Budgeting for the new year isn’t always easy to plan for, especially in unprecedented times. In order to gain deeper insights into retail, I turned to industry veterans Rich Pedott and Daniel Binder of Columbus Consulting. One way to streamline the process of keeping budgets in check while accommodating vendors is to use artificial intelligence (AI) negotiations. Retailers such as Walmart have embraced AI technology to optimize operations, and as 2021 budgets hang in the balance, other large retailers may want to follow its example. Survival may depend on the willingness to adapt in ways never before anticipated.
Solutions such as AI negotiation platforms address both the time and capital elements of the challenge of budgeting for the future. They make a fast, measurable impact to the bottom line and enable the human capital of an organization to be focused on high-value activities that create even more earnings-oriented value. There's so much potential value in renegotiating stagnant contracts with suppliers, and AI is designed to take on the challenge of making your money work for you.
There are many benefits to using AI in retail negotiations. Once implemented and tailored to the retailer’s needs, the system yields measurable bottom-line results within the scope of the same fiscal year, all while compiling crucial data to constantly evolve and improve negotiations going forward. The efficiency of an organization’s human capital is also improved, allowing the allocation of human resources to higher-value processes. As a result, return on investment with AI negotiation technology is very compelling with regard to the 2021 budget and beyond.
AI also yields extraordinary leverage in negotiations, impacting both gross margins and improvements in operating expenses. Furthermore, it allows engagement in activities that no one has time for, such as hundreds or even thousands of long-tail negotiations. AI, however, always has time for the supplier and is always informed with the latest data. Applied wisely, AI is like having a huge team that never sleeps, working for you — and is inherently accurate, 100 percent of the time, leaving important processes to the experts.
Automated negotiations make it easier to obtain and process data, as terms are automatically entered into a database and stored for future company use, and the data serves as the basis for AI to learn and evolve. This, however, doesn’t mean that the negotiations are impersonal. With some retailers that handle huge volumes of supply chain transactions, the company may only interact with its long-tail suppliers just once in five years. AI always has the time for the supplier and is able to bring equal attention to each vendor at any time.
Most importantly, AI is unbiased. One of the most important aspects of negotiation is the willingness to adapt and work out solutions that benefit both sides. The technology pushes each negotiation to be as close to Pareto Optimal as possible, making the best deal for everyone, quickly and easily. Pareto Optimal is a condition that's met when resources cannot be reallocated to make one individual better off without making at least one individual worse off. By using this “golden rule” of negotiation, deals can be made as fairly as possible for both parties.
With the unique demands of drafting 2021 budgets presenting unprecedented challenges, retailers can choose to use this crisis as an opportunity to put new systems into place and embrace the chance to adapt and evolve for the better. In short, adopting AI could be the most effortless yet impactful change that retailers can make to not only survive but thrive in a post-COVID climate.
Martin Rand is the CEO of Pactum, an AI-based system that helps global companies to autonomously offer personalized, commercial negotiations on a massive scale.
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