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When the dust settles, what can AI actually deliver in procurement?

Omer Abdullah, The Smart Cube

This content does not necessarily express the views or opinions of Spend Matters.

There’s been a lot of hype around AI this year. ChatGPT-3 made almost every news headline, lauded as a groundbreaking tool that will change the operations of every industry.

In reality, when the dust settled, it wasn’t the perfect solve-all solution people initially thought it was. But it has left many procurement leaders looking to really understand what value GenAI can bring to their organizations and how it can change the way they operate.

With 2023 in the rear-view mirror, I thought it would be a good opportunity to step back, separate reality from hype, and discuss the true potential of the technology, today and beyond.

Today’s procurement leaders are optimistic but cautious about new AI tools

As tools like ChatGPT become embedded into our personal lives – whether it’s in the cars we drive or in our smart home devices – there’s no doubt we will start to see more uptake in the procurement space. This might be for small use cases like replacing Google when we have a question or more advanced cases like supporting category managers in the buying process.

But before we get to that point, many procurement leaders are currently trying to unpack the issues with the technology. After its initial buzz, some leaders who spent time with the technology learnt that its accuracy wasn’t quite there in certain cases, it relied on recycled content, and it couldn’t be trusted with confidential information.

This made many leaders hesitant about implementing any kind of AI into their procurement workflows, while for others, it offered an idea of what needs to improve and a glimpse at the tool’s potential.

In fact, just recently, we held a webinar with CASME exploring this same topic, bringing together two procurement leaders, who had perspectives from both sides of the argument. One is exploring how AI can be brought into their procurement function but is cautious about its impact on the business, while the other is already using AI to support day-to-day operations.

The leader already using AI in their Procurement function has built their own generative processing technology (GPT) tool that has the ability to brief stakeholders before negotiations with potential suppliers. All the stakeholder needs to do is offer the tool a prompt and they will receive a detailed summary of key information about the new supplier, such as revenue, any issues the supplier has experienced and any times they’ve appeared in the news. And crucially, it’s all based on public information that previously would have required hours of research to gather.

It’s a small use case but it presents a powerful way to deliver major value to the Procurement function. And it’s only just the beginning.

The conversation around AI in procurement is shifting

While the hype around ChatGPT-3 (and 4) may have overblown some of the promises of the tool, it hasn’t been a setback. Instead, it has ultimately changed the conversation around AI in procurement.

Just two years ago, many of the conversations on AI in procurement were around automating activities and processes in the function. Now, it’s much more focused on category strategy – looking at how AI can be used to analyze data, make sense of it and interpret it in interesting ways. It’s a much higher order of activities than just replacing manual tasks.

That is really the mindset we have towards AI at The Smart Cube, too. We’ve embedded AI into strategic areas of procurement such as risk management, due to the sheer amount of value it can deliver.

Without using AI, it can be incredibly difficult to gather, analyze and process the volume of data needed to achieve true multi-tier visibility of your organization, the surrounding market and broader global events. But using the technology, it suddenly becomes possible to consider millions of data sources all alongside the human intelligence of the professionals in your Procurement team.

And of course, that’s just one element of procurement. When you look beyond the hype surrounding AI tools, there are some genuine use cases that will transform the function over the next few years.

If you want to dive deeper into the conversation, you can watch the full webinar on demand, where you get the chance to hear from two procurement leaders about how they are navigating the application of AI into their everyday operations.