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Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy

Generative AI in Procurement — Exploring 5 Use Cases

Key takeaways

  • Generative AI refers to a branch of artificial intelligence that can generate and simulate numerous types of content, such as text, images, audio, and even video.
  • In the procurement process, generative AI can help with quicker processing, faster replies, more efficient procurement duties, and more.
  • According to a 2023 Goldman Sachs estimate, generative AI may impact up to 300 million employment, boosting the global GDP by 7% in 10 years.

Generative AI in procurement is a notably resourceful tool within the scope of decision-making, automating routine tasks, and improving communications. It offers game-changing solutions for traditional procurement processes.

AI in procurement has become highly effective in automating processes to make them faster and more accurate. By reducing the time spent to complete routine procurement tasks, AI acts as an assistant to procurement teams, allowing them to focus on core activities.

This article explores five key use cases of generative AI (GenAI) in procurement and the many ways it can amplify sourcing, market research, and more.

Generative AI in Procurement

Generative AI is a branch of artificial intelligence that can generate and simulate numerous types of content, such as text, images, audio, and even video. It can help us become more efficient by reducing the time it takes to complete tasks error-free. With the rise of OpenAI’s ChatGPT, users are experimenting with its use in different applications. But how is it used in procurement?

In procurement, generative AI can be used for various tasks; big and small. Whether drafting emails to suppliers or uploading data for global market analysis, generative AI is set to change how we source, negotiate, communicate, and more.

Impact of Generative AI on Procurement

Generative AI models, such as ChatGPT, are increasingly becoming a controversial topic. As users, we grasp its capabilities in generating content based on its interpretation of our data. However, the questions about its accuracy and impact on our careers remain evident.

Many are also concerned about its impact on jobs, careers, and entire industries. Based on a 2023 report, Goldman Sachs predicts that as many as 300 million jobs could be affected by generative AI, increasing global GDP by 7% in 10 years. 

However, GenAI can complete routine tasks, shifting the focus of human resources onto activities that are consumer-centric and core-focused. Routine tasks are always going to be crucial aspects of procurement, and if we don’t complete routine tasks, the entire process could fall apart. On the other hand, if there’s a much faster way to get these tasks done— such as automation— why not explore it? With generative AI like ChatGPT, you can complete processes much faster with the right inputs.

5 Use Cases of Generative AI in Procurement

Generative AI in procurement can be a highly resourceful tool with many use cases. Its capabilities in automating tasks and allowing teams to leverage time savings make it a valuable asset in procurement.

Human creativity is indispensable, but using AI responsibly to make workflows more efficient and impactful can bring long-term success. Below are five use cases of generative AI in procurement:

1. Creating Document Drafts

Generative AI can act as an assistant in drafting various procurement documents, such as RFIs and RFPs; and can even generate contract drafts and purchase orders. 

Documents are routine requirements within procurement, and AI-driven tools can help save critical thinking time by generating first drafts for you. This reduces the time it takes to manually create documents and helps ensure consistency and accuracy.

Generative AI’s capabilities in retaining patterns can aid rapid response times, enabling procurement teams to focus on higher-value tasks. However, unlike humans, AI lacks the nuanced understanding that human professionals bring to complex language. Therefore, in leveraging the benefits of generative AI, procurement teams should always use critical thinking when using AI to generate documents.

2. Assisting Strategic Sourcing

While generative AI can’t complete the entire sourcing process for you, it can analyze large amounts of data. From there, it can help you complete market research, including analysis of trends and patterns in the market.

With capabilities in processing large datasets, generative AI can look at historical procurement data and market intelligence, assisting procurement professionals in making strategic decisions in sourcing, cost management, and supplier relationships.

Strategic sourcing requires data analysis, research, and critical thinking. With the help of generative AI, teams can analyze large amounts of data which can then be processed to help identify potential suppliers. However, we should always uphold data privacy and security. To do so, procurement teams can anonymize data before using it in their chosen AI model.

From there, generative AI can quickly process and categorize information and give procurement teams the necessary insights for strategic and informed decisions. AI contributes data-driven analysis to strategic sourcing, but procurement teams should always use their own strategic thinking and communication skills to make decisions about sourcing partners and negotiations.

