Procurement beyond RPA:

The cognitive future of procurement

in the age of Artificial Intelligence and
Machine Learning
 Traditionally, enterprises have viewed procurement
transformation as a linear journey. However, today
we are at an inflexion point in the evolution of
procurement technology.

The evolution of procurement

technology systems:
ERP and MRP Systems:
In the first wave, large global organizations invested in ERP and MRP systems
to computerize their processes with the intention of getting all information
and records in one single source of truth. The primary objectives were process
compliance, discipline and data sanctity. Material masters were created,
the systems of purchase orders, goods receipts and 3-way match were
computerized. However, the primary design considerations for these systems Material masters were created,
the systems of purchase orders,
were completeness and accuracy; user convenience was not necessarily a
good receipts and 3-way match
factor. were computerized.
As system usage increased and the user base became more widespread, user
convenience became an important factor.

eProcurement systems
eProcurement systems started making a mark with the promise of providing
greater convenience to the user than the clunky ERP systems. These systems
introduced the concepts of catalogs and requisitions. Users could now search
for an item in the catalog by providing a text description, instead of having
to know things like Material ID. While this was a significant change from Catalogs and Requisitions
the ERP systems, most eProcurement systems have failed to evolve the user were introduced. Users
experience in line with the expectations of usability, and remain extremely could now search for an item in
difficult to use. the catalog by providing a text
description, instead of having to
For example, the amount of information captured from the users still remains know things like Material ID.
very high. In our experience, we have seen several large global enterprises
that continue to have a large number of people deployed in roles such as
“preparers”, with the primary job being to prepare Purchase Requests in the
eProcurement systems based on information provided by the end-user in a
fixed spreadsheet template. Over the last few years, the trend that has been
becoming popular is that of Self-service procurement systems.

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Self-service Procurement Systems
These systems go further than traditional eProcurement systems and enable
the end-user to raise their own purchase requests, track their own orders,
etc. These systems empower the category managers by allowing them to set Self-service
procurement systems
different channels for individual commodities and rules for guiding the end-
empower the category
user or a casual buyer towards those channels. Further, they empower the
managers by allowing them
casual buyer by guiding them in the buying process across these channels to set different channels for
and enabling them to complete the buying process in a manner similar to individual commodities and rules
one that they are used to in their personal lives – search, add to cart, check- for guiding the end-user or a
out. One of the main characteristics of these systems has been the concept of casual buyer towards those
built-in compliance, ensuring that aspects like preferred suppliers, contracted channels.
rates, limits, approval workflows, etc., are all handled behind the scenes
without the end-user having to worry about those.

A changing world
While businesses in general have been progressing on this linear journey, and specific enterprises are at different
stages in their own evolution, today the world is changing. Advances in technologies for automation and Artificial
Intelligence (AI) and Machine Learning (ML) are now making it possible for enterprises to take a huge step up and
away from where the linear journey would have taken them.

Robotic Process Automation (RPA) is enabling rapid improvements in productivity and efficiency by the automation
of repetitive manual tasks. Technology has enabled the redeployment of the people from these repetitive tasks into
more value-adding tasks. This has been a driver of both gain in productivity and in several cases, also an improvement
in employee satisfaction resulting from redeployment to tasks that are seen as more meaningful and intellectually
stimulating.

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 RPA in Procurement:
Some commonly automated procurement functions include:

1. the automation of the PR creation in organisations that are using the type of
eProcurement systems referred to earlier

2. creating RFX events and sending invitations to the suppliers

While RPA
is about mimicking 3. checking contract compliance during the PR to PO flip
human behavior, Cognitive
Automation is about discerning 4. bots for budget check
patterns, recognizing context,
5. bots for invoice entry, and so on
collating multiple data points
and using all of this for
Although RPA is a recent trend and organizations are at different stages in
understanding intent and then
their RPA journey, the real breakthrough is coming via Cognitive Automation.
behaving in an intelligent
manner. This is the ability to use Artificial Intelligence and Machine Learning to automate
processes.

Today, this is no longer in the realms of science fiction. Cognitive automation is seeing
application in various use cases across the spectrum of business scenarios – customer service,
ITSM, employee assistance for understanding policies, extracting context and metadata from
contracts and so on. In the realm of procurement, cognitive automation is set to fundamentally
alter the experience for both the end user and for the CPO’s office.

The cognitive future of procurement

Cognitive automation brings the ability to combine RPA with intelligence. We see the following
as some fundamental shifts in the procurement realm as a result of the emergence of cognitive
automation:

Chatbots:
With the increase in proportion of Gen Y and millennials in the work force, the expectations
from enterprise systems are also changing. Fundamental questions are being asked about the
need for eProcurement systems or self-service procurement systems. AI or ML-based chat
bots coupled with back-end process orchestration will emerge as a key mechanism for casual
buyers to raise purchase requests. Users will be able to ask the chat bot on their mobile phones
for the price of an item, swipe through matching options that the chat bot displays, and select
the one that has to be bought. The intelligence process orchestration will then take over at the
back end, and use multiple mechanisms including chat, email, etc., to drive the process forward
for approvals, PR creation, PO creation and transmission, etc.

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Spend classification:
We see the application of AI and ML making rapid progress in the area of spend classification.
Today, ML algorithms are already being used for post-facto classification of spend data. Multiple
algorithms with varying levels of mathematical sophistication are being applied to analyze
data, find patterns and matches with past classification, draw inferences and classify spend
data. We are now seeing the application of AI and ML to near-real time classification of data.
Purchase orders will be tagged with the right classification at the time of raising, or Invoices
will be classified along with the Invoice entry itself. This will not only improve the accuracy of
the spend classification, but also impact the efficiency and timeliness of the analysis.

