ChatGPT & AI in
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ChatGPT in Procurement — Revolutionizing the Norm

Key take-aways

  • ChatGPT is an AI language model introduced by OpenAI in 2022, designed to provide conversational responses and answer complex questions.
  • ChatGPT can automate and streamline various tasks in procurement.
  • Writing effective prompts is crucial for getting the most out of ChatGPT.

ChatGPT is getting popular not just in procurement but also in various industries as it assists professionals in their everyday work. However, what is it?

This article will help you know what ChatGPT is. Additionally, we will show you how ChatGPT can help automate procurement professionals in their work.

Once you are done reading this article, you will be able to know the impact of ChatGPT in changing procurement. Additionally, you will be able to use it effectively in your profession.

What is ChatGPT?

OpenAI, an AI research and deployment company, introduced the AI called ChatGPT on November 30, 2022, that answers conversationally complex questions. ChatGPT has been regarded as revolutionary as it is trained to learn what humans mean when they are asking questions.

Many users are amazed at how ChatGPT can provide human-quality responses when they are asking questions. Thus, inspiring the feeling that it may change how humans interact with computers in the future.

An additional layer has been added called Reinforcement Learning with Human Feedback (RLHF) to assist the AI in learning the ability to follow directions and generate human-like responses.

According to an analysis by UBS Switzerland, ChatGPT is the fastest-growing app of all time. In January, only two months after it had been launched publicly, it had already amassed 100 million active users. For you to have an idea of how fast this is for an application, TikTok took nine months to reach 100 million.

Featured Download: Enjoying this article? If so, click here to accelerate your career:
Here is the ChatGPT Negotiation Toolkit to help you prepare your upcoming negotiations.

HowDoes it Work?

ChatGPT is a language model which is an improvement over its predecessor GPT-3. It is capable of generating text in a wide range of styles, but with remarkable detail, precision, and coherence compared to its predecessor.

The most basic training of language models involves the prediction of the sequencing of words. Commonly, it is observed as either next-token-prediction or masked-language modeling.

OpenAI used a combination of both supervised learning and reinforcement learning to improve ChatGPT. However, it is the RLHF that makes it unique which uses human feedback in the training loop to reduce harmful, false, or biased outputs.

ChatGPT is a highly capable tool that comprehends and produces human-like replies to natural language input. In essence, it acts as a virtual or personal assistant, streamlining communication and information processing tasks for procurement. By automating these processes, it significantly enhances speed, efficiency, and accuracy in procurement tasks.

For example, when a supplier sends an email inquiring about their order status, instead of crafting a response manually, you can feed the email into ChatGPT, which will generate a suitable reply on your behalf. This not only saves valuable time but also ensures consistency and precision in the response.

Use cases of ChatGPT inProcurement

ChatGPT is changing the game for each professional in various industries. It revolutionizes the way procurement professionals work. The AI helps assist and support procurement professionals by answering questions regarding the procurement process.

Here are some ways ChatGPT can help procurement professionals:

1. Sourcing suppliers

ChatGPT can help procurement professionals to identify potential suppliers by analyzing supplier data. Additionally, it can identify potential suppliers based on their industry, location, or product/service offerings.

2. Contract management

ChatGPT can provide assistance to procurement professionals by assisting them in managing their contracts by providing information on the contract terms and conditions.

It can also assist you in handling disputes with suppliers and answer your questions about contract renewals.

3. Supplier performance

ChatGPT helps professionals to gauge the performance of their suppliers by analyzing supplier data and providing real-time alerts on any issues. For example, you can ask ChatGPT to provide information about the delivery performance of a specific supplier.

4. Market analysis

It can assist professionals by analyzing market trends and identifying potential opportunities or risks which can help them create a market analysis.

Additionally, ChatGPT can help provide information about the pricing and potential risks associated with a specific supplier or product.

5. Creating quotes

ChatGPT can assist procurement professionals by providing them templates for quotations when they need to procure some products or services with their suppliers.

Additionally, procurement professionals can ask ChatGPT to create a quote to acquire materials or services. Thus, helping you to speed up your process.

