Here's an innovative solution to an age-old procurement problem.
Walmart International targeted payment schedules, hoping to negotiate early payment discounts or extended payment terms without discounts. In exchange, Walmart would offer suppliers the option to change Walmart’s right to terminate contracts immediately without cause to providing a 30-, 60-, or 90-day written termination notice. Walmart would also selectively offer suppliers opportunities for growth in assortment and sales volume in exchange for price discounts.
Walmart International invited around 100 tail-end suppliers to try the solution. Eighty-nine agreed to participate. The chatbot was successful in reaching an agreement with 64% of them — well above the 20% target — and with an average negotiation turnaround of 11 days. Walmart gained, on average, 1.5% in savings on the spend negotiated and an extension of payment terms to an average of 35 days.
Several suppliers, however, still would have liked to negotiate face to face. Other suppliers wanted a less verbose, more fluid script instead of prohibiting suppliers from backtracking to early steps in the negotiation. Other companies interested in automating procurement can apply these lessons on how to develop and introduce such a system:The AI journey for many companies languishes in the proof-of-concept phase —make it into production, according to Gartner. That’s because proof-of-concept phases focus on technical capabilities instead of business goals. Walmart decided to skip a proof-of-concept phase and to go straight to a production pilot focused on business goals.
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