MIT Sloan Management Review Article on Procurement in the Age of Automation

Executives are often skeptical about automating procurement processes, particularly when they involve negotiations, but automated negotiation tools offer considerable value for all stakeholders and can be used effectively throughout many businesses.

Over the past three years, we have studied modern automated procurement practices at dozens of organizations. We studied technologies that have been around for a while but not widely adopted, such as e-auction technology, as well as newer technologies, such as AI chatbots. Companies in our study that had automated procurement negotiations consistently saved money compared with those engaged in traditional person-to-person negotiations and improved supply chain resiliency by identifying more qualified suppliers. Automated negotiations also increased buyer productivity, allowing buyers to spend less time and energy on tasks that are now handled by software. Suppliers benefited from clarity on how they would be assessed, shorter sales cycles, real-time feedback on their current standing, and confidence that they would be treated fairly, even in situations that involved entrenched incumbent suppliers.

About the Author

Remko Van Hoek is a professor of supply chain management at the University of Arkansas’s Sam M. Walton College of Business. He previously served as chief procurement officer at The Walt Disney Co. and had executive roles in procurement at several other companies, including Nike and PwC. Mary Lacity is a distinguished professor of information systems at the Walton College of Business.

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