AI Unlocks Institutional Knowledge in Procurement
Going by your gut won’t be sufficient when AI models give different recommendations. Can you adapt your decision-making style to this new era?
Corporate procurement departments are sitting on a goldmine of institutional knowledge. However, much of this valuable information remains locked away in the minds of experienced staff. This hard-won knowledge is inaccessible to the wider organisation. Now, Artificial Intelligence (AI) is emerging as a powerful tool to capture, interpret, and leverage this critical knowledge.
Preserving Institutional Knowledge
Veteran procurement professionals possess a wealth of insights about suppliers, market dynamics, and internal processes. They know which vendors can deliver in a pinch. They also know which ones struggle during certain seasons and how to navigate complex negotiations. This tacit knowledge, built up over years of experience, is invaluable to organisations. However, when these seasoned employees retire or leave, their expertise often walks out the door with them.
Just think how effective your procurement staff could be if everyone had access to institutional knowledge and insights that are locked in the minds of experienced staff. The larger the enterprise, the more difficult it becomes to capture and disseminate this knowledge effectively.
Creating a Digital Memory for Procurement
Artificial intelligence offers a solution to the loss of institutional knowledge by creating a “digital memory” of the combined staff knowledge. AI systems can analyse vast amounts of data from both internal and external sources. This includes spend data, demand patterns, supplier information, and market insights. By processing this information, AI can identify patterns and extract key insights. It can also make this knowledge accessible to the entire procurement team.
Real-World AI Procurement Impact
Several companies are already reaping the benefits of AI-powered knowledge management in procurement:
Sanofi: The pharmaceutical giant implemented AI-driven should-cost modelling across multiple categories. This effort achieved an average 10% reduction in spend. Their advanced analytics platform also slashed tender evaluation time by two-thirds.
Teva Pharmaceuticals: Teva deployed analytics-driven procurement with an automated spend cube, McKinsey reported. This initiative improved supply resilience more than tenfold. Their AI-powered category creation system cut strategy development time by 90%.
General Mills: The company is using AI to evolve its supply chain from a “design-to-value” model to an “always-on” approach. Their ELF (End to End Logistics Flow) product leverages AI to optimise order processing, considering factors like cost, weather, and emissions. In just six months, it’s generating tens of thousands of dollars in daily benefits.
Transforming Decision-Making
As AI systems become more sophisticated, they are not just supporting human decision-making. They are increasingly making decisions themselves. Paul Gallagher, Chief Supply Chain Officer at General Mills, told Consumer Goods: “We’re moving from a world where people make those decisions supported by machines to one where the machines make most of the decisions that are guided by people.”
This shift is dramatically accelerating procurement processes. Decisions that once took a day can now be made in minutes. AI systems provide hundreds of recommendations daily.
New generative AI features place buying decisions in the hands of business partners. Buyers will be able to describe their purchasing needs using natural language, and the system will generate a list of recommended products and services. The recommendations will take into consideration not only cost but also carbon footprint, local regulations, and similar transactions to optimise efficiency and spend management.
Retaining the Human Element
While AI is revolutionising procurement, human expertise remains vital. AI systems learn from the knowledge and experience of procurement professionals, and human oversight is essential to guiding and refining AI-generated insights.
As procurement departments embrace AI, they must also focus on change management and upskilling their workforce. The goal is not to replace human decision-makers. Instead, it is to augment their capabilities and free them up to focus on more strategic tasks.
Looking Ahead
As AI technology continues to evolve, its potential to transform procurement will only grow. From automating routine tasks to providing deep market insights, AI is helping procurement teams work smarter, faster, and more strategically.
For procurement leaders, the message is clear: embracing AI is no longer optional. It is essential for staying competitive in the digital age. Procurement departments can drive significant value for their organisations by harnessing AI’s power to capture and leverage institutional knowledge. They can turn data into actionable insights and preserve crucial expertise for years to come.