6. Answering procurement-related questions

ChatGPT can answer a wide range of procurement-related questions including the definition of terms, regulations, and best practices in procurement.

Additionally, it can help procurement professionals by answering questions such as “what is a purchase request” and “what are the processes involved in the procurement”.

7. Predictive analysis tool for procurement planning

ChatGPT can analyze huge amounts of historical data to assess the trends and patterns that will allow procurement teams to make data-driven decisions.

By using its capability to predict demand, businesses can manage their inventory levels and streamline their supply chain more efficiently.

8. As a tool for communication

AI tools like ChatGPT can help you fix communication gaps between your team and suppliers. ChatGPT can be used to draft emails, clarify requirements, and simplify negotiations that can help you build a strong relationship with the supplier.

Also, it can be used to help you construct what you want to say with your suppliers professionally if you are having a hard time communicating what’s on your mind and your expectations.

9. Risk management

Using AI can help you manage risks better. By utilizing AI tools to evaluate supplier performance, and check the stability of finances, and compliance of suppliers, you can determine the potential risks and take actions to mitigate them.

10. Simulate negotiation

Using AI like ChatGPT can help you simulate negotiation. You can do this by asking chatGPT for a prompt about simulating a negotiation. Then, once you have asked it that you wanted to simulate a negotiation, it will respond that you must give it further details about what you wanted to negotiate about.

By doing this, you can be guided on what needs improvement in your negotiation, especially when you are preparing to negotiate with a supplier. ChatGPT can also give insights on what needs to be changed and how you can gain more once you are at the negotiation table.

ChatGPT Promptsin Procurement

When using ChatGPT, you will inevitably encounter the word “prompt”.  However, what is a prompt? Simply put, prompts are statements or questions that are designed to generate a specific response or action.  By crafting a well-defined prompt, you can direct the AI to produce specific, relevant, and coherent outputs. This leads us to the next question, how can you make a good prompt?

Don’t worry, we got you! We will show you an example of a good and bad prompt:

Poor Prompt: “Can you tell me how you can help me negotiate better?”

Good Prompt: [Describe the negotiation situation, your interests, your goals, the company you’re negotiating with, their interests, their goals, and what you want to get out of the negotiation] “Can you describe 3 possible negotiation strategies my negotiation counterpart will likely use? And for each one, describe how I should counter it.”

In this example, the poor prompt is too vague and does not provide specific guidance on what type of assistance is being sought. The good prompt, on the other hand, is specific and contains specific details on the context of your question.

Do you want to learn more about writing a good prompt? Then check out our ChatGPT & AI in Procurement Course here.

Limitationsof ChatGPT

1. Answers are not always correct

ChatGPT is trained to answer your questions that feel right to you. Thus, it can trick you that the output it made is correct. Many users discovered that ChatGPT can provide incorrect answers. Thus, you should always remember that it cannot always be depended upon to provide accurate findings.

2. It is not completely trained

ChatGPT is still undergoing its development. The creator of ChatGPT, OpenAI, suggests that all contents that the AI generates should be consulted and examined by professionals or existing facts available on the internet.

3. ChatGPT lacks insights

An article by The Insider quoted an academic that says that academic essays generated by ChatGPT lack insights about the topic. Although it may exhibit high grammar qualities and sophisticated ideas, it lacks insights.

Best ChatGPTPlugins

Before we list down the best plugins for ChatGPT, let’s first define what are plugins.  Plugins are additional modules or extensions that can be added to a software or platform to enhance its functionality and provide users with extra features.

To simplify, these are extra tools you can add to a program to make it better and do more things. In the context of ChatGPT, plugins are special add-ons that give the language model extra abilities, making it even more versatile and capable of handling different tasks and topics.

Now that you know what are plugins, here are some of the following plugins for ChatGPT:

1. Link Reader

Link Reader allows you to retrieve information from a specific webpage. However, its functionality extends beyond just specific pages.

For instance, if you have a broader query like “I need to get updated on the latest trends in procurement, can you provide a list of relevant articles? LINK: https://www.procurementmag.com,” it will gather procurement-related articles not only from ProcurementMag but also from other relevant sources.

