Artificial Intelligence In Procurement: Market Trends 2019

Transitioning to Digital Procurement and AI-enabled Supply Chain: market state, trends, facts, statistics.

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Why Being Wise About Supply Chain AI Becomes A MUST

These days we are more than comfortable hearing of AI-based technologies as game-changers revolutionizing regular practices and even fundamental models we’ve never really paid attention before. While Supply Chain AI seems now generally accepted as a matter of course in many industries, its real value remains for the most part heavily colored or pretty much edited for our ears. The very concept Artificial Intelligence in Procurement is one of the most, if not the most overhyped terms dominating today’s front-runner economic and tech development — let’s face it.

Therefore, even despite innovative tools and solutions being proven to effectively streamline financial services, the actual potential of industry-specific AI in Procurement and Strategic Sourcing is still unclear for the lion’s share of C-suite leaders. Of course, we had previously reviewed its full-swing deployment assuming its global impact in terms of greater operational efficiency and outlined the major benefits of Procurement Automation powered with Artificial Intelligence. While some CEOs and CPOs have already committed to a Digital Transformation roadmap, there would be lots of unique opportunities and challenges on the way to its actual adoption to manage Procurement. Recognizing that being wise about Supply Chain AI becomes a MUST for every successful C-suite leader, let’s get this straight with the actual figures.

Supply Chain AI: Market State, Facts, Figures

Market Research Future

Based on the recent analysis by MRFR, total value of Supply Chain AI market worth $545m globally (dated 2017) was estimated to gain 37% CAGR and reach $3,000-4,000m by 2023 already. The primary market drivers named by the experts were mainly found in the growing demand for greater Supply Chain process transparency, booming trends of online purchase and E-commerce, and Big Data technology rapid development. Among the other key players, industry giants like Amazon, IBM Corporation, and eBay have been clearly setting this general trend worldwide. At the same time, however, the lack of technical expertise could be still showing restraint in establishing more sustainable expansion of Artificial Intelligence in Supply Chain and Procurement operations down the road.

Study By Deloitte

AI in Procurement can be extremely useful in getting complex data streamlined for improved decision-making, says Deloitte in their recent research which had surveyed over 200 C-suite leaders in different organizations that have successfully adopted the technology. On a broader basis, Artificial Intelligence in Supply Chain Management representing cognitive sourcing (i.e., powerful AI-based algorithms providing B2B buyers and Procurement teams with the ability to automatically identify the right suppliers) might as well turn out to be a natural outgrowth of considerations about Supply Chain AI and its actual application C-suite leaders are already having within their marketing, sales or customer-facing operations. But when it comes to AI in Strategic Sourcing, most of the experts believe it has the power to alter the entire DNA of the business.

What types of AI companies are deploying today

 

Source: Deloitte State of Cognitive Survey, August 2017

Tractica Forecast

And what if Artificial Intelligence has to be analyzed from a much broader perspective? As according to Tractica forecast, the overall revenue generated from AI software (including its direct and indirect application) is expected to rocket from $643.7m (dated 2016) to $36.8bn by 2025 — representing a significant growth through the next 9 years with a CAGR of about 56.8%. Assuming a somewhat conservative approach to using the technology in the investment and hedge fund community (mainly due to the fact that algorithmic trading remains on top among the other 191 use cases covered by the study), the experts believe that nearly half of the assets traded globally will be AI-driven by 2025 already. Also, there is another good market projection showing that roughly 60% / 40% of the cases are related to image and object recognition respectively. This is how the world is expected to shape up over the next few years.

Artificial Intelligence Revenue Forecast, World Markets: 2016-2025

Source: Tractica Research Report 2016

Capgemini Research

Artificial Intelligence in Supply Chain operations and, more specifically, in the world’s retail sector is already demonstrating a widespread enthusiasm in business adoption — that would be a seven-fold increase from 2016 when just 4% of the companies were using the technology. This is another 17% increase from 2017 and the average pace of 28% observed for now says the latest retail report by Capgemini Research Institute. If the companies can scale and expand their existing tech deployments, global retail opportunities of Artificial Intelligence exceed $300bn in total. When it comes to the actual application in the sector, here is the list of players leading the way: United Kingdom (39% of retailers admitted working with AI-based technologies), Germany (29%), and the United States (25%). Also, there is just 10% of physical stores compared to 30% of omnichannel and 68% of purely online retailers having successfully implemented AI in Procurement and distribution operations.

AI penetration by geographies

Source: Retail Report by Capgemini Research Institute.

Supply Chain & Procurement AI: Market Segmentation

Indeed, as clearly illustrated in the previous paragraphs, Artificial Intelligence in Procurement and Supply Chain operations must be undoubtedly a success, but still only a qualified success. It would be therefore necessary to include the following classification that would be helpful in exploring the vast opportunities of Supply Chain AI by having its key features and areas specified as follows:

  • Depending on location — Europe, North America, Asia-Pacific and the rest of regions around the world
  • Segmented by component — Software, Hardware, Processors (CPU, GPU, ASIC, and FPGA)
  • According to end-user — Retail, Manufacturing, Aerospace, Automotive, FMCG, Electronics, etc.
  • Classified by application — Supply Chain planning, Logistics & Shipping, Warehousing, Risk & Supplier Relationship Management, etc.
  • Based on technology — Machine Learning, Context-aware Computing, Computer Vision, Natural Language Processing with on-cloud / on-premise / hybrid deployment

Leveraging AI In Procurement: Today’s Challenges

Below is a list of the key challenges and obstacles faced by Artificial Intelligence in Supply Chain and Procurement operations. Of course, they are not necessarily limited to the following, but should be still kept in mind to become a strategic function in every sense of the word:

  • Global economic volatility making it harder to complete savings targets
  • Significant restructuring and downsizing opportunities for business
  • Shrinking public budgets and their adverse impact on front-line services
  • Sizeable gaps and leakages in internal process performance
  • Financial concerns due to modest commercialization and strategic capabilities
  • Common business challenges strong enough to hamper capacity-building

     


After all, there has never been a better opportunity for business owners, key executives and Procurement leaders to stand out with Supply Chain AI and prove its necessity. And there is the only thing in this world we can be sure of — tech innovation driven wit Artificial Intelligence must have a great impact on people in the future.

On top of that, the simple truth is that only a finite number of forward-looking businesses might have a head start. By putting heavily in Supply Chain AI and staying the course of data-driven technology, here at Nectain we believe the wise governor can seize the momentum and claim the future!

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