Hyper over generative AI in the procurement sector is at an all time high, and could mean real productivity gains in as little as two years.

Generative artificial intelligence (AI) is unquestionably the technology most loudly and obviously impacting the procurement sector (indeed, many sectors) in 2024. 

AI powered by large language models (LLMs) has been touted by McKinsey as the secret to new forms of value. It will supposedly empower content generation, enabled synthesis, augmented engagement, and accelerated software planning. Of course, many leaders in the procurement sector (and out of it) are skeptical. They argue that generative AI might be “a great toy” that’s “good to play with”. However, they also say their day-to-day work remains unchanged. 

Is generative AI the once-in-a-lifetime technological disruption people selling it claim it to be? Or, is it a flash in the pan headed the way of dinosaurs, crypto scams, and the metaverse? 

The peak of the hyper cycle 

Unintuitively, the closer you get to the peak of a hype cycle, the harder it is to see where you’re going to land. The more generative AI dominates the conversation, the more money gets spent on it. The waters get muddier. It gets harder to see if we’re headed for a bubble bursting or a gentle glide into sustainability. 

Gartner, however, remains optimistic. ”GenAI can already enhance many different workflows in procurement and 73% of procurement leaders at the start of the year expected to adopt the technology by the end 2024,” says Gartner’s Kaitlynn Sommers, “this  level of adoption, along with promising use cases, such as contract management, means GenAI will rapidly move through the Hype Cycle and reach the Plateau of Productivity at a faster rate than is typical for most emerging technologies in procurement.”

In the last 12 months, use cases for generative AI have rapidly expanded, as has the availability of generative AI tools. More capabilities are being added by vendors across the sourcing and procurement landscape every month, according to Gartner. 

Early examples of procurement and sourcing applications include contract management, sourcing, and supplier management. Down the road, Gartner also expects use cases to include supporting supplier performance management, P2P and analytics.

Third party LLMs support adoption

Of course, a major barrier to generative AI adoption is a potentially high cost of entry. However, as time goes on, procurement technology vendors are integrating third-party LLMs into their offerings. These can provide more affordable access to GenAI capabilities in line with digital process support. Third party LLMs can adapt to provide recommendations and support based on organisations’ data and an individual’s procurement role, such as category manager or buyer.

“The window for building competitive advantage through early adoption of GenAI in procurement is narrowing,” said Sommers. “Despite this, procurement technology leaders should remain aware of the obstacles to successful implementations, notably in the areas of data quality and integration of GenAI with their current systems.”

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