ChatGPT & AI in
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ChatGPT in Procurement — 10 Use Cases + Examples
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Table of contents
- 10 Use Cases of ChatGPT in Procurement
- How to Write Good ChatGPT Prompts in Procurement
- AI Prompt Engineering Tool
- Limitations of ChatGPT in Procurement
- What is ChatGPT?
- How Does ChatGPT Work?
- Is ChatGPT Free to Use?
- ChatGPT as a Catalyst For Achieving Sustainability
- ChatGPT Policy in Procurement
- Using ChatGPT in Inventory Management
- The Role of ChatGPT in Supplier Communication
- ChatGPT Roles in Negotiation
- Procurement Expert’s Advice on ChatGPT
- Conclusion
- Frequently asked questions
What is ChatGPT in procurement?
- ChatGPT is an advanced conversational AI developed by OpenAI, that can generate human-like text responses and streamline, automate, and enhance procurement processes.
- ChatGPT in procurement helps professionals automate tasks like supplier communication, contract analysis, and data-driven decision-making, improving efficiency, and accuracy.
- ChatGPT in procurement can generate insights, optimize negotiations, and provide tailored recommendations, making procurement processes more strategic and cost-effective.
In this article, we will break down 10 powerful use cases of ChatGPT in procurement and highlight important factors to watch out for when using ChatGPT. Be sure to read the entire article to avoid costly mistakes as small errors can lead big problems down the road.
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.
I have created a free-to-download, Productive Procurement with ChatGPT Toolkit template. It includes a PDF file that contains prompts that can help you streamline the procurement process and boost efficiency. I even created a video explaining how to use the templates.
10 Use Cases of ChatGPT in Procurement
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.Example ChatGPT prompt for sourcing suppliers
Pretend you are a Chief Procurement Officer. Here is what I need from you: I want to develop a structured sourcing methodology that can be used as a roadmap for all future sourcing activities.
Important details you should know: The sourcing methodology should include a clear differentiation between sourcing methodology, strategy, and policy. It should cover all necessary steps, from goal assignment to forming a sourcing team and conducting various analyses like market analysis and financial analysis. The methodology should also ensure management commitment and stakeholder support.
Format of the reply: Text (Header, subheader, Bullet points)
About me: I am a senior procurement manager with 10 years of experience. I am responsible for overseeing the procurement process for a multinational manufacturing company.
Audience for the output: The output will be reviewed by my procurement team and the executive management team.
Do’s & Don’ts: Do ensure the sourcing methodology is detailed and specific to my industry. Don’t use generic or overly broad advice.
Before you give me an answer, please ask me 5 follow-up questions that will help you to create a better reply.
Tone preference: The tone should be formal and authoritative, suitable for a strategic document that will be reviewed by senior management.
Length preference: At least 1000 words, but no more than 1500 words.
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.Example ChatGPT prompt for contract management
Pretend you are a Procurement Contract Specialist. Here is what I need from you: I’ve successfully negotiated a deal with a supplier for industrial-grade steel, and now I need to draft a contract that I can forward to our legal team for review. The contract should clearly outline all agreed-upon terms, including any critical variables that need to be included. I also need guidance on what to pay special attention to before signing the contract to ensure everything is in order and aligns with our business interests.
Important details you should know: The contracting process should include steps to verify that supplies were delivered in good condition, assess any delivery delays, and ensure payment has been settled with the supplier. Additionally, the process should incorporate the use of procurement software for document storage where applicable, or manual tracking for companies that do not use digital systems. It’s crucial to have all documents well-organized and stored, as they may be needed for future market research or procurement activities.
Format of the reply: Text (Header, subheader, Bullet points)
About me: As a senior procurement manager at IKEA with seven years of experience, I oversee sustainable wood sourcing initiatives, ensuring all timber is FSC-certified or recycled. My role is crucial in maintaining transparency through IKEA’s global wood supply map and advancing the company’s 2030 forest agenda to promote biodiversity and smarter wood utilization.
Audience for the output: It will be me, but with the help of your output I will create the final document.
Do’s & Don’ts: Do ensure the contracting process is detailed, including steps for verifying deliveries, addressing delays, and confirming payments. Don’t overlook the importance of proper document storage and organization, whether through procurement software or manual systems.
Before you give me an answer, please ask me 4 follow-up questions that will help you to create a better reply.
Tone preference: The tone should be formal and precise, suitable for a document that will guide the legal and administrative aspects of procurement.