Additionally, Link Reader proves valuable in locating recent procurement case studies, the latest updates on supply chain management, and much more. It can also sift through various document formats like PDFs, PPTs, images, Word files, and others to find the relevant information you seek.

Furthermore, it seamlessly integrates with other plugins, enhancing its usefulness and allowing for a more comprehensive procurement information-gathering experience.

2. Prompt Perfect

Prompt Perfect is an excellent ChatGPT extension that helps users create ideal prompts for the AI chatbot. If you struggle to write effective prompts, Perfect will be a huge help.

Just start with “perfect” before your question and the plugin will rework the prompt behind the scenes, making it detailed and precise for ChatGPT. This ensures the AI chatbot gives you well-informed and specific answers based on your prompt.

3. Speak

Speak can be an invaluable ChatGPT plugin for procurement professionals who work with other countries. As the name suggests, Speak allows you to learn how to say anything in different languages, making it an excellent tool for negotiating with people from other countries.

Apart from translation, the plugin offers assistance with verbs, conjugations, nuanced grammar, and more. Just type your language query, and ChatGPT will provide a prompt response, making it a powerful tool to enhance communication and understanding in international dealings.

Is ChatGPTFree to Use?

ChatGPT is completely free. This is due to its “research preview” time to provide feedback on the responses of the AI to improve it better.

The subscription plan for ChatGPT, ChatGPT Plus, is now available for a monthly fee of $20.

By subscribing to this paid plan, users enjoy uninterrupted access to the service even during peak usage times when the free version may be at maximum capacity. Additionally, ChatGPT Plus offers quicker response times compared to the free version.

Subscribers of the Plus plan receive priority access to new features and enhancements that OpenAI introduces, including early access to the latest updates like GPT-4. Furthermore, Plus users will have priority access when ChatGPT plugins are launched in the future.

ChatGPT as a Catalyst For Achieving Sustainability

In the past few years, many companies shifted their focus toward sustainability, aiming to reduce their environmental impact without sacrificing operational efficiency and effectiveness.

At Procurement Tactics, we conducted a survey among our email subscribers to inquire about their sustainable procurement practices. Among the 500+ respondents, 56.4% confirmed that their organizations have established formal policies regarding sustainable procurement. This substantial majority underscores a robust dedication to sustainable practices among more than half of the participants.

The surge in companies adopting ethical and sustainable procurement methods has been notable over the past few decades. Artificial intelligence, with its diverse applications across various industries, showcases considerable potential in advancing both procurement and sustainability initiatives.

Utilizing ChatGPT and other AI models empowers procurement teams to capitalize on automation, leading to quicker processes. However, the ascent of artificial intelligence has ignited debates on ethics and system bias, causing reluctance in its adoption.

While acknowledging these concerns is crucial, embracing ChatGPT can prove valuable in procurement, enhancing efficiency, and ensuring sustainable and transparent supply chains.

In 2023, a survey by Deloitte, involving 350 senior procurement leaders from 40+ countries, revealed that 72% successfully elevated their ESG (Environmental, Social, and Governance) efforts while maintaining operational efficiency.

Expanding on sustainability, ChatGPT offers a strategic advantage. Promoting automation in procurement processes, not only accelerates tasks but also helps in making environmentally-conscious decisions. ChatGPT can assist companies in achieving sustainability goals by optimizing resource usage, reducing waste, and fostering transparent practices within the supply chain.

The adoption of ChatGPT aligns with the broader trend of using advanced technologies to balance efficiency with ethical considerations, contributing to a more responsible and sustainable approach in procurement practices.

Using ChatGPT in The Supply Chain

In today’s business landscape, the integration of cutting-edge technologies like ChatGPT and machine learning is revolutionizing traditional supply chain management.

At its core, ChatGPT learns from the extensive datasets you provide, enabling it to produce coherent and contextually accurate responses. Picture it as your digital assistant, automating tasks like procurement, and logistics, and even diving into data analysis and customer service.

However, while the potential seems limitless, it’s crucial to acknowledge the limitations. It may not be able to seamlessly address every intricate aspect of the entire supply chain. Additionally, occasional inaccuracies or misunderstandings may arise due to discrepancies between prompts and the model’s responses.

