The weight on procurement leaders' shoulders is heavy. They're tasked with building resilient supply chains, digitizing processes, and gaining complete visibility across a complex network. However, many procurement activities – from supplier management to spend analysis – are restrained by limited resources, time, and even a perception of lacking strategic influence.

Compounding this challenge, around 75% of companies struggle to leverage analytics within their procurement operations effectively. This data paralysis stems from three shortcomings:

• poor quality data sets,
• a lack of in-house analytical expertise, and,
• simply not having the right technology.

Here, generative AI for procurement has made its way to address these bottlenecks. By overcoming the limitations of traditional data analysis, it has the potential to revolutionize procurement practices.

A New Era of Procurement x GenAI

Thanks to emergence of Generative AI - Procurement is on the verge of becoming increasingly proactive, predictive, and personalized. OpenAI's ChatGPT, with its massive user adoption, showcased the growing acceptance of this technology. Recent advancements, like the unveiling of Personalized GPTs by the CEO of OpenAI during DevDay, suggest a shift toward personalized solutions further solidifies GenAI's role in shaping procurement. This trend will help procurement by customizing solutions to meet the specific requirements of each organization.

According to market research, North America has emerged as the leading area for Gen AI in procurement, holding a substantial 45.8% market share is indicative of the quick adoption of prominent technologies and its focus on an innovative procurement process.

The quick progress of GenAI suggests a future where procurement functions will become more intelligent. As McKinsey indicates, “GenAI’s precise impact will depend on a variety of factors, such as the mix and importance of different business functions, as well as the scale of an industry’s revenue.” This understanding is especially important in the field of procurement, as the proper combination of technology can result in significant improvements in efficiency and strategic decision-making.

Bettering decision-making with Generative AI for procurement

By now it’s clear that the world of procurement is experiencing a significant change, driven by the abilities of Generative AI which empowers strategic decision-making by improving the overall effectiveness of procurement operations by streamlines processes. Let’s find out how.

1. Enhancing supplier risk management

Deloitte marks that 92% of procurement leaders recognize supplier relationship management as a key focus area. Here, GenAI goes beyond simple tool; it provides insights that enhances collaboration, supporting developing strategies for more resilient partnerships. This changes the way businesses approach managing supplier risks.

• GenAI powered tools like Supplier Self-assessment simplifies supplier vetting with self-assessment portals for transparency and accountability.
• Further , by analyzing various data points, GenAI can generate risk scores for individual suppliers allowing procurement teams to prioritize their risk mitigation efforts and focus on the suppliers with the highest potential impact on the business.

Giants like siemens uses a combination of both by analysing supplier data, including financial health and past performance metrics. This helps them identify reliable partners and mitigate potential risks.

2. Addressing Inefficiency and Time-consuming process

When companies like Blue Prism highlight a 90% acceleration in processing time by streamlining administrative works like data entry and payment sorting it becomes a necessary investment to increase efficiency. And why not? Oxford study shows that AI can cut the time spent on procurement processes by up to 60%. GenAI can significantly reduce the time spent on -

• Sourcing and Negotiation by finding top suppliers & auto-generate RFPs/contracts based on your needs, all with real-time market insights for better negotiation.
• Improve Contract Management by automating contract review, setting renewal alerts and ensuring compliance by continuosly monutoring it with company policies and regulations.

With the help of GenAI, your supply chain gets the ability to operate 24/7 around the clock, leading to faster cycle times and improved productivity by continuous execution of tasks.

Cost reduction and financial optimization

Traditionally, technical support has been a resource drain. Nevertheless, GenAI AI tools can now automate tasks, slashing processing costs by up to 40%. The impact of GenAI is directly seen in faster decision processes through:

• Effortless Catalog Management where GenAI automatically updates product info with real-time data from suppliers and internal systems.
• Predicting Demand with Precision with GenAI analyzes vast data sets for accurate forecasts, optimizing inventory and preventing stock issues.
• Reduces frauds like invoice manipulation or fake suppliers by purchasing data to identify anomalies and suspicious patterns, helping in proactive risk mitigation to prevent financial losses.

This results in improved financial outcomes for businesses by offering better deals and becoming more agile in responding to market changes.

The start to generative AI for procurement

73% of the executives say Generative AI plays an important role in increasing productivity. Hence introducing AI in a phased approach allows for controlled integration and ongoing optimization. To fully harness the benefits of Generative AI, we recommend starting with a detailed evaluation of your procurement needs, engaging with expert partners for tailored solutions, and prioritizing staff training for successful adoption. This allows for decision-making based on real-world performance and feedback.