How Artificial Intelligence is Redefining Modern Hospitality Procurement

E-procurement has a new ally in AI. Recently introduced generative AI tools, like ChatGPT, have taken the business world by storm. And they have the potential to supercharge e-procurement and potentially even make up for a significant part of the losses that were inevitably incurred by the impact of the last few years.

While the future holds much promise, the rising operational costs pose a significant issue. From labour costs and food prices to energy bills, hotels must find ways to manage expenses and maintain profitability without compromising on quality. Given the current state of supply chains worldwide, many of the industry's "classic" procurement challenges have been exacerbated.

The biggest challenge has to be cost management. The persisting supply chain disruptions coupled with soaring inflation have significantly raised the cost of doing business. Prices have exploded across the board, making profitability and growth more difficult to achieve.

That meteoric rise in prices had a significant impact on supplier management, prompting many in the hospitality industry to shop for different suppliers in an effort to drive down costs. Not only does that entail logistical overhead, but it also opens the door to uncertainty regarding supply and quality. And as organizations grow their number of suppliers, managing those relationships becomes even more challenging.


Finally, the delicate balancing act that is inventory management has also grown in complexity. In the current economic conjecture, suppliers are less eager to provide guarantees on stocks and delivery times. That makes ensuring you have enough stock at hand while avoiding overstocking even more delicate.

And while all of the above points may be harder to pull off, they're no less critical. And I believe AI is the best tool in our arsenal to alleviate that pressure and put us back on a path towards growth.

E-Procurement is the New Normal

E-procurement was already on a growth trajectory before the pandemic. But the pandemic cemented that trend. To meet the above challenges, many more organizations in the hospitality industry have since turned to e-procurement - the purchase and sale of supplies and services over the Internet - and that shift has provided benefits. Those benefits range from more streamlined processes and greater efficiency to reduced costs and increased resilience to supply chain disruptions.

But what if I told you that recent advances in artificial intelligence (AI) could do even more for the industry?

Artificial intelligence is complicated tech. But in lay terms, it enables machines to perform tasks that would typically require a human being - things like recognizing speech, making decisions, and understanding language. And when you endow a machine capable of millions of computations per second with the above, it can do some pretty impressive things. Given its array of capabilities, AI has the potential to make e-procurement even smoother and more agile.

Let's look at some of the most significant benefits AI can bring within the context of e-procurement and also provide insights into some of its challenges.

Automating Routine Tasks

One of AI's primary benefits, in any context, is its ability to automate routine tasks, allowing your human workforce to focus on tasks in which human discernment and judgment are more critical. That also applies to e-procurement.

Using AI, you can automatically generate purchase orders, match invoices to purchase orders and approve payments. That not only simplifies your e-procurement processes, it reduces their costs, and frees up your staff for more human-centric work.

Improved Accuracy of Procurement Data

AI can also improve the accuracy and quality of your procurement data. The tech has a dizzying capacity to ingest huge amounts of information and identify trends, patterns, and exceptions. In fact, that's what it does best. Having AI analyze your procurement data can provide you with a bird's eye view of your procurement patterns and produce clear and actionable reports so stakeholders can make more enlightened and informed procurement decisions, which augments your odds for growth.

In 2020, WBR Insights conducted a survey of procurement professionals, sponsored by Amazon Business, and found that 76% of surveyed organizations qualified their ability to develop strategic insights based on AI-powered analytics as “advanced” or “above average.” They also claimed that AI provided their procurement teams with more time to work on the opportunities they identified. As AI makes processing analytics less labor intensive, 62% of respondents stated it allowed them to reallocate time that would have been spent on manual processes to other tasks in which human judgment is more critical.

Imagine having AI analyze your suppliers' performance data to identify suppliers that consistently deliver high-quality products and services at a sensible price while flagging suppliers that present irregularities.

Yeah, we want that guy in our meetings too.

Streamlined Supplier Selection

Another significant benefit of AI on e-procurement revolves around supplier selection. Supplier selection has historically been a time-consuming and labor-intensive process. It's no simple task; it requires manually reviewing supplier profiles, conducting interviews, and evaluating proposals.

Traditionally, choosing a supplier requires numerous people within the organization to work numerous hours. But AI can simplify the process by automatically analyzing supplier data and identifying the most suitable suppliers based on the factors that matter most to you at a given time - be it price, quality, or delivery time.

Enhanced Transparency, Accountability, and Accuracy

Humans don’t see very well in the dark. You don't need me to tell you that. But I can tell you that by using AI, you can improve the transparency and accountability of your e-procurement processes. AI can dramatically improve your organization’s visibility into its procurement processes, making adjustments and fine-tuning that much easier.

Using AI to automate some of your procurement processes reduces the potential for human error, ensuring your data is trustworthy and accurate. It can also help reduce the risk of fraud and corruption, ensuring your procurement activities are conducted fairly and transparently. And aside from strengthening trust between buyers and suppliers, it also enhances predictability, which is critical to the overall effectiveness of your procurement activities.

That's Not to Say There Aren't Challenges…

As is the case with any new technology, integrating artificial intelligence into your e-procurement processes comes with its own challenges. However, in our use case, the benefits clearly outweigh the challenges - it’s just a matter of setting things up properly.

Like Father, Like Son

One of the biggest challenges is the potential for bias getting baked into AI algorithms. That's true of AI in general, not just within procurement. But as the now old adage goes, AI algorithms are only as good as the data they are trained on, and if the data is biased, the algorithm will also be biased.

A biased data set will result in biased reports, leading to biased procurement decisions. That will undermine the integrity of your procurement process, your relationships with suppliers, and, ultimately, your brand.

New Tech Requires New Skills

Those working in procurement will need to adapt their roles and acquire new skills to properly integrate AI into their workflows. They must be able to understand and interpret the results generated by AI algorithms and then use those results to make informed procurement decisions.

Addressing this challenge will require organizations to invest significant resources into training and development because, as powerful as AI can be, we still need human stewards calling the shots. Your workforce shouldn't feel overwhelmed when working with AI - and a willingness to embrace new technologies can only come with proper training.

Wrapping Up

So that's my case for AI in e-procurement. And the fact that AI is embedding itself into modern businesses' processes across industries would seem to drive that point home. We now have machines that can analyze massive amounts of data - radically more than any human brain could ever hope to. It seems silly not to use them.

AI can give you visibility into processes that would otherwise fly under the radar, giving you a real-world big picture to inform your decisions. This can lead to better deals with suppliers, more opportunities for cost savings, and the ability to anticipate future demand for products and services.

The future of e-procurement is intelligent automation.
The future of e-procurement is AI.

Learn more.

About FutureLog

FutureLog provides a fully integrated, cloud-based procure-to-pay platform for the hospitality industry. We facilitate an end-to-end procurement process from purchasing, through inventory management and up to invoice processing; all available in one platform to save you time and money. The FutureLog procure-to-pay platform is the foundation for seamless connectivity between Hotel Operations, Corporate Centres and Suppliers.

Suzanne Ward
Vice President Digital Marketing and Communication
+41 41 759 1861
FutureLog AG