There's a bright future for procurement in the age of AI, supply chain professors argue

The value of procurement as a business function will be significantly enhanced in the age of AI, says Dr Mary Lacity and Dr Remko van Hoek, both distinguished experts in supply chain management.

"It's really kind of cool what it's going to mean for our students that are going into this field in terms of what their day-to-day will will look like," says Dr Van Hoek. "It's really really incredible what potential it can bring for procurement specifically to grow its business contributions."

They made these comments during a recent interview together on the Be Epic podcast hosted by Brent D. Williams at the Sam M. Walton College of Business, which is part of the University of Arkansas.

Host Williams says he was fascinated by the study that Dr Lacity and Dr Van Hoek were involved in on 'How Walmart automated supplier negotiations'.

It was co-authored with Michael DeWitt and Travis Johnson from Walmart who have been pioneering the company's embrace of autonomous negotiations.

"The truth of the matter," explained Dr Van Hoek, "is that when you look at a procurement organization, typically, you have thousands of suppliers and quite a large number of those fall in what's so-called "tail spend". So they are relatively small when you look at the amount of money you spend with them, the number transactions you have with them, and so they're not necessarily an area where professional buyers can spend a lot of time developing relationships and negotiating terms and conditions.

"What this technology does is let the bot take care of it so that you can negotiate with those that you normally don't have time to negotiate with, allowing the buyer to spend more time on the things that are most important to that business."

Dr Van Hoek says that means buyers can focus more on higher level strategy managing these negotiations.

The supplier perspective

Host Brent D Williams said he was surprised by the high proportion of suppliers that embraced autonomous negotiations and asked what benefits they are seeing.

1. An added opportunity to improve terms

"First of all, they are in a negotiation with Walmart so rather than just having to accept the term and conditions that Walmart normally applies, there's an opportunity to discuss those [terms] and there's an opportunity to make decisions which they previously might not have had.

2. The supplier negotiates at their own convenience.

"Number two, the technology, which is Pactum that they use, allows the supplier to think and to go back and so there's lots of flexibility in the hands of the supplier to put control over the negotiation in their hands and that's a real benefit.

3. Firm, clear aggreements.

"The other thing has to do with how Walmart approaches negotiations. If you have a deal with Walmart, you have a deal with Walmart, so the follow through on those agreements is very high, as well, which is a real benefit to suppliers. Like, a pitfall in procurement is 'I negotiated with you yesterday but today I want to talk to you a little bit further' and that's highly frustrating and can be borderline, you know, unethical in terms of how you approach suppliers. There's none of that in this. The negotiation ends with an agreement, a commitment, a contract that's crystal clear and super transparent."

In addition to the highlights video above, the full interview is available wherever you get your podcasts, including Spotify, Apple, and YouTube, while the full transcript can be read here.