What is Artificial Intelligence in Procurement?
What is Artificial Intelligence in Procurement?
Artificial Intelligence in Procurement is playing an increasing part in our everyday lives, powering our decisions and processes. But few people in procurement really understand what Artificial Intelligence is, how it works, and more importantly, why it is so important to Procurement. We seek to answer those questions and specifically address its benefits to the Procurement process by addressing the following Procurement checklist for Artificial Intelligence:
Checklist
What is Artificial Intelligence?
Artificial Intelligence Definition
The Oxford English Dictionary defines Artificial Intelligence (AI) as the theory and development of computer systems able to perform tasks normally requiring human intelligence such as visual perception, speech recognition, decision-making, and translation between languages.
For many people in Procurement, the language used in data science can be confusing. It is far simpler to explain by simply saying, powered by AI.
Types of Artificial Intelligence In Procurement
However, when investing in large-scale technology transformation projects it is important to know what element of the process is powered by AI and how the AI itself works.
Artificial Intelligence or Machine Learning are typically classified into two broad categories:
The computer is presented with example inputs and their desired outputs. "Teacher" or “Training set” data are used to establish a general rule that maps inputs to outputs.
No labels are given to the learning algorithm, allowing it to independently find structure in its input. Unsupervised learning can be an effective method of discovering hidden patterns in data.
Both Unsupervised and Supervised Learning can be used to establish baseline behavioral profiles for various entities which are then used to find meaningful insights & anomalies.
Within the field of Procurement data analytics, machine learning is a method used to devise complex models and algorithms that lend themselves to the following tasks or processes:
Inventory Management
Invoice Payment – Invoice Fraud
Supplier Relationship Management
Sales Pipeline
Marketing Analysis
Customer Segmentation
On-Time Delivery
Operational KPIs
Supplier on-Boarding
Powered by AI is a common feature or term used to sell the benefits and merits of digital transformation solutions. The aim of these analytical models is to provide Procurement teams with reliable, repeatable decisions and learn from historical relationships and trends in the data. Therefore, it is important to have a general understanding of how it works and what is powering the AI.
Powered By AI
What is the real power behind AI?
The power behind AI is a series of structured learning algorithms or code used to analyze input data. Often open-source coding software like R or Python is used to develop the AI power that these software models use. Within these applications, there are several models or libraries that can be used to “power” the AI.
Below is a list of the most popular decision libraries that Power AI
Decision tree learning
Association rule learning
Artificial neural networks
Deep learning
Inductive logic programming
Support vector machines
Clustering
Bayesian networks
Artificial Intelligence Transparency
What is AI Transparency?
A criticism levelled at AI models is the term “Blackbox”, likening it to an airplane flight recorder. It is true that AI models are not always transparent. It can be difficult to understand how they derived the outcomes and exactly how the calculation or prediction was made.
AI Model Construction & Accuracy
A model can have more than 95% accuracy and be optimized using several iterations called epoch(s), to produce stable functioning. This does not mean the output from the model is accurate, simply that the model itself is stable and performs as it should.
Data Training and resource allocation
Completion of the model can take several hours to finalize. But it can take days or even months to achieve accurate outcomes and run the risk of the model over-fitting. Additionally, it may require an expert subject matter resource to be set aside upfront to validate the outcomes.
Accuracy is critical and, in many cases, dependent upon the training data set itself. The training set needs to be considered carefully to make sure there is no data bias. Bias occurs when one or more groups feature more often than others and distorts the outcomes, creating bias.
However, repetitive tasks that are predefined and use a flow process called robotic process automation that replicates manual tasks make uploads faster, the process slicker and produces very accurate results.
AI Procurement Benefits
For most Procurement professionals these models seem complex. Models that initially require highly skilled data engineering and data science professionals to write the code are costly to produce. For many, AI echoes the same sentiment which drove big data a decade ago, with its varied success use cases and Procurement benefits.
With the proliferation of marketing hype and veiled technology “Black box” solutions, it is more important than ever to fact-check and gets clear answers about how AI is powered.
The aim of Procurement digital transformation is to perform tasks and process more efficiently using technology to deliver benefits seamlessly, without impacting its current operations. Like many sourcing decisions, it is important to understand the benefits of AI, the Procurement case for it and the return on investment.
What is Accelerated Insight
Accelerated Insight is a spend analytics software, that takes raw spend data, organizes quickly it into a Spend Analytics Dashboard. Agile process design which requires minimal input from Procurement, designed to take Data to Dashboard in Minutes*.
A budget-friendly spend analytics software and solution, that combines data science, business intelligence with procurement subject matter expertise. Built with purpose, to provide a future-proofed, robust, Spend Analytics Software Solution.