Length preference: I want you to be as thorough as possible, but provide the response in at least 1000 words but no more than 1500 words.
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.
Example ChatGPT prompt for supplier assessment
Pretend you are a A Supplier Performance Analyst would have the expertise to evaluate supplier data, identify trends, and provide actionable insights into supplier delivery performance and related metrics.. Here is what I need from you: I want to create a robust system for monitoring supplier performance using data analytics to identify trends, flag issues, and improve supplier relationships.
Important details you should know: The system should include key performance indicators (KPIs) like on-time delivery rate, quality defect rate, and cost compliance. It should provide real-time alerts for underperformance and suggest corrective actions. This is critical for maintaining supply chain efficiency and meeting organizational objectives. The analysis should also account for industry-specific benchmarks and historical supplier performance trends.
Format of the reply: Text (Header, subheader, Bullet points)
About me: I am a procurement manager responsible for supplier relationships and ensuring supplier performance aligns with organizational goals. I have experience in supplier evaluation and contract management.
Audience for the output: It will be me, but with the help of your output I will create the final document.
Do’s & Don’ts: Do’s:
Include specific KPIs like on-time delivery rate and defect rate.
Provide actionable recommendations for underperforming suppliers.
Ensure the response considers both qualitative and quantitative performance data.
Don’ts:
Avoid overly technical jargon that may confuse non-technical stakeholders.
Do not generalize metrics; tailor recommendations to industry-specific benchmarks.
Explanation: These guidelines help ChatGPT produce a focused and relevant response.
Before you give me an answer, please ask me 4 follow-up questions that will help you to create a better reply.
Tone preference: The tone should be formal and professional, suitable for presentation to both operational teams and senior management.
Length preference: At least 800 words, but no more than 1200 words.
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.Example ChatGPT prompt for market analysis
Pretend you are a Market Analysis Consultant. Here is what I need from you: I want to create a comprehensive market analysis that identifies trends, risks, and opportunities in our industry. This will include pricing trends and risk assessments for key suppliers and products.
Important details you should know: The market analysis should cover current market trends, competitive landscape, pricing benchmarks, and risk factors. It should also include potential opportunities for cost savings or strategic advantage. Analysis of supplier-specific risks, such as geopolitical or financial risks, should also be included. This analysis will be used to inform procurement strategies and supplier negotiations.
Format of the reply: Text (Header, subheader, Bullet points)
About me: I am a procurement manager responsible for supplier relationships and ensuring supplier performance aligns with organizational goals. I have experience in supplier evaluation and contract management.
Audience for the output: It will be me, but with the help of your output I will create the final document.
Do’s & Don’ts: Do’s:
Include relevant market trends and competitive insights.
Provide actionable recommendations for mitigating risks or leveraging opportunities.
Use clear language and avoid excessive jargon.
Don’ts:
Avoid broad or generic advice that isn’t tailored to the industry.
Do not focus solely on pricing; include qualitative insights as well.
Explanation: These guidelines ensure the response is focused, relevant, and actionable.
Before you give me an answer, please ask me 4 follow-up questions that will help you to create a better reply.
Tone preference: The tone should be formal and professional, suitable for a strategic document that will be reviewed by senior leadership.
Length preference: At least 800 words, but no more than 1200 words.
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.
Example ChatGPT prompt for creating quotes
Pretend you are a A Procurement Quotation Specialist would have the expertise to create professional and industry-standard quotation templates tailored to procurement needs. Here is what I need from you: I want to create a standardized and professional template for quotations that can be used to request pricing and terms from suppliers for products or services.
Important details you should know: The quotation template should include sections for supplier information, product/service details, quantities, pricing, terms and conditions, and delivery timelines. It should also include space for special requests, payment terms, and contact information. The template must be flexible enough to accommodate different industries and procurement requirements.
Format of the reply: Text (Header, subheader, Bullet points)
About me: I am a procurement manager responsible for supplier relationships and ensuring supplier performance aligns with organizational goals. I have experience in supplier evaluation and contract management.
Audience for the output: It will be me, but with the help of your output I will create the final document.
Do’s & Don’ts: Do’s:
Include all essential fields such as supplier details, item descriptions, and terms.
Ensure the template is professional and easily customizable.
Provide space for notes or additional requests.
Don’ts:
Avoid overly complex language or formatting that might confuse suppliers.
Do not include unnecessary fields that may clutter the template.
