Can artificial intelligence enhance procurement by expediting key tasks and allowing for more informed decision-making? This article delves into AI for procurement with examples for the food industry.  

Gathering the information needed to optimise procurement decisions can be incredibly complex and time-consuming, especially in the food industry. When you consider the work involved in tasks such as sourcing, tendering and drafting up contracts and service agreements, it makes sense that businesses are leveraging AI for data-intensive and administrative tasks so they can make better, faster procurement decisions.  

AI has a valuable role to play in the food industry, given that it has one of the more complex procurement landscapes. This article examines how leveraging artificial intelligence in procurement contributes to profitability, quality, and efficiency by allowing for more informed decision-making.  

The case for digital transformation in procurement  

Artificial intelligence is often a driver for businesses considering digital transformation. It holds out the promise of streamlined processes, enhanced decision-making, and ultimately a more efficient procurement lifecycle.  

One of the main benefits of AI algorithms is their capacity for advanced data analysis. Their ability to quickly spot patterns and trends in a large dataset eliminates lengthy processes in which human error or oversights might affect the accuracy of conclusions. Provided that the analysis has been well-conceived and that the data sources are properly verified, this should produce reliable results in an expedient, cost-effective manner.  

Furthermore, AI’s predictive analytics allow for data-driven market forecasting for both supply and demand. The propensity for detecting anomalies such as missed or incomplete audits can also help businesses identify and manage individual supplier risks in a timely manner. 

Finally, because AI tools such as predictive analytics platforms process data in real time, they provide current insights to support proactive decision-making - a feature that would be impossible to match using more manual and disparate data sources and analysis methods.   

The food industry is subject to numerous challenges, such as maintaining food safety, sustainability and brand reputation in a dynamic and highly regulated market. In-depth insights are therefore vital to effective decision-making and procurement is no exception. On a human level, keeping abreast with this may seem all but impossible. However, if the right parameters are put in place, AI can provide the insights necessary to navigate these aforementioned challenges. 

Defining generative AI in procurement  

Generative AI is a specific type of AI where algorithms are fed prompts to generate data and media. It can be used to create original ideas and reach autonomous conclusions - as long as the prompts are as thorough and specific as possible. Procurement-related outputs may include proposals and supplier evaluations based on data and predefined rules. Thanks to its ability to rapidly analyse real-time data, generative AI can help food industry professionals optimise sourcing strategies by reducing the need for manual intervention and facilitating data-driven decision-making. For example, someone buying livestock for beef can access automated reports with data concerning prices and exports, national cattle kill rates, weather conditions and any other factors that may affect procurement costs.  

That said, it’s also important not to fall into a "set it and forget it" mentality. Companies should manually check data and outputs on a periodic basis to ensure that sources are robust, and analyses are logical and reflective of the data and the prompts being fed into AI systems.  

What are the benefits of using AI in procurement?  

Efficiency & accuracy  

The main benefit of AI tools in general for procurement is efficiency. Routine tasks like data gathering are automated with high levels of accuracy, allowing businesses to divert the resources that would otherwise have been devoted to these activities elsewhere.  

Fast-track decision-making  

With highly efficient data gathering and analysis, businesses are able to make decisions faster. Humans will still do all of the strategic thinking, but it needn’t extend to determining the current status quo.   

Cost savings  

Apart from all the time AI procurement tools can save, they also allow for cost savings in supplier selection. Negotiating with suppliers? You’ll have inside information that allows you to present your position based on prevailing market conditions.   

Data-driven forecasting  

How much inventory should you hold? How much of your finished product will your market demand? These are make-or-break questions that have previously plagued both small and large food industry players. AI can produce forecasts based on historical and current data, helping you to adjust your procurement and production schedules accordingly.   

Fostering innovation  

Introducing products based on up-to-date insights into market trends allows you to remain relevant and innovative in a fluctuating market. With AI to help you, it’s possible to see how prevailing trends might influence your procurement strategy.  

For example, if there’s a trend towards locally grown produce, how might that affect your current procurement strategy? The answers lie in data, and your AI tools may prove invaluable in uncovering innovative procurement strategies that appeal to your target market.   

What are the main uses of AI in procurement?  

Having considered the benefits of using artificial intelligence in procurement, we’re ready to consider the areas in which it will prove useful to food businesses. Here are some of the processes and principles it helps you to support.   

Optimise your supply chain  

There are many factors food businesses must take into account when making supply chain decisions. These include food safety and quality, traceability, costs, logistics, and sustainability. Advanced artificial intelligence can take all your parameters into account, producing reports that allow you to identify and evaluate your options.  

As a simple example, if you are sourcing grass-fed British beef of a particular grade and within a certain price range, you can use AI to evaluate your options. Based on its reports, you can either choose a new supplier or negotiate better terms with an existing one.   

Comply with regulations & maintain quality  

The food industry is subject to a complex regulatory environment to ensure food safety and quality. AI could support traceability systems in facilitating compliance by pulling together information from disparate sources (eg provenance-based information, alerts on recalls, safety and quality audits) to determine the risks associated with sourcing from particular countries and regions alongside a range of other factors.

Forecast demand & implement intelligent inventory management  

Having too much or too little inventory can impact profit margins, especially in the food industry where ingredients and raw materials are often perishable. AI can analyse historical sales data, seasonal trends and patterns of market fluctuation to make more precise inventory forecasts, minimising the risks of either over or under-stocking. You can then adjust procurement strategies, so that you continually meet consumer demands and reduce the likelihood of waste or unnecessary spending.  

Detecting instances of procurement fraud 

AI can be used to detect instances of procurement fraud, for example through flagging excessive product loss or other irregularities in volume and weight, as well as anomalous rises or drops in bid prices. It’s important to mention, however, that this type of detection is an unsupervised technique and should be combined with human insight and analysis to keep abreast of potential instances of food fraud. 

The key takeaways

  • AI in procurement can foster innovation and fast-track decision making.
  • It can consider a number of food industry parameters and provide comprehensive reporting.
  • It can be used to detect instances of food fraud and highlight other areas where cost savings can be made.

Foods Connected offers AI-driven procurement management software as part of its suite of supply chain software solutions. By sharing insights such as market forecasts, pricing sentiment and cost-yield models, our procurement system will allow you to engage with suppliers better than ever before for an optimised supply chain. Request a demo today to find out more.  

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