Generative AI: What’s in It for Procurement?

Up to 94% of respondents to Procurement Leaders’ CPO Compass 2024 survey expect AI to transform procurement in some way. 

But how exactly can procurement organizations use this technology? Where can it be used specifically? 

Can procurement teams fully rely on its results and analysis? And what are the things to keep in mind while using this form of AI?

If you run a procurement business and plan to leverage generative AI, you may have a lot of questions like these. Well, you are not alone in this dilemma. 

Many procurement organizations, even in large enterprises, are currently exploring how to make the best use of this new technology.

Let’s try to answer some of these questions by identifying specific use cases of generative AI in procurement.

Before discussing these use cases, we need to understand generative AI’s transformative potential. By simplifying access to accurate data and intelligence, generative AI democratizes the use of AI and eliminates the need for complex data retrieval processes. Procurement teams can effortlessly pose questions in natural language, get ready answers and broaden their access to external data sources.

Additionally, this form of AI not only can learn from unstructured data but also adapt continuously and get smarter. This also means that models trained for a specific task or use case can be finetuned and applied in other tasks.

Not surprisingly, generative AI has already affected 16% of administrative and data maintenance tasks in procurement, adds the Procurement Leaders’ survey.

Let’s now look at a few use cases.

How Generative AI Can Simplify Procurement

1. Procurement Strategy

Generative AI can streamline procurement strategy and planning by reviewing performance and recommending improvements and changes based on data, trends and benchmarks. By tweaking the thresholds, it can eliminate the need for a number of approvals in policy that adds to the procurement workload.  

2. Spend Analysis

With its ability to read and analyze a huge volume of information, generative AI can add depth to spend analysis. For example, it can check the movement of raw material indicators. It can also detect changes in supplier markets. Further, it can support budgeting with real-time spend, realized savings and market information to adjust baselines.

3. Source-to-Contract

Generative AI can provide RFX support by drafting documents and quickly summarizing responses. In contracting, it can provide automated purchase-specific templates. It can also summarize contract terms, services and risks.

4. Purchase-to-Pay

Generative AI can boost catalog usage by building rules that create more targeted results. It can automate spot buys for low-risk purchases. It can also provide requisition support with natural language-based purchasing for end-users.

5. Supplier Relationship Management

Generative AI-powered supplier relationship management can enhance collaboration with suppliers and facilitate proactive risk management. At the outset, it can help procurement with sourcing and supplier onboarding. It can track service-level agreements and generate performance reports by gathering supplier performance data across multiple databases. Based on the ongoing spend, it can also monitor supplier emissions.     

Procurement Needs a Skilled Workforce 

To leverage generative AI in the above-mentioned use cases, procurement needs a workforce that can work with advanced data and tools. While technology can automate most of the routine tasks such as drafting and communication, it can also bring together data from different internal and external sources. As a result, a diverse set of data — market indexes, weather forecasts, news alerts — will now be accessible. This means that the workforce will have a lot more interaction with data streams. 

Additionally, procurement must also learn how to interpret AI-generated responses, refine its data further and embed it into business decisions. While all this may seem overwhelming at the beginning, procurement should consider this as an opportunity to enhance its overall skillset. Once they understand how to interpret data and insights, they can make the best use of this technology and optimize several processes.

Learn about GEP’s generative AI-powered Total Procurement Orchestration platform