AI Won't Be Taking Over Procurement Yet
Although chatbots and automation can help streamline operations, suppliers still need human interaction for negotiating and problem-solving.
Artificial intelligence is exploding and procurement will not remain untouched.
On the sellers’ side, proponents of AI’s efficiency and scope are marginalizing the human contact-based customer-supplier relationships by employing customer service chatbots devoid of personality and decision-making skills.
On the buyers’ side, managers are using AI to automate transactions to streamline procurement, reduce staff and align supply and demand through complex analytics. But AI has never had to negotiate with a supplier to add an overtime shift, negotiate rates for varying routes and types of freight, cut a price to meet a specific customer demand, override a bill of material or host an engineer to mark up a blueprint and generate an engineering change order. At least not yet.
Chatbots lack human emotions and empathy, which are the key to many customer interactions. In complex or emotionally charged situations, customers may require personalized attention and understanding that only a human can provide. Chatbots also heavily rely on data and algorithms, which means they can only provide information within their programmed knowledge base.
AI has the potential to automate certain aspects of procurement processes and enhance efficiency, but ‘buyerbots’ are unlikely to replace human procurement professionals. The reasons are as follows:
Strategy: Procurement involves strategic decision-making, supplier relationship management and negotiation skills, all of which require judgment and expertise. While AI can provide data-driven insights and recommendations, final decision-making requires human involvement.
Negotiations: Procurement professionals engage in complex negotiations with suppliers, considering a range of factors beyond price, such as quality, delivery terms and contractual obligations. Building relationships, understanding market dynamics and finding mutually beneficial agreements are areas where human skills and experience are crucial.
Supplier relationship management: Developing and managing supplier relationships involves trust-building, collaboration, communication and understanding the supplier’s capabilities, all of which require strong interpersonal skills. Procurement involves ethical and sustainable sourcing practices, supplier diversity initiatives and regulatory compliance. Humans are essential in evaluating and ensuring supplier integrity, advocating for social responsibility and strong ethical standards.
Creativity: Procurement professionals need to adapt to changing market conditions, emerging technologies, supply chain risk and evolving and emergent customer needs. They also need to think creatively to identify innovative solutions and workarounds, explore new supplier options and optimize existing procurement procedures.
Cross-functional integration: Procurement professionals interact with various stakeholders within the organization, including finance, marketing, engineering and operations. Procurement teams require human communication and internal relationship-building skills to collaborate, align objectives and manage expectations.
This all confirms what we know at Nucleus. Understanding our customers and their business is absolutely key to successful supply chain optimization engagements. And the only way to do that is through building a relationship with the customer. Technology so far provides useful tools but the true value lies in our people understanding intricately the needs of customers.