Artificial Intelligence (AI) is steadily changing the way the public sector carries out procurement exercises. It takes on tasks involved in the procurement process itself, as well as essential roles in behind-the-scenes activities, like scheduling contract termination reminders and crunching big data to provide meaningful analytics results that enable informed decision-making in real time.
Let’s take a closer look at AI’s role in modern procurement.
What is AI in Procurement?
Artificial intelligence (AI) in procurement refers to the use of advanced technologies and algorithms that enable tech to perform tasks traditionally carried out by humans. Artificial Intelligence is used to automate and augment various aspects of the procurement process, such as sourcing, supplier management, and contract management.
The goal is to make more insightful decisions that optimise resource allocation and streamline procurement operations. This includes reducing manual errors and enhancing overall efficiency. This saves time and costs and allows procurement professionals to focus on more strategic activities that add value to your business.
AI, Automation, & Data Analysis for Informed Decision-Making
Data comes from internal and external sources. Internal sources include purchase orders, supplier performance metrics, contract details per supplier, etc. External sources include newsletters, financial reports, social media mentions, reviews, etc.
AI and automation process, analyse, and clean data (ensuring there are no errors, duplicates, or inconsistencies). As they do so, they detect patterns (e.g., highest purchasing periods), which they can leverage to prepare and manage inventory for that time.
Predictive analytics forecasts trends and identifies potential risks and opportunities so you can manage one and optimise the other.
AI also plays a key role in analysing supplier performance. This separates the wheat from the chaff, so you can discard suppliers that don’t pull their weight and nurture relationships with those that consistently perform well.
Artificial Intelligence enhances data analysis in many ways
As you’ll see below, AI-supported data analysis covers a great deal of ground.
1) Cost-related data
Market intelligence tools analyse commodity prices and economic trends while staying on top of shifting regulatory requirements globally.
AI tools also assist in pricing and negotiation, risk assessments (different from risk identification), especially supply chain risks, supplier evaluation, and real-time reporting for insightful decisions.
2) Supplier selection and evaluation
AI tools dedicated to procurement data collection and analysis scour external sources (databases, publicly accessible information, etc.), crunch data, and identify promising suppliers who meet predefined requirements. These include the degree to which suppliers meet relevant KPIs and whether their business has the financial capacity to deliver the contract.
3) Contract management
Contract management is a full-time process, especially if you’re going several contracts running simultaneously. The question is, do you have staff to spare to ensure the job is done with the attention it needs?
AI and automation tools can manage a lot of the process for you, with particular specialisation in the repetitive tasks that deaden the mind and invite insidious errors.
Examples of AI contract management tasks:
- Customised templates
- Contract creation and approval
- Alerts and reminders
- Monitor compliance
- Automatic renewal
- E-signatures
4) Supplier relationship management (SRM)
Supplier management should also have the dedicated attention of a full-time staff member. But do you have the budget to spare for another permanent employee? Instead, good AI systems can:
- Monitor supplier performance
- Enable real-time collaboration
- Create and evaluate KPIs
- Recommend improvements in procurement operations
Compliance management
The public procurement process is bound by many regulations, not least of which is the Procurement Act 2023. Key areas of compliance include data security, social value, ethical supply chains, and occupational health and safety.
AI tools can be set up to monitor two factors that affect compliance.
1) Supplier performance to ensure they remain compliant with the relevant legal requirements on a local, national, and global level.
2) The overall public sector procurement market to detect market trends, changes, adaptations, or updates that could render suppliers non-compliant. Suppliers are informed and given the chance to update their processes.
Fraud detection
Modern eTendering platforms make it difficult to commit fraud, what with all the transparency and accountability built into the systems. That doesn’t stop fraud attempts, however. AI technologies detect anomalies in data, like maverick spending, iffy invoicing, and unusual payments. They flag incidents they consider suspicious so human intelligence can take the matter further.
AI, Automation & Bid Assessment
So far, we’ve looked at the benefits AI and automation have for procurement functions. Now, we’re going to look at how AI solutions directly impact the public procurement process.
Saves time and labour
Robotic process automation (a type of Artificial Intelligence) manages all the manual tasks, like data entry and bid comparison. Staff can focus on their core activities instead of worrying about incorrect calculations.
Increases accuracy
It’s unsettling how easy it is to make mistakes in manual procurement processes. Even small mistakes can have big consequences. Automation all but eliminates human error, including bias. This ensures tenders are assessed strictly according to predefined parameters.
This meets the government’s transparency requirements.
Supplier selection
Whether you get three tender responses or 33, the suppliers must be thoroughly vetted. This takes time and, despite clear criteria, is also subjective. Artificial Intelligence doesn’t care if Supplier A crossed an imaginary line in Buyer B’s mind. Supplier A meets all the criteria, so the company goes through as a likely candidate.
This meets the government’s requirements for fair tender evaluation processes.
Contract Award
Automation can manage the contract award process, including compiling and sending contract data and facilitating e-signatures. It also sets reminders for key dates, like official performance assessments, contract due dates, and contract renewals.
AI & Automation for eTendering (eProcurement, eSourcing) Platforms
eProcurement and eSourcing platforms, like Delta eSourcing, have improved digital procurement solutions no-end. For instance, submission times have been halved, and staff are more productive without the tiresome admin.
The standardised templates that require all suppliers, regardless of size, to provide the same information puts everyone on the same footing.
Platforms ensure all stakeholders have access to the same information in real time. This transparency keeps the process fair and honest. All interactions are recorded, so there is a log of activity that meets audit requirements.
AI algorithms used in eTendering platforms provide a range of other features. For example, Delta eSourcing provides the following:
- Tender and workspace management
- Advanced analytics
- Data integration
- Collaborative opportunities for procurement teams
- eAuctions
- Branded portals (hubs)
- Supplier management and engagement
Also, eTendering platforms provide enhanced communication channels that facilitate collaboration and innovation. Communication also supports feedback mechanisms to improve supplier performance. Ultimately, supplier relationships are strengthened.
Delta eSourcing Goes Above & Beyond Your Needs
Delta eSourcing has been an industry leader in public sector procurement since the industry began. Our experience, combined with the support of our partner, BiP Solutions, enables us to stay abreast of all industry changes and keep buyers up to date with regulations and other features of the public procurement landscape.
This has become a particularly important service as AI technologies advance so rapidly that it’s difficult to keep track of the effect on existing procurement systems.
Book a free demo today and find out more about the benefits of AI for procurement teams.
