With rising costs and competition, sourcing and procurement professionals are under increasing pressure to find innovative ways to optimize their operations and drive cost savings. Procurement has always been at the forefront of adopting new technologies to improve performance, be it using automation for invoice processing or analytics software to draw spend insights. Deloitte’s 2023 Global Chief Procurement Officer (CPO) Survey found that ‘Digital Transformation’ is one of the top three priorities for a staggering 80% of CPOs over the next 12 months.
Generative AI, or GenAI, is the latest horse in the technology adoption race. Since the launch of ChatGPT, much has been said about GenAI’s potential to disrupt the market. At its heart lies two vital capabilities that make this technology so special: (1) the ability to process large amounts of data and (2) the ability of LLM (Large Language Models) to converse with the user.
Let’s look at some of the ways GenAI can help optimize your organization’s sourcing and procurement functions.
Supplier Selection and Supplier Relationship Management
The procurement cycle begins with identifying the right supplier and continues with supplier relationship management, with companies wanting to dig deep into profiling their suppliers. GenAI can analyze tons of data and summarize it in the form of crisp reports that enable rapid, informed decision-making, e.g., finding suppliers that align best to your company’s ESG goals.
After a supplier is onboarded, GenAI can facilitate effective communication, with timely delivery reminders, submitting invoices through chatbots, and automated emails that drive more efficient procurement processes.
Contract Compliance and Contract Management
GenAI can be used to manage contracts throughout their lifecycle. With its namesake ’generative‘ capability, GenAI can draft contracts from scratch based on simple inputs, like legal clauses and payment terms. GenAI can also review draft contracts for any missing information and other potential issues, such as missing or incorrect payment terms.
Moreover, GenAI can help maintain contract compliance by tracking contract deadlines and flagging contracts that are up for renewal, to make sure they get renewed on time. GenAI can even negotiate pricing in upcoming contract renewals based on real-time market intelligence. Retail giant Walmart is using an AI-based tool called ‘Pactum’ to negotiate the best prices with their vendors. To ensure maximum supplier performance, GenAI can provide summarized reports showing any KPIs that are not being met, which can position businesses to take a firmer stance on contract governance and drive continuous improvement.
Risk Management and Spend Anomaly Detection
GenAI’s ability to process large volumes of data can assist in analyzing risk-related information from multiple sources simultaneously. This may include social media, online news sources, global market data repositories, etc. For example, if your company is initiating a purchase with a large multi-national corporation, which sources its raw material from a country considered to be high-risk, GenAI can quickly look at the current market scenario and build an approved list of vendors that can provide a suitable alternative.
Spend Analysis is another core procurement function where GenAI’s data capability can be put to good use. A simple prompt like, “Show me my top 10 suppliers based on total spend,” will return a list of suppliers without any spreadsheet work or manual analysis required. Moreover, with the integration of OCR (Optical Character Recognition) technology, GenAI can also flag anomalies in invoice trails. This helps prevent organizations from overspending.
Generative AI is a Game-Changer for Procurement
GenAI enables automation, data-driven insights and improved supplier collaboration. Businesses that adopt this technology can streamline their procurement processes, reduce costs and make more informed decisions. Integrating GenAI into your operations is the key to staying competitive in today’s ever-changing business landscape.
To realize GenAI’s full potential and gain maximum value from GenAI solutions you implement in your organization, it’s crucial to choose a partner who understands the nuances of GenAI and can tailor AI-enabled supply chain and procurement solutions to your specific needs.
Bristlecone is a leading provider of AI-powered application transformation services for the digital supply chain. With custom solutions, seamless integration, comprehensive training and end-to-end consulting services, Bristlecone is well-positioned to help you leverage GenAI to optimize your supply chain and procurement operations.