Explanation: These guidelines ensure the template is practical, user-friendly, and focused on key requirements.
Before you give me an answer, please ask me 4 follow-up questions that will help you to create a better reply.
Tone preference: The tone should be formal and professional, suitable for a strategic document that will be reviewed by senior leadership.
Length preference: No word limit, but it should be concise and focused on creating a structured and user-friendly template.
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”.
Example ChatGPT prompt for asking about procurement processes
Pretend you are a Procurement Knowledge Advisor. Here is what I need from you: I want to quickly and accurately address procurement-related queries to improve understanding and decision-making within the team or organization.
Important details you should know: The answers should be concise yet comprehensive, using clear and professional language. They should include relevant examples and align with industry standards or organizational policies where applicable. Questions may range from basic definitions like “What is a purchase request?” to more complex topics such as procurement regulations, processes, and best practices.
Format of the reply: Text (Header, subheader, Bullet points)
About me: I am a procurement manager responsible for supplier relationships and ensuring supplier performance aligns with organizational goals. I have experience in supplier evaluation and contract management.
Audience for the output: It will be me, but with the help of your output I will create the final document.
Do’s & Don’ts: Do’s:
Use clear and professional language.
Provide examples or context where relevant.
Align with industry standards and best practices.
Don’ts:
Avoid overly technical language that may confuse junior staff.
Do not provide overly generic answers; ensure they are specific and actionable.
Explanation: These guidelines ensure the response is practical, easy to understand, and aligned with professional standards.
Before you give me an answer, please ask me 4 follow-up questions that will help you to create a better reply.
Tone preference: The tone should be formal and professional, suitable for a strategic document that will be reviewed by senior leadership.
Length preference: Responses should range from 50 to 300 words, depending on the complexity of the question.
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.Example ChatGPT prompt for predictive analysis
Pretend you are a Procurement Data Analyst. Here is what I need from you: I want to leverage predictive analysis to forecast demand, optimize inventory levels, and streamline the supply chain, ensuring cost efficiency and operational effectiveness.
Important details you should know: The predictive analysis should include forecasting demand for key products or materials, identifying trends in supplier performance, and highlighting potential risks (e.g., stockouts, supplier delays). It should consider factors such as seasonality, market trends, and historical purchase patterns. The analysis must provide actionable recommendations for inventory optimization, supplier engagement, and cost management.
Format of the reply: Text (Header, subheader, Bullet points)
About me: I am a supply chain manager responsible for procurement planning and ensuring inventory levels meet organizational needs without overstocking or understocking.
Audience for the output: It will be me, but with the help of your output I will create the final document.
Do’s & Don’ts: Do’s:
Use historical data trends to inform forecasts.
Include actionable recommendations for inventory management and risk mitigation.
Provide clear and visually supported insights.
Don’ts:
Avoid overly technical jargon or complex statistical explanations.
Do not focus solely on predictions; include actionable steps for implementation.
Explanation: These guidelines ensure the analysis is practical, actionable, and accessible.
Before you give me an answer, please ask me 4 follow-up questions that will help you to create a better reply.
Tone preference: The tone should be formal and professional, suitable for a strategic document that will be reviewed by senior leadership.
Length preference: Responses should range from 50 to 300 words, depending on the complexity of the question.
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.Example ChatGPT prompt for communicating with suppliers
Pretend you are a Supplier Relationship Manager. Here is what I need from you: I want to develop an SRM strategy that will help us establish and maintain strong, collaborative relationships with our chosen suppliers while also keeping good relationships with those not selected, ensuring we have reliable alternatives for future needs.
Important details you should know: The SRM strategy should focus on fostering trust, transparency, and collaboration with chosen suppliers through regular communication, performance evaluations, and feedback exchanges. It should also include strategies for maintaining positive relationships with suppliers who were not selected, as they could be valuable in future negotiations or as alternatives. This approach will help strengthen our supply chain and ensure successful long-term partnerships.
Format of the reply: Text (Header, subheader, Bullet points)
About me: I am a procurement manager responsible for ensuring supplier reliability and mitigating risks that could impact our supply chain.
Audience for the output: The output will be reviewed by the procurement team and senior management to ensure alignment with our overall procurement strategy and business objectives.
Do’s & Don’ts: Do ensure the SRM strategy includes regular communication, performance evaluations, and feedback mechanisms with chosen suppliers. Don’t overlook the importance of maintaining positive relationships with suppliers who were not selected, as they may be needed in the future.