3. Automating Supplier Selection

Do you have specific, predefined standards for supplier capabilities? If so, you can amplify that with generative AI by prompting the model to analyze specific factors. This can include anything from delivery times to product quality and compliance history.

Based on these factors, generative AI can recommend the ideal supplier for the task. This lets procurement teams make quicker data-driven decisions when selecting suppliers. By assessing performance history, pricing, and regulatory compliance, generative AI can automate the supplier selection process. 

This assists the supplier evaluation and selection processes by creating an efficient screening and ranking process for procurement teams. Does this mean AI will replace humans in selecting suppliers? No. Human judgment is irreplaceable, especially in situations that call for industry expertise and nuanced understanding. 

However, we can’t deny the benefits of harnessing generative AI for its strengths in a way that is ethical, responsible, and in a way that will definitely improve supplier selection workflows.

4. Analyzing Market Patterns

When we talk about market patterns, analysis is crucial for helping procurement teams make the best decisions in optimizing costs and developing ideal strategies for their procurement process. Generative AI analyzes data, making it ideal for studying market patterns and providing valuable insights into market trends. 

AI algorithms can identify patterns you might not initially notice or acknowledge as a human analyst. In that sense, generative AI lowers the risk of overlooking these factors. Therefore, procurement professionals can leverage AI capabilities in analyzing datasets at a much quicker pace while remembering that human intuition plays a large part in driving informed decisions. 

With generative AI, procurement teams can use its capabilities to study and categorize data to make data-driven decisions while using their own strategic skills to adapt their strategies to shifting market conditions.

5. Summarizing Documents

Procurement documents are part of routine tasks in the process. Generative AI can help procurement teams save time and boost their efficiency by summarizing documents. These documents include anything from contracts to market reports and Request-for-Proposal (RFPs).

Generative AI can study large sets of information and generate concise summaries of them to highlight key details that procurement teams need to make strategic decisions. 

While this is a valuable tool to have, generative AI may lack the understanding of nuances and technicalities of legal documents. Procurement teams can access benefits to this such as time savings and accessibility while keeping in mind that only humans can fully capture contextual knowledge.

Balancing AI Capabilities and Human Creativity

Finding the balance in the fusion of artificial intelligence with human creativity is key to making processes more efficient and accurate. AI tools play an impactful and meaningful part in optimizing our methods of decision-making in procurement. Meanwhile, human creativity is at the heart of all procurement decisions; it is responsible for positive communications and healthy business partnerships.

Without human intuition, negotiations, sourcing, purchasing, and other stages within procurement fail to function as they should. Adopting modern technologies such as AI-powered tools can also bring multiple benefits, such as faster processing, rapid responses that bring key insights, streamlined procurement tasks, and more. Integrating AI into procurement workflows proves beneficial, aiding in demand sensing, inventory optimization, and risk management.

Moreover, the nuanced nature of supplier relationships, negotiations, and strategic decision-making are areas within procurement where human professionals excel. Procurement is more than negotiating and buying; it necessitates a clear understanding of dynamic markets, cultural differences, and evolving strategies—all tasks where human creativity is indispensable.

With AI in procurement, the ideal approach lies in harnessing the strengths of artificial intelligence to work in balance with human intuition. AI can handle intensive tasks such as processing vast sets of data and automating routine tasks. Meanwhile, human professionals bring creativity, emotional intelligence, and strategic thinking — all of which are irreplaceable qualities that AI cannot replicate. When combined to work collaboratively, teams can effectively navigate procurement processes and the intricate nature of business relationships.

To strike that balance where AI capabilities assist procurement professionals in streamlining tasks, it can help to define a process or policy that clearly outlines when and where AI will be applied. This helps to ensure responsibility but also provides teams with a clear framework of how to use generative AI in procurement. 

Generative AI excels at handling data-driven tasks and routine processes, such as evaluating potential suppliers, assessing supplier criteria, and drafting documents. Moreover, procurement teams should handle higher-value tasks that require creativity, problem-solving skills, and emotional intelligence. This can include maintaining supplier relationships, handling contracts, communicating with stakeholders, and other hands-on tasks that require their oversight.

