Artificial Intelligence (AI) Applications Promise Significant Efficiencies for Procurement Organizations
Artificial Intelligence (AI) is revolutionizing procurement organizations by automating routine tasks, enhancing decision-making, and optimizing supplier management. This technological transformation allows procurement teams to focus on strategic activities while improving efficiency and reducing costs. By automating processes like purchase requisition (PR) review, purchase order (PO) creation and invoice processing, AI frees professionals to concentrate on more critical aspects of their roles. It enhances supplier selection by analyzing performance data and market conditions, leading to stronger supplier relationships and more reliable supply chains. Additionally, AI processes large volumes of spend data to identify cost-saving opportunities, enabling teams to negotiate better deals. With predictive analytics, AI forecasts demand and market trends, allowing for proactive decision-making to mitigate risks. It also monitors compliance with procurement policies and regulations, identifying potential risks early on.
Considering the huge potential efficiency gains through AI, procurement organizations are increasingly tasked with the option of choosing between internal AI applications or external AI applications. Internal AI refers to the AI applications developed and used solely within an organization, giving them complete control over data security and customization, while External AI refers to applications accessed through third-party productized services, offering quicker implementation but potentially less control over data and functionality tailored to specific needs. Below, we take a deeper look at the merits and demerits of using internal and external AI applications for procurement organizations.
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Parameters
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Internal AI
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External AI
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Customization
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Can be tailored to meet specific business needs.
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May not fully align with specific business needs, leading to potential gaps in functionality or efficiency.
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Data Security
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Sensitive data remains within the organization, reducing the risk of data breaches and ensuring compliance.
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Sharing sensitive data with third-party vendors can cause data security concerns and complicate compliance. However, such risks can be effectively mitigated by using On-Prem solutions.
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Level of Control
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Allows full control over the development, deployment, and maintenance of the AI tools, allowing for quick adjustments and updates as needed.
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Relying on external vendors can create dependency, making the organization exposed to changes in vendor policies, pricing, or service quality.
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Ease of Integration
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Internal tools can be seamlessly integrated with existing systems and workflows, enhancing overall efficiency and productivity.
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Integrating external tools with existing systems and workflows can be complex and may require additional resources and expertise.
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Cost
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Developing and maintaining internal AI tools require significant investment in infrastructure and tech workforce.
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External AI tools often come with lower upfront costs, as they are typically offered on a subscription basis.
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Time to Deploy
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Building AI solutions from scratch can be time-consuming, delaying the realization of benefits.
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External solutions are usually ready-to-use, allowing for rapid implementation and quicker realization of benefits.
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Resource Intensity
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Requires a dedicated team of skilled professionals, undoing some of the benefits of using AI.
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Leveraging external tools provides access to the expertise and innovation of specialized AI vendors, ensuring timely technology upgrades and best practices.
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Scalability
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Scaling internal AI tools to accommodate growing business needs can be complex and resource intensive.
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External tools are designed to scale easily, accommodating the evolving needs of the business without significant additional investment.
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On-prem AI for Bespoke Needs Balances the Risk of Internal and External Solutions
Majority of the concerns about using an external AI application can be reasonably mitigated by engaging with a bespoke AI-driven solution provider that could offer an On-prem solution. On-prem solutions offer the benefits of an external AI tool, while significantly lowering the concerns related to data security.
For instance, Evalueserve Procure.AI solution integrates internal data, external intelligence and subscriptions data of a procurement organization to run a proprietary Agentic engine that enables significant efficiencies in all procurement insights needs such as category insights, spend insights, performance insights, supplier insights, commodity insights and so on.
Evalueserve also offers an on-prem contract management solution that helps in identifying risks in non-compliant clauses, suggesting alternatives clauses/ languages, and analyzing past agreements to provide negotiators with valuable insights for faster resolutions and favorable terms.
This GenAI tool accelerates contract review cycles by optimizing terms and conditions and flagging non-compliant clauses intelligently. Moreover, it improves contract compliance and quality by minimizing errors and risks, ensuring alignment with the parties' goals and expectations.
Similarly, Evalueserve’s on-prem agentic negotiation toolkit enables the users to evaluate should-cost of any products/ services in a matter of minutes, further allowing them to identify negotiation levers, and execute data backed negotiation with suppliers.
