Artificial intelligence in procurement and supply chain is amplifying and automating various repetitive procuring tasks and activities. They offer a key insight to the management from the large complicated database. In other words, AI is a software or application focusing on resolving specific tasks and activities. Today, we’ll discuss artificial intelligence in procurement and supply chain; various types, benefits, applications, and examples.
Types of AI in Procurement and Supply Chain
- Artificial Intelligence – algorithms show the smart behavior
- Machine Learning – algorithms recognize the pattern and use it in the decision-making process
- Natural Language Processing – has the capability to generate, interpret, and comprehend human language
- Robotic Process Automation – decreases the repetitive tasks for human
Benefits of AI in Procurement and Supply Chain
- Continuous improvement through machine learning and algorithms; have the capability to recognize patterns and trends and improve the outcomes
- Managing the mass volume of data relevant to the changing business and market needs and requirements
- Recognizing patterns and analyzing financial stability to recognize the SC disruptions; taking preventive measures to decrease the risks
- Improves demand forecasting, contract management, and supplier selection by negotiating a better deal with them
- Capability to analyze the mass volume of data and offers you a key insight into decision-making process
- Process automation frees the procurement staff so that they can engage in strategic activities
Application Artificial Intelligence in Procurement and Supply Chain
Let’s discuss the uses and applications of artificial intelligence in procurement and supply chain management; they’re as follows;
AI-based tools and applications allow businesses and companies to develop risk mitigation and risk analysis strategies. They have the capability to process and analyze a mass volume of data and information and recognize potential risk factors; compliance violation, market volatility, and performance issues of suppliers.
However, it allows AI to proactively deal with risks and launch risk mitigation strategies to recognize anomalies and risk mitigation strategies. AI is also highly useful in the following ways;
- Decreasing reputational and financial risks relevant to fraudulent procuring activities
- Detecting and preventing fraud
Inventory Optimization & Demand Forecasting
AI-based demand forecasting models help businesses and companies to accurately recognize patterns and forecast future demand. The analysis is based on external factors, market trends, and historical trends. However, it allows procuring professionals to perform the following;
- Streamline supply chain operations
- No stockouts
- Optimizing inventory levels
Smart inventory management employs AI algorithms and it helps them to find the right balance between customer service level and inventory holding cost; customer satisfaction and high operational efficiency.
Automated analysis and contract reviews help businesses and companies to streamline their contract management system. The AI algorithms have the capability to extract keywords from the contracts like responsibilities, clauses, and terms; and offer a quick contract review. It decreases the overall manual contract analysis reviews; better contract compliance, and decreases the risks attached to non-compliance contracts.
The AI-automated supplier profiling and analysis improves the supplier selection and management process. It has the capability to analyze the mass volume of supplier’s data like the following;
- Compliance record
- Performance metrics
- Financial information
AI is the same as specific procuring requirements with supplier qualification and capabilities; sourcing is efficient and targeted. However, it allows procuring professionals to make the right decisions while complying, analyzing risks, and selecting suppliers.
Cost Optimization & Spending Analytics
AI data analysis offers key insight to the procuring professional about cost-saving opportunities, the performance of suppliers, and recognizing spending patterns. The AI-based demand forecasting models and predictive analytics allow businesses and companies to negotiate better pricing, optimize inventory levels, and forecast demand.
Examples of Artificial Intelligence in Procurement and Supply Chain
Some of the main examples of AI in procurement and supply chain are as follows;
Amazon is efficiently employing AI and automated technology in various supply chain operations. The AI algorithms help the company to deliver route optimization, managing warehouses, and demand forecasting.
Walmart has invested a significant amount of capital resources to amplify supply chain visibility, demand forecasting, and managing inventory. The AI algorithms help the company amplify its replenishment processes and bring efficiency to the logistical network.
Procter & Gamble
P&G is also employing AI technology and automated tools for demand forecasting. It allows you to analyze data from various sources including point-of-sale and social media channels. However, it improves their capabilities to predict changes in demand.
Conclusion: Artificial Intelligence in Procurement and Supply Chain
After an in-depth study of artificial intelligence in procurement and supply chain; we have realized that AI algorithms improve performance, growth, and efficiency. If you are learning about AI in procurement and supply chain; then you should keep in mind the abovementioned elements; applications, types, and benefits.
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