To know more about the role of ChatGPT in enhancing supply chains, read our article about ChatGPT in the supply chain. The article also highlights the ways that you can use ChatGPT to enhance your control in your supply chain.

Using ChatGPT in Global Procurement

ChatGPT and other generative AI have become a valuable tool for optimizing processes in many industries including procurement. However, when it is used on a global scale, there must be ethical considerations that professionals must follow. 

Although ChatGPT in global procurement presents a huge opportunity for making processes more efficient and faster, procurement teams must be responsible with its utilization which is paramount in protecting not just the company and its stakeholders but also their customers. 

Read our eight crucial tips in our article about chatGPT in global procurement to know the right and ethical implementation of ChatGPT in the global setting.

ChatGPT Policy in Procurement

ChatGPT plays a huge role in procurement by offering several features that can speed up the procurement process. Its smart conversational interface enables procurement teams to communicate effectively, facilitating the streamlined management of procurement tasks and negotiation processes.

As ChatGPT and other generative AI tools continue to become normalized in all workplaces, procurement professionals should exercise responsibility in utilizing these tools. 

That’s why we made an article on how to create a ChatGPT policy in procurement. Reading the article will walk you through developing a policy on how AI can be used in your procurement process responsibly and effectively.

Using ChatGPT in Inventory Management

Nowadays, ChatGPT is being used in almost all industries. That’s why it’s not surprising that many businesses use it to manage their inventory levels. It serves as a valuable tool for managing inventory effectively, using AI-powered conversations to cut costs and improve efficiency. 

Through natural language processing (NLP) and deep learning, ChatGPT swiftly analyzes large data sets to check and control inventory issues and enhance the procurement process.

To give you an example, Amazon, the e-commerce giant relies on AI to enhance warehouse processes and optimize its supply chain management. Prominently, it utilizes robots for selecting and packing items for delivery. This process is further refined through route optimization, ensuring the choice of the most efficient path that minimizes both carbon emissions and transportation costs.

Furthermore, ChatGPT still faces a lot of challenges in inventory management such as data privacy issues, scalability, limitations due to external factors, lack of industry-specific knowledge, and poor precision. Nonetheless, these challenges can be overcome with the right strategies and processes. To learn more about addressing these challenges, read our article about ChatGPT in inventory.

The Role of ChatGPT in Supplier Communication

Smooth communication with suppliers is crucial in the procurement process, requiring good management and communication skills. AI chatbots, like ChatGPT, can step in to make things easier. They fit into different parts of supplier communication, like handling contracts, managing vendor portals, dealing with purchase orders, and more. 

Picture them as helpful assistants automating routine tasks, giving quick updates, and even helping in negotiations. ChatGPT makes supplier communication more efficient and streamlined, making the entire procurement process smoother.

However, ChatGPT still has its own downsides when utilized for supplier communications. Some of the problems include security risks, the ability to handle ambiguous queries, industry tailoring, system integration, and more. Read our article about chatGPT in supplier communication to know how to mitigate or address these problems effectively to help you utilize ChatGPT effectively for supplier communication.

ChatGPT Roles in Negotiation

Another vital part of procurement where chatGPT can be used is negotiation. However, you may wonder, “How can chatGPT assist procurement professionals in negotiation?”

Well, it can assist in finding information about the other party that will allow you to have a better strategy once you are at the negotiation table. 

For example, Picture yourself entering talks with a potential supplier. ChatGPT can quickly gather data on market prices, supplier reviews, and industry standards, streamlining your preparation and enabling you to enter negotiations well-informed.

There are several benefits to utilizing ChatGPT during negotiations. For starters, it provides a new perspective by analyzing data and offering insights you might have yet to consider or think about. Moreover, its ability to simulate human conversation assists in preparation, enabling you to anticipate potential responses from the other party.

For example, ​​you’re negotiating a contract with a big client. ChatGPT can help you analyze past and current industry reports to uncover your client’s priorities and potential concerns. With these insights, you can create a negotiation strategy that addresses their specific needs, increasing the likelihood of a successful agreement.

