Across all industries, the unprecedented disruption caused by the COVID-19 pandemic, along with the “growing need for procurement to enable growth, mitigate inflation/risk, and drive significant levels of value” has, according to Deloitte’s 2023 Global CPO Survey, afforded businesses’ procurement function “a seat at the table.” However, with the recognition of procurement’s importance comes responsibility and, increasingly, pressure.
The procurement function of a modern enterprise is one of the final remaining frontiers where truly value additive transformations can occur. Cutting costs, identifying new efficiencies, and pursuing more sustainable practice throughout the supply chain are non-negotiable KPIs for all procurement teams.
Artificial intelligence (AI) and machine learning (ML) have long been a part of successful procurement and logistics strategies—automating manual and menial tasks, freeing up professionals to focus on more strategic objectives. The recent advent of generative AI, underpinned by natural language processing (NLP), pattern recognition, cognitive analytics, and large language models (LLMs), however, has the potential to support procurement professionals in new, more impactful ways than ever.
Here are our top X ways that generative AI can help procurement professionals deliver on the demand for smarter buying, more ethical sourcing, and the holy grail of an unshakably resilient supply chain.
1. Predicting Disruption
If the last three years have taught us anything, it’s that the supply chain is a fragile thing. Organisations struck by the pandemic that failed to adapt and recover as fast as their competitors are, at the very least, facing a harsher world today than they were in 2019, with many having been absorbed by more resilient, faster-moving competitors. Even with the pandemic behind us, its effects are still being felt, and disruptions are a fact of life.
In case of a disruption, procurement teams need to be able to identify and respond quickly—something only 25% of firms are able to do, according to Deloittle’s 2023 procurement industry survey.
AI tools bring a heightened ability to identify patterns and analyse large data sets to the procurement department, dramatically increasing procurement professionals’ ability to identify disruptions (both within the organisation and in the market as a whole) before they happen and adapt accordingly.
2. Textual Data Analysis
Artificial intelligence has been used to sift through large data sets for years, but Generative AI may allow the scope of those data sets to expand by orders of magnitude. The ability for ML-powered LLMs to analyse large amounts of unstructured textual data, such as news articles, social media posts, contracts, and customer feedback could create a wealth of new insight and recommendation generation opportunities to benefit businesses’ procurement functions.
Procurement professionals will have an additional angle from which to evaluate vendors, examine their compliance status, gather market intelligence, and assess risk. Unstructured text remains one of the great untapped data resources, and LLMs have the ability to convert that raw data into actionable insights for the procurement function.
3. Intelligent Recommendations
In addition to internal purchasing recommendations based on compliance, generative AI could also be used to create highly personalised, granular criteria for business buyers. An AI-powered buying tool could, for example, scrape hundreds of thousands of item listings, eliminating results based on millions of data points, to create proposed shopping carts for particular applications weighted by any number of criteria determined both by company policy and the buyer’s own preferences.
4. Automated Compliance
Generative AI’s ability to analyse large, unstructured data sets and draw complex, human-like conclusions from them that are then translated into insights and decision recommendations could be transformative for handling compliance in procurement.
A generative AI model could be used to monitor company-wide activity for anomalous or non-compliant purchasing behaviour—alerting the procurement department if an issue arises. In addition to creating more freedom for buyers outside the procurement function, and freeing up time within procurement that would otherwise be spent reviewing company spend for compliance, a Generative AI could be used to make intelligent spending recommendations in order to increase compliance with minimum spend contracts, for example.
By Harry Menear
