Is Procurement’s Fear of Artificial Intelligence (AI) Justified?

By Dennis Bouley

August 16, 2018 at 11:40 AM

Artificial Intelligence resized.jpgAdvancements in software and artificial intelligence have expanded both the number of activities that can be automated and the degree to which automation of tasks is possible. According to a 2017 McKinsey study, within procurement organization, 60% of the source-to-pay process can be largely automated using today’s technologies.

A common reaction from most people who work in procurement that hear of this news is to assume that such a trend is a direct threat to their immediate job.  But is this fear justified?

Consider first the view of the senior executives running most companies. They are tasked with generating corporate profits and helping their organizations to grow. CEOs want to take advantage of the new wave of digital transformation in order to generate competitive advantage. However, the new technologies are forcing changes in business models and these same corporate leaders are struggling to address a shortage in workforce talent.  New people are coming into the job market with different talents and organizations are changing their internal functions. If the new talent is not available in sufficient quantities, the only other alternative is for organizations to retrain existing employees to learn and practice new skills. Therefore, the tendency is not to eliminate jobs.

Lauri Palokangas, Director of Product Marketing and Sales Enablement at Basware has a unique perspective on this dilemma.  His company has for many years offered procurement customers with tools to help simplify their procure-to-pay process.  Many of these tools have integrated artificial intelligence within them which help simplify tedious, repetitive tasks and which leverage analytics to help procurement mangers make better decisions.

“Artificial Intelligence (AI) is really about removing tasks and not displacing people,” says Palokangas.  “However, it does introduce an element of change.  In some cases, it will force organizations to shift the roles of the people in order to better align to more digitized business processes. AI is an integral part of the software and systems that people use. AI is a building block for a good user experience.”

Palokangas emphasizes that any introduction of new technologies into the core procurement processes should focus on eliminating lower level tasks so that the procurement employees can focus on higher level decision making that renders the overall procure-to-pay process faster and more efficient.

“It’s difficult to say which roles, if any, will go away. But we can certainly say that procurement manager and sourcing manager roles will continue to exist.  However, they will be impacted drastically by technology. Consider the vendor selection and negotiation process, for example. Around 50 to 80% of those tasks can be automated. Therefore, the person who currently holds that responsibility will continue performing 20- 50% of the tasks they performed before. However, in their redefined role they will take on many new tasks that, in effect, add to job enrichment. These are tasks that could not have been performed before because so much time had to be spent executing tedious manual steps and lower level tasks,” he said.

Banking transformations mirror changes in procurement

A good comparison of what will go on in procurement is to compare it to changes that took place in banking. In the 1960’s, bank branches functioned without ATMs. The average number of employees in a bank branch back then was 20 employees. After the ATMs were introduced, over a certain period of time, that average number dropped down to 7 people.  However, these cost savings allowed the banks to open more branches employing more people, which resulted in more revenue generation. Thus, the total employment in that industry went up and not down.

“To turn negative, fearful attitudes into positive, opportunity-generating attitudes, executives that introduce technology changes have to turn the whole definition of artificial intelligence upside down and talk instead of the intelligent augmentation,” said Palokangas.  “It’s not playing with words, there is a difference. You cannot delegate the final decision-making responsibility to a computer. Computers with AI capabilities will become your new colleagues and you will have to learn to work with them. They will help you perform your job more efficiently in a manner that is different from the job you are performing today. You have to stress the role of the human in that partnership,” he said.

According to Palokangas, a great user experience is one where the task gets done and the user doesn’t see it happen. “Automation changes quite fundamentally what needs to be done manually, and it changes the tasks that people are performing.  AI is built into the machinery and most of the time people don’t even know that it’s AI. The bottom line is that is allows people to do their jobs better,” he said.

Basware is the global leader in providing networked source-to-pay solutions, e-invoicing and innovative financing services. Basware’s commerce and financing network connects businesses in over 100 countries and territories around the globe. Find out more at www.basware.com.



Tags: Procurement AI procurement machine learning source-to-pay AI digital procurement
Category: News Article

Dennis Bouley

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Dennis Bouley is Editorial Director of MyPurchasingCenter.com and special advisor to MediaSolve Group, a strategic B2B marketing services firm focused on helping companies and institutions leverage the web and social media to achieve business goals. He spent 18 years at Schneider Electric as Managing Editor of Global Publications, and was responsible for cross-division management of the corporation’s white paper and customer success story processes. Prior to that, he spent 10 years working for IBM managing both small and large accounts. He holds a Bachelor of Arts in Journalism from the University of Rhode Island and holds a Certificat Annuel from the Sorbonne in Paris, France. 


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