In today’s construction industry, companies are increasingly shifting towards AI-powered procurement software to streamline their sourcing processes and manage contracts more effectively. With its ability to automate manual tasks, augment human capabilities, and leverage cutting-edge technologies such as machine learning and big data analytics, this emerging technology has the potential to dramatically transform construction procurement for the better.
Whether you’re a construction professional or simply interested in the role of AI in modern business, this post will give you a better understanding of how this technology is shaping the industry. So, let’s dive in and see how AI is changing the way we approach construction procurement.
Key areas where AI is being used
- Automated RFQ creation
- Intelligent bid comparison & supplier evaluation
- AI-assisted supplier negotiation
- Smart contract management
- Maverick spend management
- Accurate master data management
Automated RFQ creation
One of the trends in construction procurement today is the increasing use of automation in RFQ creation. This is done through the use of AI-powered software that can self-generate RFQs by analyzing user-provided parameters and requirements, past purchase data, and pre-existing templates.
Additionally, advances in supervised and reinforced machine learning techniques are helping to improve the accuracy and reliability of RFQ generation, enabling construction companies to eliminate the effort required to create time-consuming and laborious RFQs.
Intelligent bid comparison & supplier evaluation
Another key trend in construction procurement is the use of automation to streamline the bid comparison and supplier evaluation processes. This involves using complex algorithms to analyze large quantities of data on suppliers, past bids, pricing trends, market conditions, and other relevant factors to identify the most competitive bids for a given construction project. It also allows procurement professionals to create multiple award scenarios to evaluate potential suppliers more objectively and efficiently, reducing the risk of bias or other errors that can negatively impact overall procurement value.
Additionally, autonomous sourcing systems can continuously learn and improve over time, making them an ideal solution for construction firms looking to stay on top of emerging market trends and evolving industry standards.
AI-Assisted Supplier Negotiation
One of the key benefits of autonomous sourcing in construction procurement is the ability to leverage advanced AI and machine learning tools, such as natural language processing and sentiment analysis, to facilitate more effective supplier negotiations. These technologies can do the initial round of negotiation with the suppliers and share target prices based on the bids received and historical data. It also empowers procurement professionals by giving them intelligent insights based on past supplier negotiation patterns, real-time data on supply market conditions, and should-be costs to make more informed and strategic decisions when negotiating with suppliers.
Smart contract management
The use of automated and data-driven contract management tools is growing in popularity in the construction industry. These tools use artificial intelligence to analyze large volumes of contract data and past supplier performance metrics to better understand what types of terms and conditions are most advantageous, as well as identify potential “outs” or loopholes that may allow them to extract more value from their contracts. In addition, it can be used to alert users to potential issues such as expiration dates. They can include automated payment triggers based on pre-set project milestones and performance metrics, as well as rules governing the allocation of resources.
Maverick spend management
Maverick spend refers to unauthorized or unexpected expenditures that occur on a construction site. This can include things like materials that were not included in the original project budget. Managing it is becoming an important focus area in construction procurement, especially as organizations seek to improve cost control and reduce operational inefficiencies. One of the methods used is establishing strict protocols for purchasing items only from e-commerce aggregators or vendors with whom prices are pre-negotiated. Another is, using AI-powered tools for automated sourcing of vendors. It that can be done by analysing past purchase data & supplier data from third party vendor databases. AI tools also help to identify and flag renegade spending or “maverick” purchases that deviate from typical procurement practices.
Accurate master data management
Master data management (MDM) is a key component of effective construction procurement. It involves the use of tools and systems that help companies centralize, cleanse, and standardize critical information about suppliers, buyers, materials, projects, and other relevant data points.
In today’s digital world, this means leveraging technologies such as deep learning models to process large volumes of unstructured and complex data from multiple sources and make it easier to analyze, interpret, and act upon. The advancements in NLP and generative AI techniques are helping construction companies automatically classify and enrich their data to get better supplier recommendations and improve control over their operations and make more informed procurement decisions.
Benefits of AI-powered sourcing and procurement
Streamlined Processes and Increased efficiency
Automating manual tasks such as RFQ creation, evaluating lengthy techno-commercial proposals from suppliers, contract analysis and more can drastically improve efficiency in the procurement process. A structured and automated process from purchase requisition to supplier payment with approvals set in place can help construction companies streamline and eliminate redundancies and reduce costs. This helps ensure that the team spends less time managing non-value-added tasks and more time on strategic work.
More effective negotiations
Deep insights into past supplier negotiations and performance, real-time market data, cost models, and intelligent analytics make it easy for procurement professionals to make the best possible deal. Additionally, they can also use the data to set up better contracts with suppliers that are more aligned with their organizational objectives and ensure they get the best value for money.
Improved cost control
By utilizing AI-powered master data management tools, construction companies can gain greater visibility and understanding of their past purchasing behavior, which helps them to identify rogue expenditure and reduce overhead costs. Moreover, the system can prevent any unauthorized spending by detecting outliers and activating automated authorizations for the same.
More accurate budgeting
The system, by intelligently analyzing historical data and monitoring project progress in real-time, can generate more accurate forecasts to provide insights for proper budgeting. This will help organizations make informed decisions while managing their finances.
Improved contract compliance
Advanced analytics capabilities and automated alert systems allow construction companies to track supplier performance against contracts, helping them to ensure better compliance with terms and conditions and reduce risks associated with non-compliance.
Challenges associated with implementation
One of the main challenges associated with AI-enabled construction procurement software is ensuring that it can accurately process and analyze large amounts of unstructured and complex data from multiple sources that are typically found in construction projects. Though advancements in NLP and other AI models have solved it to a great extent, 100% precision at all times is yet to be achieved.
In addition, there are concerns about how well these tools can adapt to changing market conditions and evolving project requirements, as well as issues around integration with existing systems, and data security.
Conclusion
Despite these challenges, many construction firms believe that AI-enabled construction procurement software presents a tremendous opportunity for improving efficiency and reducing costs, ultimately helping them stay competitive in today’s fast-paced construction landscape.
As such, we are seeing increasing investments and efforts being made to adopt such tools and deploy them at construction sites around the world.
