[Column] Sandi de Souza: Why top-performing companies use AI to boost procurement

[Column] Sandi de Souza: Why top-performing companies use AI to boost procurement

Published: 22-09-2023 14:57:00 | By: Pie Kamau | hits: 2429 | Tags:

Leading organisations are augmenting their source-to-pay processes with automation and artificial intelligence (AI), unlocking greater efficiency and driving improved bottom-line and sustainability outcomes. One Deloitte study found that high-performing procurement organisations are eighteen times more likely to have deployed AI capabilities than their lower-performing peers.

For Chief Procurement Officers facing the combined challenges of an uncertain operating environment, supply chain pressures, inflation, a complex risk landscape and the growing need for more sustainable business practices, AI provides an invaluable edge. A report by IDC highlighted how Chief Procurement Officers are leveraging AI for better spend visibility, improved compliance, and better resource optimisation. According to the report, procurement teams are often shorthanded in expertise and capacity, driving the need for greater adoption of technologies such as AI to augment internal capabilities.

AI enhancing procure-to-pay processes

For procurement leaders, AI can make a profound impact on the source-to-pay process. By leveraging the rich data inherent in procurement networks, organisations can streamline a broad spectrum of processes, ranging from contract management and compliance to identifying key suppliers and helping deliver an enhanced buying experience.

For example, the AI embedded in SAP Ariba Sourcing extracts hidden insights from past data to optimise supplier lists. This can help organisations circumvent potential skills shortages by automating best-practices around RFQs and RFPs, ensuring the organisation maintains optimal procurement performance.

For companies that lack internal capacity or skills to successfully adopt AI across their procure-to-pay processes, this embedded AI capability can help them reap the rewards of procurement modernisation more quickly. A study by SAP Africa revealed that a third of African organisations view AI and machine learning as in-demand skills within their business, while the latest WEF Future of Jobs report placed AI and machine learning as the fastest-growing skills category globally.

Mitigating procurement risks

Procurement specialists are also beset by an expanding portfolio of risks, with the ability to detect, measure and manage risk a top challenge. According to a Deloitte report, 70% of Chief Procurement Officers felt they had good visibility over risks to their Tier 1 suppliers, but only 26% were able to confidently detect such risks within their supply bases. Innovation within procurement networks can play a valuable supporting role in assisting CPOs with improving their risk strategies and capabilities.

SAP partner organisation Merlynn, for example, developed a prototype Digital Fraud Review Panel which aims to prevent payment fraud within procurement and payment systems. Merlynn’s Decisioning Digital Twin Technology enables organisations to deploy a digital team of fraud experts within their SAP payment system to enhance existing controls.

The Digital Fraud Review Panel acts as a second set of eyes that monitors payment activity in real-time, identifies potential fraud and stops the payment before money flows out of the organisation, all integrated into SAP via API. Merlynn’s Digital Fraud review panel solution is now listed on the SAP Store.

Sustainability imperative

Chief Procurement Officers are under growing pressure to develop more sustainable procurement strategies and embed sustainability in the entire procure-to-pay value chain. Sustainability continues to be a top global business imperative for organisations, with studies showing revenue from sustainable products growing at six times the rate of other products, and 90% of global investors revising their investments if companies do not at least consider ESG criteria within their business models.

Chief Procurement Officers have a guiding role to play in enhancing an organisation’s sustainability efforts by ensuring sustainability is embedded within the organisation’s procurement processes. This can help companies reduce their carbon footprint by prioritising suppliers that have fully integrated sustainability in their own business models. One study found that more than half of global businesses already have a sustainable procurement policy in place, which provides the additional benefit of also building greater resilience within their value chains.

As AI tools become increasingly embedded in day-to-day procure-to-pay processes, organisations stand to unlock immense benefits through greater automation and ease of use, improved sustainability, increased visibility over risks and better user experiences. For companies weathering the storm of an unpredictable supply chain and global business environment, AI tools may be the key to keeping the business running optimally, no matter the emerging challenges.

Sandi de Souza is the Chief Financial Officer at SAP Africa

 

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