Why You Need to Add Intelligence to Procurement

Cloud-based procurement is the most cost-efficient way to bring employees the products and services they need. Until it isn’t.

Employees often request items not yet in the company catalog — someone might want a just-released item like the latest smartphone or a virtual reality headset. Meantime, the procurement team is bogged down deciphering individual employee requests, or worse, waiting for expensive, outdated spending reports.

All these issues go away when companies bring intelligence into the cloud. To understand just how disruptive machine learning is to procurement as we know it, I talked to Gregor Tielsch, chief architect of LoB Procurement for SAP S/4HANA at SAP, in this video interview at SAP TechEd.

“Using intelligent insights for procurement on SAP S/4HANA Cloud, employees who can’t find what they’re looking for in the catalog simply write in what they want,” said Tielsch. “The algorithm running on SAP Leonardo Machine Learning uses natural language processing to understand the ask, automatically determining in real time the number of requests for this item, and alerting the procurement team to next steps.”

When employees’ requests for a non-stocked item reach a predetermined critical threshold, the algorithm proposes adding it to the catalog. People on the procurement team can accept ─ or not ─ the algorithm’s proposal. Included is the suggested category as well. In one click, someone in procurement can add that product to the company catalog. While this might sound trivial, Tielsch assured me it’s a big deal.

“We’re talking to many customers who are extremely excited about having this machine learning capability in procurement,” he said. “Employees will no longer waste time searching for items and waiting for procurement to update catalogs. Procurement teams will become more efficient, quickly adding items in response to real-time employee demands.”

Automation Reduces Costs, Increases Efficiency

For procurement, adding products to the company’s catalog of goods and services is tedious at best, error-prone at worst. Using machine learning to automate previously manual tasks like employee requests for new items helps procurement make timely catalog updates, categorize items more accurately with suggestions, and stay abreast of changing business demands. Just as important, machine learning allows employees to service themselves, submitting orders for products and services easily.

Tielsch envisioned a totally automated procurement future, where all mundane tasks like adding products to a catalog would be relegated to machine learning. This kind of intelligence frees up procurement departments to provide more strategic value. For example, digital business increasingly depends on an ecosystem of suppliers, making procurement’s role much more strategic to the bottom line.

“With dynamic, contextual information about every request and transaction, procurement can make informed decisions about the best suppliers to build relationships with and when,” said Tielsch. “Maybe it’s time to renegotiate a contract made years ago when circumstances were very different. Intelligence gives procurement the ability to spend less time on rote operational tasks, and more on these kinds of value-added responsibilities.”

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