Winds of Change: Adapting to Procurement Change with Artificial Intelligence

Winds of Change

As seen in Forbes

Due to a relatively rapid shift in supply chains and related conditions, buying and selling critical materials isn’t as easy as it used to be for businesses. In response, resident procurement teams and suppliers are going through a massive transformation to reap a more competitive advantage. 

Faced with an unpredictable global economy, global manufacturers are tasked to manage risk better and prioritize digitalization, optimize MRO spend analysis, or implement a supplier intelligence solution as part of their procurement processes.  These reformed goals mark a pronounced shift for procurement executives: transitioning their plans and strategies from purely tactical operations to a new strategic decision-making model, using AI-enabled technology. This will enable them to move closer to what Gartner has identified as “autonomous procurement,” which has the potential to drive efficiency and savings to new heights when the right building blocks are in place to help organizations compete faster and smarter. 

Cognitive computing makes a difference.  New AI/cloud-based technologies are significantly helping with data harmonizing and supply chain network architecture optimization in significant ways. These technologies can help procurement teams and their organizations to adapt to change by ensuring reaction times are quicker than their competition while bolstering supplier relationships. In addition, having real-time information helps them arrive at data-driven decisions faster and more reliably. 

But managing this change is a tall order for any tech executive team. So let’s dig into what is required and how to lay the groundwork for successful adoption and engagement. 

Key Strategic Change Management Principles

Let’s walk through some key areas of change management that your procurement team may undertake for prioritizing an internal digital transformation.  

Leadership Alignment – Leadership in your organization must be flexible. Are they open to change management for procurement processes? Do they understand the benefits of AI technology? Can you get them on board to support upcoming changes? 

Stakeholder Engagement – Stakeholders are essential in this process. Is your team ready to effectively engage with all the various stakeholders for whom some element of their behavior will be changed? For example, where is your Procurement Officer or CIO? Are they in the room with your team to make decisions on this?

Communication Practices – Throughout a change management scenario, your team will need to have transparent communication throughout the change. This communication must address the specific needs of procurement and MRO teams. This includes upstream communication to your supply base to minimize risk. 

Training & Implementation – Change management at this level, as hinted at above, must include training for the new behavior. This training is not a one-size-fits-all approach; it must be customized for specific roles among the procurement teams. 

Behavior Adoption – Teams undertaking this change must be able to define metrics that help those involved see the management changes transparently. 

Variations on these themes may apply to your specific industry scenarios. But each of these is critical to company buy-in on your next moves. 

Improve Operational Efficiency with AI in Procurement

A recent study by Globality showed that 90% of global procurement leaders are moving quickly to transform their operating models and processes to better meet the challenges of today’s volatile, uncertain business world. Multiple data points from the study indicate this forward rush. 

  • Nearly as many respondents (87%) are focusing on building digital and data teams to gain predictive insights, deploy new technologies, and react more quickly to future disruption and economic change;
  • 81% of procurement leaders believe more support is needed from within their businesses to enable this crucial digital transformation;
  • Half of the organizations surveyed showed interest in transforming to a business procurement-centric organization, acting as advisors and business partners rather than executing routine processes.

This advancement to transform procurement and operations models will help build agility and resilience in the ever-changing business world, said those executives surveyed. 

Figuring in the Labor Shortage 

The human element of the supply chain is a critical factor for change management in procurement. How can organizations capture human intelligence more effectively in procurement practices? Similarly, how can management teams and employees come to decisions on procurement operations? The short answers lie in the introduction of AI-enabled technology tools.

Labor shortages are helping fuel the rise of AI in operational manufacturing environments. In addition, as the baby boomer workforce ages out of manufacturing roles, fewer young people are entering into manufacturing and production fields. The result is that companies are inclined to look more closely at AI/ML technology tools to augment the workforce.

The burnout factor is real for procurement managers, who are said to be at their ‘breaking point’ in procurement. A Ceridian 2022 Pulse of Talent survey in the UK found that UK workers suffered some form of burnout, either through deadline pressures (32%), higher workloads (49%), and even mental health difficulties (34%). 

AI tools can augment human workers to avoid these burned-out periods and help drive greater employee satisfaction. AI can take over repetitive, menial human tasks that are more suited to automation. This, in turn, does not replace workers at their jobs but instead allows workers to take on other, more strategic, fulfilling work. Employees can work with management on making decisions on how to properly apply AI in a manufacturing or production environment to reduce costs and/or mitigate risks. 

Change for a Real-Life Manufacturer 

One of our customers, a leading manufacturer of tissue, pulp, paper, packaging building products and related chemicals, was struggling with bad data as their MRO inventory was inaccurate, which resulted in bad decision-making and significant delays. 

The manufacturer needed help. The company wanted to work faster and have access to real-time and accurate decision-making. So our team came in to provide data analytics, artificial intelligence and visualization capabilities which enabled the manufacturer to optimize its asset strategies and inventory stock levels. 

The team also brought change management principles and overall structure to the manufacturer’s supply ops, procurement, finance, and IT strategies. We aggregated multiple SAP/EAM systems’ data simultaneously. These AI strategies ensured that the right inventory was available at the right time.  A verified savings of $20M+ was identified as a savings opportunity in the first 45 days.

Technology Benefits Ahead

AI-enabled technology can enable a procurement team to work more efficiently and effectively, helping quickly identify and manage supplier risks.

It’s high time to streamline the ai and procurement process, reduce costs, adapt quickly to change, and improve compliance with ever-changing policies and laws. Embracing change management and communicating top-down will help procurement teams and the entire organization adapt to change.

Paul Noble

Founder & CEO of Verusen

Follow me on Twitter or LinkedIn

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