At the end of Samuel Beckett’s famous 1953 play, “Waiting for Godot,” one character says “Well, shall we go?” He is answered by “Yes, let’s go.” The stage direction, however, pointedly and humorously states, “They do not move.”
This desire to move counterbalanced by zero progress towards movement will sound common to anyone familiar with organizational change. Organizational change is always more than flipping a switch: it is often a reframing of vision, priorities, and even relationships. This phenomenon is especially true when it comes to AI adoption in business functions, such as procurement. Most practitioners and scholars see the promise of AI to digitize procurement, but this potential remains unrealized.
To address this gap in adoption, Walton College supply chain professor Remko van Hoek conducted the first empirical exploration of actual adoption levels of AI in procurement. In “Insight from industry – early lessons learned about AI adoption in core procurement processes, directions for manager and researchers,” van Hoek brings nuance to the hype-filled discussions of AI and offers productive avenues for managers and researchers wanting to digitize procurement. The novel contribution that van Hoek’s study makes is highlighting the gaps between what procurement literature proposes and what the procurement profession does.
Moving Past Stasis
As anyone who has lived in an area where there’s ample road construction will know, there are barriers and then there are barriers. A set of cones is not the same as a road closure or a lengthy detour. The same is true when it comes to technological change in firms: a barrier to adoption in the next quarter or so may differ greatly from a barrier in the next several years. To learn more about these barriers and how firms have made moves (or not made moves) to overcome them, van Hoek surveyed professionals in Europe (Barcelona and Toulouse) and in the United States (Fayetteville) during a series of workshops in early 2024.
Readiness is a key concern many firms have regarding AI and procurement. For example, Gartner estimates that by 2027 50% of organizations will support AI-enable contract negotiation tools; however, only 14% of procurement leaders trust they have the talent to meet the business requirements of the future. Technological innovation matters very little if you lack capacity or the capabilities to harvest its gains.
While there are lower levels of readiness across the board in firms, technical team members and top management support may not be the primary issue. Instead, firms should leverage the positive sentiment that exists across the board to ensure that buyers are engaged and that team members and suppliers are “trained up” and involved in the process. In short, making sense of digitalization cannot solely be the purview of technical teams and top managers if your organization expects results and meaningful progress to occur.
Yes, costs and efficiencies are the first benefits many professionals list when it comes to digitization. Amongst survey participants, the greatest reported benefit to date has been, unsurprisingly, productivity gains. Visibility and innovation ranked high as well, which is in line with scholarship. Cost savings ranked lower than expected, which indicates that other benefits are being realized quickly. For example, as van Hoek has argued previously, digitization can foster higher employee engagement levels. Other likely advantages of digitization include service and sustainability benefits, increased responsiveness and revenue generation, greater spend coverages, improved risk management, and supplier collaboration.
Even the areas of procurement that are pursuing AI solutions go against assumptions professionals may hold. Unexpectedly, adoption is slightly higher in supplier relationship management (SRM) than in sourcing or ordering. That said, higher levels of adoption are under consideration in strategic sourcing, so levels of adoption could alter in the coming years.
As more use cases develop and more pilots are conducted, firms can more confidently weigh the costs of implementation with whatever productivity or revenue generation opportunities that occur. That said, most pilot costs have been reported as being modest, which suggests that the increased knowledge and sense-making by decision-makers could be a major factor in spurring wider implementation and testing.
Managerial Implications
Any capital improvement or implementation carries risk, and AI is no different. If an organization’s staff are not familiar with the technology or if governance and process controls are lacking, then any foray into digitization could be troublesome.
The key question any firm should ask is where to target its efforts; as van Hoek pointedly asks, “do you automate what you master or do you automate to master?” The answer to this strategic question will vary from firm to firm, but it remains one that must be asked at critical junctures. A lot of room exists for additional consideration of the potential AI holds for procurement and firms may have more runway than expected for use cases given the low costs incurred for pilots. As such, the hype about AI is not misplaced. Professionals can imagine and – in some cases – have realized its potential in their firms.
What is needed is a good dose of nuance into the conversation, which is exactly what van Hoek’s timely study provides to managers and decision-makers. The cure for stasis isn’t just movement; as this study shows, it’s movement in the right direction.