However, you must know how to make good prompts for ChatGPT to help you effectively with your negotiation strategy. Making poor prompts will consume lots of your time explaining to chatGPT what you want. 

For more guidance on creating successful prompts, refer to our comprehensive article on ChatGPT negotiation prompts.

Procurement Expert’s Advice on ChatGPT

For this article, we asked an experienced procurement expert to share her insights to help answer common questions about ChatGPT in procurement.

Faiza Iftikhar
Co-Founder, Procura
Pakistan

LinkedIn Profile: linkedin.com/in/faiza-iftikhar

1. Can you give us an example of how you utilized chatGPT in procurement? However, if you haven’t used it yet, what are your thoughts about using chatGPT in procurement?

Supplier inquiries: Procurement managers can use ChatGPT to quickly respond to common supplier queries, such as questions about procurement processes, payment terms, or document requirements, ensuring efficient and consistent communication.

Market Research: ChatGPT can gather and analyze market data, providing insights into pricing trends, supplier performance, and market conditions. This information aids in making informed procurement decisions.

Contract Management: ChatGPT can assist in tracking contract milestones and renewal dates, sending automated reminders, and organizing contract-related documents, simplifying contract management.

Vendor Selection: Procurement managers can instruct ChatGPT to identify potential suppliers based on specific criteria, such as cost, quality, and delivery capabilities, making supplier selection more data-driven and efficient.

Policy Compliance: ChatGPT can monitor procurement requests and actions to ensure they align with established policies and compliance requirements, flagging any potential issues for the manager’s attention.

Utilizing ChatGPT in procurement streamlines routine tasks, provides quick access to information, and supports data-driven decisions. However, it’s essential to use ChatGPT in conjunction with human expertise, particularly for complex negotiations and strategic aspects of procurement. Data security and ethical considerations are also crucial when integrating AI into procurement processes.

2. What’s the most important thing you learned about using chatGPT or other AI tools in procurement?

“The primary lesson in using AI tools like ChatGPT in procurement is that they enhance efficiency and data-driven decision-making. However, they should complement, not replace, human expertise. Data security, ethics, and staying current with AI advancements are crucial considerations.”

3. What tips can you give procurement professionals about using chatGPT in procurement?

  1. Use ChatGPT for efficiency and data-driven insights.
  2. Clearly define ChatGPT’s role in your workflow.
  3. Combine AI with human expertise for complex decisions.
  4. Prioritize data security and ethics.
  5. Stay updated on AI advancements.
  6. Establish a feedback loop for continuous improvement.

Featured Download: Enjoying this article? If so, click here to accelerate your career:
Here is the ChatGPT Negotiation Toolkit to help you prepare your upcoming negotiations.

In Conclusion

With the continuous growth of AI, ChatGPT and other AI tools will continue to be integrated into many business activities like the procurement process to help streamline the procurement and supply chain operation.

ChatGPT and other AI tools are still in their early stages. Yet, it has greatly changed the business landscape and how we work nowadays. We cannot deny how helpful AI can be in our work.

However, we must take note that because it is in its early stages, it still has a lot to improve. Thus, you still need to fact-check whenever you are going to use ChatGPT and other AI tools as a source.

Moreover, AI is continuously being developed, and soon, all businesses will adopt it and all of us should too. We just need to keep in mind to use it carefully, ethically, and solely for growing the company and enhancing your skills in procurement.

Frequentlyasked questions

What is ChatGPT?

ChatGPT is a large language model that can generate answers to your questions with human-like responses or text.

How does ChatGPT differ from other chatbots?

Unlike other chatbots, ChatGPT can answer follow-up questions, challenge incorrect premises, admit its mistakes, and reject inappropriate requests.

How can it help procurement professionals?

ChatGPT can help procurement professionals by answering procurement-related questions, providing them with necessary data for their procurement, and creating quotes to send to their suppliers.

About the author

My name is Marijn Overvest, I’m the founder of Procurement Tactics. I have a deep passion for procurement, and I’ve upskilled over 200 procurement teams from all over the world. When I’m not working, I love running and cycling.

Marijn Overvest Procurement Tactics