While some industries have called the surge in artificial intelligence (AI) challenging, many others are utilizing groundbreaking technology to create more advanced and efficient processes–and when it comes to municipal procurement, the impact of AI is not only positive, it’s profound. In this continuation of our series on municipal procurement and technology, we explore the impact AI is beginning to have on the procurement landscape. We also provide tips for procurement professionals on how to harness the power of technology to improve efficiency, streamline processes, and drive better outcomes for their organizations.
AI in Procurement: A Sleeping Giant Awakes
Like many emerging technologies, AI is starting to make waves in municipal procurement. It is poised to become a key player in transforming procurement processes as those working in the space learn more about how it can be harnessed to improve efficiency, speed and transparency.
“AI has had limited uptake within public procurement until now,” explains Dan Munshaw, a municipal sector veteran and Business Development Advisor with OECM, a trusted not-for-profit collaborative sourcing partner for Ontario’s public sector.
Munshaw says that exploring AI has been a somewhat slower and more gradual process due in large part to the upheaval that many (if not most) industries have had to face head-on over the past five years. Global challenges such as the pandemic, assorted supply chain disruptions, continuing staffing shortages and new legislation have sidetracked many procurement professionals from understanding and exploring the potential uses of AI.
That said, Munshaw says the possibilities of AI in public procurement are vast and already showing promise.
“Times are very exciting today as it’s the tip of the iceberg in terms of knowing the full potential of AI applications within public procurement. We’re talking about improvements to process flow, more stable supply chains, total cost reductions, and better risk mitigation as likely outcomes,” he says.
“AI has been a sleeping dog but is soon ready to explode onto the scene.”
Real-World Applications of AI in Municipal Procurement
Deepali Vasisht, OECM’s Senior Manager of Strategic Sourcing, says that while AI exploration is in its infancy in municipal procurement, the possibilities are broad and varied, and users can expect significant improvements in process efficiency–among other benefits.
“AI has been a dormant force in the sector, but it is on the verge of becoming a transformative presence,” she says.
As for what types of AI are more suitable for municipal procurement, Vasisht says Generative AI, a subset of AI, holds great promise. Generative AI can create new content, such as drafting procurement documents, generating supplier scorecards, and developing predictive models for demand forecasting.
“This can drastically reduce the time and effort required for these tasks, allowing procurement professionals to focus on more strategic activities,” she says.
Generative AI tools such as OpenAI GPT-4, Copy.ai, ChatGPT, Grover, Frase, and Tabnine are just some of the programs transforming public procurement by automating tasks and enhancing decision-making.
Vasisht says OpenAI GPT-4 can automate the drafting of procurement documents and support predictive modelling, while Copy.ai could help speed up the creation of RFPs and bid summaries. The others can assist with everything from procurement strategy development and report creation to policy document production and custom software development.
While Vasisht is excited about AI’s positive impact on municipal procurement, she says its implementation must be accompanied by “rigorous validation and human oversight to ensure accuracy, ethical use, and alignment with organizational goals.”
AI in Action: Canadian Municipalities Leading the Way
Across Canada, public sector entities are beginning to implement AI in their procurement processes. The Government of Canada is investigating AI’s potential in automating workflows and improving decision-making, while cities like Toronto and Vancouver are piloting AI-driven tools for spend analysis, vendor selection, and demand forecasting.
As AI evolves, its applications in municipal procurement will continue to expand, offering even more opportunities for efficiency, transparency, and cost savings. The federal and municipal governments’ initiatives provide valuable insights for other municipalities looking to harness the power of AI in their procurement practices.
Top Tips for Procurement Professionals: Leveraging Technology for Success
With AI and other emerging technologies, procurement professionals are standing at the precipice of a new era of public procurement. But how can they best harness the power of these tools? OECM offers some practical advice for procurement professionals to get started:
1. Embrace e-Procurement Systems
- Adopt comprehensive e-procurement platforms to automate and integrate procurement processes from end to end. E-procurement systems reduce paperwork, minimize errors, and speed up procurement cycles, resulting in significant efficiency gains.
2. Leverage Data Analytics
- Utilize data analytics tools to analyze procurement data, identify trends, and make informed decisions. Advanced analytics can optimize spend management, forecast demand accurately, and enhance supplier performance, leading to better cost control and more strategic procurement decisions.
3. Partner with a GPO or Strategic Collaborative Sourcing Partner (like OECM)
- Leverage their in-house experience and expertise, negotiated contracts, and procurement solutions and re-invest your valuable time and resources to support more strategic priorities.
4. Foster Collaboration with Cloud-Based Tools
- Cloud-based tools enhance transparency and streamline workflows. Use cloud-based collaboration platforms to improve communication and coordination with suppliers and internal partners.
5. Invest in IT Skills and Continuous Learning
- AI and other software tools are only as effective as the skills of the people using them. Ensure new hires possess strong IT competencies and invest in ongoing training opportunities for your team to enhance their technical skills and stay updated with the latest technological advancements.
There’s more to come. As AI technology continues to mature and evolve, its applications in municipal procurement will only expand, offering even more opportunities for innovation and improvement. From automating routine tasks to providing advanced analytics for decision-making, AI is set to become a driving force in transforming how municipalities procure goods and services. By leveraging AI technologies and continuously investing in education and partnerships, public sector entities can achieve greater efficiency, transparency, and cost-effectiveness in their procurement activities.
This article was published in the November 2024 issue of the Ontario Public Buyers Association (OPBA) Caveat Emptor E-News.
