drive better ROI.
Two Key Applications of Cognitive Procurement
So, what functions are ripe for cognitive procurement? You may already have a clue: sourcing and contracts.
Intelligent Sourcing—Cognitive technologies can help with sourcing by continuously re-evaluating suppliers in order to achieve the greatest efficiency and value with the least amount of waste. Think about the implications of this in retail, for example. What if your system could use big data points to optimize decision making throughout the supply chain? What would this mean to your business or your customers? Intelligent sourcing could help you identify suppliers whose product capabilities best align with customer preferences; analyze spend; and eliminate under-performing suppliers without time-consuming research and manual data aggregation.
Intelligent Contracts—Cognitive technologies can also streamline contracting functions. What if you could automatically identify relevant terms and conditions against a legal library and taxonomy; or, administer contracts without third-party intervention. By employing cognitive systems you can essentially shorten contract negotiation cycles and reduce costs by teaching systems to target ideal price points based on expected volume and contractual discounts.
Cognitive technologies like blockchain are eliminating the need for third-party services (i.e., banks, transfer services, card processors) to process transactions, giving both companies and suppliers quicker settlement. For companies that provide services and employ smart contract technology, they are able to register new clients automatically once a payment is sent. When data is able to move freely and transparently, it streamlines and speeds up the transactions.
Cognitive Procurement—The Final Frontier
In this post, we’ve just seen the tip of the iceberg on the subject of cognitive technologies and procurement. JAGGAER’s white paper, Cognitive Procurement: The Final Frontier, takes a much deeper dive into this subject, providing a comprehensive definition and how cognitive technologies will shape and influence the future of procurement. Download your copy now.