Procurement Bots – Transformers or Destroyers?

In recent years there has been a lot of real (and increasing) hype related to the emergence of software robots (so-called bots/bot) and procurement bots disrupting the old human-interface procurement processes.

This research paper presents the concept and evolution of the bots, their characteristics with a focus on sourcing processes, the pros and cons, and debates on the transformation of the sourcing function (vs destroying the human interface).

In summary, bots have great appeal on the transactional and digital side of procurement processes and will grow exponentially in the coming years with the advent of cognitive and machine learning tools.

The strategic interfaces in procurement planning, strategy, performance management and relationship building continue to be human-centric However, they will increasingly rely on the bots to support them with structured knowledge that is immediately available.

What are bots and how will they evolve in the future?

A bot (short for software robot) is, simply put, a software program designed to perform a task that would be done by a human (like solving queries). The end-to-end transformation is also known as Robotic Process Automation (or RPA).

Like any software, these bots can be programmed to run almost anything where the workflow can be programmed and information digitized, with the added benefit of introducing artificial intelligence that improves the human-machine interface. The main difference between a bot and any off-the-shelf software is that the bot is generally able to work in multiple system environments.

What are “chat bots” and how are they different from RPA bots?

With recent advances in human language translation (such as IBM Watson, Microsoft’s LUIS, and equivalents), many softwares are now able to seamlessly interact “human-like” with humans, and these bots are referred to as “chat bots” ( chat bots).

They usually take care of the front-end human interfaces and then interact with the back-end systems to accomplish the task. They are quite different from the RPA bots, which are primarily back-end (non-human-facing) software that performs the task based on the system-generated routine, unlike the chat Bots triggered by human interaction.

The chat bots can then be further classified into

  • Informational Chat Bots: Providing information based on human input. “Say or enter flight number” and the chat bot will provide the flight information. (However, the ticket cannot be booked for you)
  • Interactive/Intelligent Chat Bots: Ability to perform specific tasks based on customer input. This type of chat bots can book tickets for you or even solve defined problems based on rules “explain your problem in few words and I will try to help you”.
  • Machine Learning Chatbots: Self-learning chatbots that learn from past interactions and adapt their interactions over time. These chat bots are still in development and will disrupt the old notion of “dumb bots”.

Which areas of procurement are more “botable”?

In a typical source-to-pay process, the following areas of source-to-pay processes are more associated with bots, with a clear spin-off of processes that will continue to be human-centric.

What are the advantages of bots in purchasing?

The procurement bots add significant value to the company on the following fronts:

  1. Improved reliability: Bots help improve the reliability of the process by removing human fallibility and the results are far more reliable.
  2. Reduced service costs: Taking human tasks away also helps reduce the cost of transactions, especially when they are performed on a large scale for repetitive tasks.
  3. Reducing cognitive bias: People who do repetitive tasks are always prone to cognitive bias and resulting errors. Bots eliminate the cognitive bias from the workflow (although they are limited by the cognitive bias built into the program itself).
  4. Cycle time reduction: Because bots work 24/7 and in real time, bots have shown a 20% to 95% reduction in cycle time associated with tasks/processes.
  5. resource allocation: Resources can be redirected to more strategic aspects of procurement. If the bots can offload the repetitive tasks and help the procurement professionals, they are now more focused on the more strategic/value-add aspects of procurement.

What are the risks of bots in purchasing?

While bots bring great value to organizations, they come with risks that need to be considered during evaluation and implementation:

  1. Bug snowballing caused by bots: The probability of bugs caused by bots depends heavily on the business rules captured in the software. If these unintentional errors are not watched closely, they can swell very easily since no human is watching these errors. Observation point for all implementations.
  2. Loss of organizational ability based on process knowledge: When organizations implement bots, organizational knowledge of how those processes work erodes, and when things escalate, very few people have an end-to-end view of those processes.
  3. Local customizations may not be reflected in bots: While bots also help standardize the processes by removing the human bias element, they also perform a double-edged sword by overlooking certain local requirements that may not have been built into the program, resulting in manual intervention or an inefficient process leads.
  4. The lack of a human interface impacts perception/relationships: While bots are getting smarter in terms of mimicking the human interface, they aren’t perfect and often end up in situations where the user gets frustrated with their inability to get across. This affects relationships and perceptions about the bots.

How Will Bots Transform Procurement?

Bots will revolutionize current perceptions of the procurement function as they can work/analyze across systems at the speed of thought.

What are the other factors to consider when transforming the procurement bot?

In addition to the obvious elements of the business case, the following considerations must be taken into account in bot implementations:

  1. Long-term focus on system architecture design: Even though the bot implementations are extremely lightweight implementations, lasting from a few days to a few months, it is imperative that the long-term alignment with the system strategy is considered before launching these initiatives
  2. Human Organizational Considerations: Consider both the organization’s existing and future ability to implement and maintain the bots. They require different skills and both are equally important to the bot’s success.
  3. Properties of the process and bot capability: The available alternatives should be carefully considered. Bot is not a panacea for process issues and should be treated accordingly.

summary

In summary, the procurement bots have a great place in the source-to-pay process to improve reliability, reduce service costs and improve the efficiency of procurement processes. They will change the future procurement organizational structure and help the organizations to focus more on the strategic aspects of procurement with a lot of support from the bots.

The myth that “bots will replace the sourcing function” is a bit of an exaggeration, as the sourcing function will continue to be a human-centric organization that will be increasingly supported by bots in the future, which will help the function become more strategic in a more reliable way to create value.

The myth that “bots will replace the procurement function” is a bit exaggerated

Procurement Bots article and permission to publish here provided by “SK” Sanjeev Kumar Roy. Originally published on Supply Chain Game Changer on December 7th, 2017.

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