Before you give me an answer, please ask me 4 follow-up questions that will help you to create a better reply.
Tone preference: The tone should be formal and collaborative, suitable for a document that will guide the strategic management of supplier relationships.
Length preference: At least 500 words, but no more than 1000 words in total.
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.
Example ChatGPT prompt for risk management
Pretend you are a Procurement Risk Analyst. Here is what I need from you: I want to develop a robust risk management framework that evaluates supplier performance, financial stability, and compliance to proactively identify and mitigate potential risks.
Important details you should know: The risk management framework should include criteria for evaluating supplier performance (e.g., delivery delays, quality issues), financial health (e.g., credit scores, bankruptcy risks), and regulatory compliance (e.g., adherence to local and international laws). It should also incorporate actionable mitigation strategies, such as diversifying supplier bases or negotiating risk-sharing agreements. The framework must align with our organization’s risk tolerance and procurement policies.
Format of the reply: Text (Header, subheader, Bullet points)
About me: I am a procurement manager responsible for ensuring supplier reliability and mitigating risks that could impact our supply chain.
Audience for the output: It will be me, but with the help of your output I will create the final document.
Do’s & Don’ts: Do’s:
Include specific metrics for evaluating supplier risks.
Provide actionable mitigation strategies for identified risks.
Ensure alignment with industry best practices and regulatory requirements.
Don’ts:
Avoid overly technical or vague risk descriptions.
Do not recommend impractical or overly complex mitigation measures.
Explanation: These guidelines ensure the response is practical, relevant, and actionable.
Before you give me an answer, please ask me 4 follow-up questions that will help you to create a better reply.
Tone preference: Make it assertive, Sound confident.
Length preference: At least 500 words, but no more than 1000 words in total.
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.Example ChatGPT prompt for negotiation simulation
Pretend you are a Procurement Negotiation Coach. Here is what I need from you: I want to simulate a negotiation scenario to improve my negotiation skills, refine strategies, and gain insights on how to secure better terms when negotiating with suppliers.
Important details you should know: The simulation should involve a realistic negotiation scenario, such as securing better pricing, negotiating payment terms, or resolving disputes with a supplier. ChatGPT should play the role of the supplier, using typical industry arguments or constraints to challenge my negotiation strategies. I need feedback on areas where I could improve, such as framing requests, countering objections, and building rapport.
Format of the reply: Interactive conversation with role-playing (ChatGPT as the supplier) and post-simulation feedback in text format.
About me: I am a procurement manager preparing for a high-stakes negotiation with a key supplier to secure better payment terms and volume discounts.
Audience for the output: The simulation and feedback are for my personal improvement, but insights may also be shared with my team for collective learning.
Do’s & Don’ts: Do’s:
Provide realistic supplier responses based on common industry scenarios.
Offer constructive feedback on negotiation tactics and areas for improvement.
Focus on actionable strategies to achieve better outcomes.
Don’ts:
Avoid overly generic or unrealistic supplier responses.
Do not focus solely on weaknesses; highlight strengths as well.
Explanation: These guidelines ensure the simulation is realistic, constructive, and balanced.
Before you give me an answer, please ask me 4 follow-up questions that will help you to create a better reply.
Tone preference: The tone during the simulation should be professional and reflective of typical supplier interactions. The feedback tone should be constructive and supportive.
Length preference: The simulation should last for a back-and-forth of 5–10 exchanges, followed by 300–500 words of feedback.
How to Write Good ChatGPT Prompts in 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.
Learn more about writing a good prompt in our ChatGPT & AI in Procurement Course.
To help you craft your own prompt to maximize ChatGPT in Procurement, try our Prompt Engineering tool.
How does this tool work?
This prompt engineering tool helps you create comprehensive prompts, giving you the best results.
- Answer each of the questions
- Click ‘generate prompt’
- Click ‘copy to clipboard’
- Paste your prompt in ChatGPT, or any other AI tool.
AI Prompt Engineering Tool
Your Generated Prompt
Limitations of ChatGPT in Procurement
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.
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.How Does ChatGPT 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.Is ChatGPT Free 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.
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 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?
- Use ChatGPT for efficiency and data-driven insights.
- Clearly define ChatGPT’s role in your workflow.
- Combine AI with human expertise for complex decisions.
- Prioritize data security and ethics.
- Stay updated on AI advancements.
- Establish a feedback loop for continuous improvement.
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 ChatGPT 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.