In the ever-evolving landscape of the electric utility industry, the integration of Artificial Intelligence (AI) tools is becoming increasingly prominent. With the emergence of AI technologies such as ChatGPT, Bing Chat, and Google’s Bard, alongside image generators like DALL-E 2, Midjourney, and DreamStudio, businesses are presented with a range of opportunities to enhance their operations.
Industry experts are forecasting a notable rise in the adoption of AI-based automated procurement decision-making solutions, projecting an increase from 15% in 2023 to over 50% by 2025. These advancements promise to deliver improvements in efficiency and cost reduction, ultimately leading to enhanced customer experiences and more informed decision-making through the analysis of large datasets.
Exploring Procurement Opportunities in the Electric Utility Industry
Over the past two years, we have explored the procurement landscape within the electric utility sector, as outlined in our articles “Powering Procurement in the Electric Utility Industry” (Part 1 in July 2021 and Part 2 in August 2022) featured in SupplyChainBrain.
We have highlighted the importance of adopting best practices for streamlining procurement processes and integrating next-generation technologies. The procure-to-pay processes, which encompass the entire procurement cycle, offer comprehensive coverage and tracking capabilities. Implementing a fully integrated global IT system infrastructure that includes procure-to-pay operations with automated workflows is crucial for utilities. Moreover, utilizing a standardized data warehouse for electronic data exchange, web-based supply and demand planning, and timely business intelligence is essential.
To optimize return on investment, procurement managers in the utility industry must continue to pursue best practices for streamlining processes and embracing enabling NextGen technologies. The utilities sector remains committed to streamlining and digitizing procurement operations, with a focus on enhancing efficiency.
Challenges in Procurement and the Role of AI
The procurement function within utility companies often faces challenges, such as siloed operations and sub-optimal performance. These issues span across business processes, technology, and performance metrics, leading to missed opportunities for improvement.
In our experience working with procurement organizations in large electric utilities, it has been observed that a small percentage of vendors (4-8%) account for the majority of spending (75-85%), while the remaining vendors (80%) make up a smaller portion of the expenditure (4-8%). This concentration of spending presents opportunities to strategically focus on the top vendors for cost reduction and minimize the efforts required to manage the “tail” of vendors. However, limited resources and tools often hinder procurement teams from driving strategic sourcing initiatives. It is essential to recognize that only a small fraction (10-15%) of procurement activities are strategic, with the majority (85-90%) being transactional.
The Potential of AI-Driven Procurement
AI holds the potential to revolutionize procurement operations within the electric utility industry. Procurement organizations have evolved over the past decade, emphasizing concepts like strategic sourcing, spend management, supplier relationships, and category management. However, there is still room for substantial improvement in the procurement organization structure for basic procurement operations.
The adoption of AI tools is on the rise, offering opportunities to enhance business processes and maximize human resources. AI can aid in recognizing patterns across tasks, efficiently analyzing data, guiding new users through complex procurement processes, and mining information across diverse suppliers and categories. Predictive analytics and “what if” analyses can be employed for holistic process monitoring. AI algorithms can streamline spend analysis, vendor matching, and data processing, resulting in better decision-making, improved supplier relationships, reduced errors, and optimal resource allocation.
Many enterprise software vendors are already incorporating AI capabilities into their offerings, simplifying processes like sourcing, contingent worker identification, category naming, and invoice reconciliation. These AI-powered solutions save time, reduce errors, lower costs, and improve compliance.
Embracing AI for Electric Utilities
Adopting AI in the electric utility sector is a gradual process that requires both short-term and long-term strategies. AI can deliver quick, high-impact wins while also fostering a transformative AI culture within organizations. In light of challenges such as the recent pandemic, climate change-related weather events, and a shrinking labor pool, utilizing AI to enhance procurement is essential.
As an aging workforce retires, knowledge continuity becomes a challenge, and utilities must attract and retain a tech-savvy new generation of workers. Strategic procurement and technology improvement are necessary to make the most of available resources and public awareness for effective community power delivery. Seizing the day through AI integration is crucial for the electric utility industry’s future success.
Stay on top of supply chain news with The Supply Chain Report. Enhance your international trade knowledge with free tools from ADAMftd.com.
#ElectricUtility #AIinProcurement #AIEmpowerment #NextGenTechnology #ProcurementInnovation #ChatGPT #BingChat #GoogleBard #DALLE2 #Midjourney #DreamStudio #AIinUtilities #ProcureToPay #AutomatedProcurement #StrategicSourcing #SupplyChainOptimization #CostReduction #EfficiencyBoost #PredictiveAnalytics #AIRevolution #UtilityTransformation #TechInProcurement #AIAdoption #SustainabilityThroughAI #ProcurementExcellence #AIForUtilities #UtilityIndustry #FutureOfWork #ProcurementChallenges #AIandAutomation
