The rise of Artificial Intelligence (AI) in Procurement and Supply Chain Management: Opportunities
Richard Mumbi, MSc, BA (Hon), MCIPS, MZIPS, Adv Dip.
Procurement & Business Expert | Public Speaker | Entrepreneur | Award winning - Best performing Procurement & Supply Practitioner in the Public Sector
As the world is slowly transitioning from the Third Revolution which has been a period evidenced by massive innovations in automation of business processes including Procurement and Supply Chain Management using programable controls and computers which led to automations without Human assistance. We are now facing and are transitioning into the fourth industrial revolution which builds on the innovations of the third industrial revolution. The key notable factors coming the fourth industrial revolution are the applications of information and communication technologies by way of enhancing the network connections and having a digital twin on the internet. In other words, the 4th Industrial Revolution allows these technologies to communicate with the business processes and bring out information about themselves. The fourth Industrial Revolution brings with it the automated production and logistical processes, smart factories and production lines in which production and logistics technologies, units and people communicate using the available networks. This is the foundation of artificial intelligence.
In view of the above allow me to borrow a simple definition of Artificial Intelligence from Staff, C. (2024, April 3) who defines it as “computer systems capable of performing complex business tasks including that of the procurement and supply function that historically only a human could do, such as reasoning, making decisions, or solving problems”. A very good example of these systems includes various Business and Procurement Enterprise Resource Planning (ERPs), Risk Management Applications, Project management Applications, and data analytics tools.
Without Much labor on the definitions allow me to share some of the benefits of the AI in the procurement and supply space.
Prediction of the future Procurement and Supply Chains outlook: AI machines can assist businesses, procurement department and project implementers to predict opportunities, risks, and failures in the business process autonomously and provides self-organized logistics which react to unexpected changes in business process.
Solving of complex procurement and supply chain problems: the procurement and supply chains processes are quite complex and outputs relatively huge volumes of data which would require multiple teams and consequently cob for a huge wage bill however, AI provides an opportunity for Procurement and supply functions to analyses these data within a short time and solve complex problems more efficiently or effectively using smart computer algorithms with little human interventions.
Enhanced Productivity: there are two factors that come with improved or enhanced productivity, namely saving time and reduction in errors. As earlier indicated in the preceding notes, AI provides for reduced time in processing large amounts of data and information with very few errors. As a result of the Machines interacting and exchanging data and information on a wider network, they have the ability to gather much accurate date related to the procurement and supplies processes.
Cost Savings: Cost saving is an integral part of the Procurement and Supply Chain Management and therefore, places demand on the procurement and supply chain function to ensure that value for money is attained. AI plays a pivotal role in achieving cost saving as it assures efficiency, predicts errors and risks beforehand, assists in supplier relationship management, and reduces supply chain errors.
Enhanced Security: Supply Chains faces a lot of security challenges both at national and global level as a result of the Geopolitical, Micro and Macro Economic, Social, Technological, Legal, and Environmental factors therefore, with the coming in of Artificial Intelligence there is an opportunity for enhanced intelligence analysis of the procurement and supply chain processes thereby reinforcing the resilience of the defense supply chains. AI plays a critical role in inventory optimization to supplier selection, compliance monitoring, ethical and sustainable sourcing, building trust and transparence through out the procurement and supply chains, minimizes errors, and has raised bar for supply chains.
Improved Competitiveness: Supply Chain Competitiveness lies at the core of operational optimization. Artificial Intelligence brings across with its data and information integrated from different procurement and supply chain stakeholders. It provides an opportunity for real-time insights into production, stock and inventory management, logistics and helps in predicting potential supply chain disruptions. In turn, it provides an opportunity for enhanced decision making, cost reduction, and optimized efficiency.
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Information: With the coming of artificial intelligence, information is available at the fingertips of every business professional and decision maker. It is a game changer in procurement and supply chain research, innovation, and development. Best practices, compliance requirements for both nationals and funded projects are made available at the disposal of all procurement and supply chain stakeholders.
In conclusion, the procurement and supply chain function must begin repositioning itself and adapt to the new demands of Artificial Intelligence (AI) in their space. AI has come and it has come to stay, our responsibility is to ensure that we adapt our operations and activities to the new demands of AI despite the challenges that it may also pose to the procurement and supply chain function which I intend to address in the next article.
The author is a procurement expert and management consultant
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