The potential for generative artificial intelligence (AI) to unlock new efficiencies and capabilities for procurement teams is a matter of widespread enthusiasm in the industry. However, challenges like poor data quality and inadequate governance may be holding back adoption.
A new study by Ivalua found that the majority of the UK’s businesses are exploring generative AI’s potential to transform procurement and supplier management. Just under a quarter (24%) of businesses have deployed Generative AI tools in the last 12 months, and another 55% are either in the process of implementing or are considering implementing generative AI over the coming year. Just 19% of companies surveyed said they had no plans to adopt.
The study also found that organisations that have adopted generative AI tools saw a 44% reduction in manual processes across the procurement and supply chain function. Organisations are most commonly applying the technology for task automation (69%), internet research (67%), document analysis (59%), and content creation (48%).
“Generative AI represents huge productivity gains and resource unlock for procurement,” Vishal Patel, VP of Product at Ivalua, commented. “But to succeed, careful change management and education are required to show employees Generative AI will enhance their role rather than replace it. With employees on board, businesses can focus on harnessing Generative AI to eliminate routine and time-consuming tasks while focusing on higher-value activities. But another key barrier remains – addressing a lack of progress on digitisation.”
Digital transformation hurdles slow Generative AI adoption
Despite widespread enthusiasm for generative AI, adoption in the procurement sector faces some significant hurdles. Specifically, digital transformation has progressed slower in procurement than in other fields. This, according to Ivalua’s research, is hampering generative AI adoption in procurement.
On average, organisations say they’ve digitalised 48% of procurement processes, compared to 45% in 2019. The report holds up the following as key reasons behind this lack of digital transformation initiative that’s impacting generative AI adoption.
- Poor data quality: 22% of procurement leaders cited poor data quality as a challenge to adopting Gen AI in the procurement and supply chain function.
- Lower technical skills among teams: More than a quarter (28%) of procurement leaders say user resistance is a top challenge to adopting Gen AI, which suggests a lack of digital skills or technical confidence will hinder progress.
- Lack of guardrails and processes: One-third (33%) of procurement leaders are concerned their team is using Gen AI tools without their knowledge, which is why nearly seven-in-ten (68%) agree they need to put more guardrails in place to ensure the accuracy of Gen AI outputs.
“Businesses need a solid data foundation for procurement and supply chain teams to effectively harness AI to improve efficiency and contribute to effective and timely decision making. But the lack of progress in digitisation and common data challenges suggest there is a significant gap to be bridged before Gen AI can deliver more strategic value,” added Patel. “Most procurement leaders agree that if their organisation doesn’t embrace Gen AI in procurement, they will lose out on cost savings and broader value creation opportunities. So, businesses must act now to digitalise and close the technology and data gaps in their procurement function. If not, they will struggle to measure up against AI-powered competitors, potentially losing customers and market share.”