Spend analysis:
Spend analysis is another area where we see chat and AI making
an impact. The current practice requires the user to log into
to a BI system, choose a workspace, load a data set, apply
filters, etc. As opposed to this, we see the emergence
of an AI-based chat assistant-driven spend analytics Artificial Intelligence, Machine
Learning and intuitive, natural
paradigm. With this, the analyst or category manager
language-based chat interfaces
will be able to ask questions in natural language such are redefining the way the
as best performing suppliers for a particular category, procurement function operates
or top 10 categories by geography by quarter for the
last year. The intelligent orchestration will then manage
all the data querying, grouping, application of filters in the
background and display the charts right in the chat window.

Planning and supply chain management:

The other area where we see AI making a significant impact is in relation to planning and
supply chain management. AI-based systems will make it possible to combine internal
and external data, take inputs from news feeds or market feeds, and use these for varied
applications such as generating insights on relative price performance, predicting supply lead
time or disruptions, etc.

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How to prepare yourself for this future?
Based on our experience, we believe the following are the important ways in which organizations need to prepare for
rolling out Cognitive procurement automation.

1. Executive commitment. Introducing automation, AI, chat bots, etc. can cause fundamental changes
in the experience for both the end-users and the procurement function, along with a large amount of
change for the supplier community. Success here requires sustained effort, perseverance, good execution
and governance. Executive commitment right from the very top is one of the most important aspects for all
of these to come together and see the initiatives through.

2. IT + business alignment. Clearly, initiatives of this nature are such that neither IT nor the S2P function
can drive in isolation. Alignment of important stakeholders from both these functions is therefore key to
success. While the objective of automation is to protect existing investments, introduction of AI, chat, etc.
brings in new technology where IT needs to be fully involved and take ownership. Similarly, introducing new
ways of doing business, changing the way compliance is measured and enforced, etc. require ownership
from the S2P function. It is imperative that senior executives of both these functions are completely aligned,
as that can drive the alignment of the teams at the execution level.

3. Automation COE. Taking a “Center of Excellence” approach towards a cognitive procurement

transformation program can significantly improve the chances of success. A COE has the advantages of
pulling in the right skill set from across the organization, empowering this team to take the right decisions
and make the right choices, and ensuring a focused effort from a team whose primary goal is the success
of the program.

4. Expectations management. Another critical aspect is the management of expectations from the
program at all levels. Organizations need to do a good amount of homework to identify the right areas
and processes for automation/AI and organizations should not rush into it. Similarly, there are bound to be
process changes and changes to the way of working and that need to be communicated well so that the
expectations of employees and suppliers are set accordingly. All along the way, during the program, there
needs to be continuous reset of expectations in line with the learnings from the program.

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5. Clear roadmap with prioritization of “Quick Wins.” Given the varied nature of processes
that would be covered in an S2P transformation program of this nature, there is bound to be a mix of use
cases where applicability is high and those where automation is not a great business case. For example, a
business process area where there is no evident pain point or where the manual effort is too low, might
not be a good candidate for automation. Similarly, it could be counterproductive to start the journey with
a very futuristic use case that needs too many new investments or large scale changes. It is therefore very
important that a clear roadmap is defined. Organisations should start with quick wins – identify the obvious
effort intensive areas where automation can quickly show benefits. PR creation and Invoice entry are two
good examples. At the same time, organisations should introduce an element of “coolness” that goes a
long way in helping the program gain popularity in the organization. One example of doing this is a chat-
based help use case. It is relatively simple to achieve this as compared to a full-fledged chat based spend
analytics, for example. But giving employees the option to get their purchase related questions on policies,
compliance requirements, spend limits, etc. answered via a chat interface can go a long way in increasing
the popularity of the program.

6. Measures of success. In line with managing expectations, agreeing to the measures of success is equally
important in two ways. First, it helps the entire program team remain focused on the objectives. As with any
large enterprise-wide program, there will inevitably be unforeseen obstacles along the way and there will
be a need to change course, to reprioritize, etc. Having clearly defined success measures helps make sure
that the team always has an eye on the correct goal when they encounter these decision points. Secondly,
it also serves as a feedback loop into the expectation management and for ensuring continued executive
commitment. Knowledge of what is being targeted and how well the program is making progress towards
the target is critical.

7. Choosing the right partner. A program of this nature has to necessarily involve a mix of technology
and outsourcing services. Depending on the implementation path chosen, there could be interim stages
where outsourced services take up some amount of manual work which then gets automated. Similarly,
there could be areas that need a combination of outsourced services and technology to achieve the goal.
However, given the very nature of cognitive procurement, most of the areas will focus on technology. In
our experience, we have seen several cases where large transformation programs fail because there are
too many different organisations involved – too many service providers. To avoid these issues and ensure
success of the program, organisations should choose a trusted partner that understands the business and
the domain, and that has proven capabilities across technology and services to be able to help manage the
entire process end to end.

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About the author:

Prashant Vaishnav leads the Procurement Automation practice at EdgeVerve, which is aimed
at helping organizations automate their source-to-pay functions through robotics-driven,
data-driven and knowledge-driven automation. Prashant has a long experience in helping
organizations across both IT- and BPO-led transformations.

About EdgeVerve
EdgeVerve Systems Limited, a wholly owned subsidiary of Infosys Limited, denes, develops and licenses innovative software products and
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