From suppliers to skills, here's how artificial intelligence revolutionises procurement

The artificial intelligence is assuming an increasingly prominent role in professional services sourcing processes, particularly in the information technology sector, offering companies new options to more quickly, accurately and effectively manage supplier selection and management. According to an analysis conducted by Fortune Business Insights, in particular, the market for digital procurement solutions including algorithm-based tools was valued at $6.67 billion in 2022, with a forecast to grow to $13.8 billion by 2029 thanks to a compound annual growth rate of 10.9 per cent. A trend that reflects the vision of TimeFlow, an Italian company able to harness the capabilities of machine learning and generative AI to help Chief Procurement Officers build 'data-driven' purchasing strategies and more effectively and efficiently evaluate the skills of their company's suppliers. The impact of artificial intelligence, says the Observatory conducted by the Milan-based company, is equal to a doubling of the return on investment compared to traditional methods, with some companies achieving performances (as confirmed by recent Deloitte surveys) that are up to five times higher.

"AI in procurement," says Lorenzo Danese, CEO of TimeFlow, with conviction, "is not a trend but an operational necessity, because we are facing a structural change in the way companies access skills and services: technology makes it possible to work on volumes of data too large for manual analysis, speeding up processes and improving the quality of decisions. A paradigm that, data in hand, seems to have found fertile ground to establish itself also in the purchasing departments of medium and large Italian companies, areas in which artificial intelligence has now entered a phase of scalability: 53% of large companies, according to indicators processed by TimeFlow, have already purchased Gen AI licences, 66% of Chief Procurement Officers indicate this technology as 'high priority' and 90% are experimenting with or would like to use AI agents to automate spend-analysis, 'request-for-x' and supplier-risk processes. The responsibility for adopting these tools, however, is no longer the sole responsibility of the head of the purchasing department. In 60% of the cases,' Danese confirms in this regard, 'the control room and the governance of the projects is shared with the CIO or the Chief Digital Officer in relation to the realignment of many purchasing offices under the IT area, implemented with the aim of exploiting data-governance and integration skills'. There is no shortage of critical issues, of course, and the biggest obstacles that have emerged are the poor quality of available data (this is highlighted by more than 40 per cent of procurement professionals), the analytical skills gap and the difficult integration with existing ERP systems and legacy platforms, compounded by widespread concerns about privacy and security.

Yet, as TimeFlow's experience in the field testifies, generative AI is proving to be a crucial lever in the process of transforming the relationship between buyers and vendors: through advanced Natural Language Processing models, in fact, it is possible to interrogate large volumes of data, extract specific insights and rapidly assess the compatibility between project requirements and the profiles offered by suppliers. As a result, the analysis of candidates' CVs and previous experience can experience new levels of automation, with the aim of bringing only the most qualified partners to the attention of corporate procurement (and the relevant managers within the organisation).

Going into more detail, other technologies that are impacting IT sourcing concern skill-matching algorithms capable of cross-referencing project requirements with the documented skills and experience of suppliers in real time, AI-driven pre-screening systems capable of selecting and prioritising the most relevant suppliers for each requirement, and, last but not least, the integration of AI into the e-Blockchain to ensure the traceability of past experience and feedback received from suppliers.

The adoption of artificial intelligence in the sourcing of professional services, the Milanese company's spokespersons reiterate, has, in short, very concrete and relevant potential advantages, but no less risks that must be managed with extreme care. The opportunity to significantly improve operational efficiency, increase the quality of decisions and make evaluations more objective is, in other words, confronted with critical issues related to the transparency of algorithms, the traceability of decisions and the management of so-called AI 'hallucinations'. Algorithms, this is the message that they emphatically reiterate from TimeFlow, must never replace human judgement, but rather enhance it by providing suggestions that procurement can understand, verify and approve. In fact, an opaque artificial intelligence risks leading to arbitrary decisions or, worse, unfounded exclusions of valid suppliers. It is for this reason that a 'human-in-the-loop' approach must always be adopted, according to which technology supports but it is the person who validates and governs the procurement process in a way that is modern but also ethical and responsible. "Procurement decisions," Danese concluded, "will be increasingly driven by data and made faster and more effective by AI, but without ever losing sight of the irreplaceable value of human intuition and experience.