Companies That Offer Generative AI Solutions for Procurement

How can you use generative AI to improve your procurement process, and is there a platform best suited for your specific need? These platforms can do just that and more, with cutting-edge software solutions tailored to every procurement need.

1. Coupa

Coupa is a leading provider of Business Spend Management (BSM) solutions, with a far-reaching platform that encompasses procurement, invoicing, and spend management. 

Coupa’s generative AI solutions are tailored to assist and improve different stages of the procurement process. With insights into spend patterns, supplier performance, and market trends, Coupa’s platform aims to help procurement managers to make smarter decisions supported by data to optimize supplier relationships and boost procurement functions to be more efficient and consistent.

Coupa’s platform boasts a user-friendly interface and robust analytics, making it the ideal platform for procurement managers to get actionable insights.

2. Keelvar

Keelvar’s expertise in providing strategic sourcing software makes it an ideal platform for procurement teams to optimize their sourcing functions. Using generative AI, Keelvar provides procurement teams with cutting-edge technology to automate sourcing.

Keelvar’s software solutions help simplify and boost intricate procurement tasks, including bid optimization, negotiation processes, and scenario analysis. 

These AI-driven solutions boost procurement teams in achieving cost savings and risk management while cutting the time spent in the sourcing process. Keelvar’s AI-driven features are essential, as they help users achieve intelligent negotiations and improve their response to changing market conditions.

3. Ivalua

Ivalua is known for its intricate Source-to-Pay (S2P) platform and its integration of generative AI to enhance supply chain operations. Ivalua’s S2P platform can help with various stages of the procurement process, including strategic sourcing, contract management, and supplier collaboration.

Ivalua’s AI platform can also facilitate predictive analytics, which is crucial for decision-making and giving insights that drive long-term success in procurement. Ivalua stands out for its end-to-end integration of generative AI, helping procurement managers assess market insights into patterns and trends, as well as assessments of supplier performance.

4. GEP

GEP is a global provider of supply chain solutions aimed at boosting procurement processes. Their unified platform uses generative AI and includes features for spend analysis, sourcing, and contract management.

On their platform, features are powered by advanced analytics and machine learning algorithms. GEP’s AI solutions help organizations manage supplier relationships while driving cost savings — both crucial in achieving procurement excellence in the long term.

Because GEP’s platform is powered by machine learning, procurement professionals can access the benefits of analyzing large volumes of data, improving supplier relationships, and strategic cost-efficiency.

5. Scoutbee

Scoutbee combines AI and big data to discover potential suppliers and improve sourcing. Powered by generative AI, Scoutbee’s platform helps procurement professionals find the best suppliers for your procurement needs.

Scoutbee’s platform can study vast datasets to recommend the ideal suppliers based on predefined criteria, which is essential for making informed decisions and supporting supplier partnerships.

With big data analytics, procurement teams can efficiently select suppliers using Scoutbee’s supplier discovery platform. With these features, procurement teams and organizations alike can make strategic decisions and manage risks to boost the longevity of their supplier relationships.

Conclusion

To sum up, generative AI can streamline routine tasks, allowing procurement teams to focus on added-value operations, strategic thinking, supplier relationship management, and adapting to dynamic markets. Generative AI, such as ChatGPT, can save critical thinking time while ensuring consistency with the reduced risk of manual error.

When used effectively, generative AI makes the procurement process more efficient, acting as a pseudo-assistant to procurement teams in negotiations, sourcing, document creation, supplier communications, and more.

Adapting AI and ML technologies is crucial for teams aiming to adapt to evolving procurement strategies, markets, and modern business methods.

Frequentlyasked questions

Will generative AI replace human professionals in procurement?

No, generative AI complements human expertise, allowing professionals to focus on higher-value tasks that require strategic thinking.

What are the concerns about the impact of generative AI on jobs in procurement?

Some concerns include potential displacement and over-reliability, but when applied responsibly, AI can improve procurement outcomes, effectively contributing to long-term success.

How can procurement teams ensure the responsible use of generative AI?

Critical thinking should always be present in any procurement process. When using AI-generated content, teams must always acknowledge AI’s limitations in contextual language.

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