Smarter, faster, still human — A GenAI playbook for modern sourcing

Continuing our deep look into AI in procurement, its use cases, capabilities and how the technologies compare, and as part of our digital transformation survival guide, we are delighted to feature these personal insights on GenAI in sourcing from Iyyappan Chandramouleeswaran, a source-to-pay transformation specialist and ex-management consultant.

Introduction

Strategic sourcing is evolving fast. What was once a human-led process built on relationships, expertise and negotiation savvy is being augmented, even redefined, by generative AI (GenAI). No longer a theoretical tool, GenAI is now embedded in the workflows of forward-looking sourcing organizations.

Procurement teams are seeing firsthand how GenAI accelerates RFP creation, analyzes supplier proposals, suggests negotiation tactics and automates contract drafting. According to The Hackett Group’s 2025 Procurement Key Issues Study, 64% of procurement executives believe GenAI will fundamentally transform their function in the next five years, with over 45% already piloting use cases in 2024.

But this isn’t about replacing humans with machines. It’s about enhancing sourcing with intelligent, explainable tools — and unlocking strategic capacity that procurement professionals have long been denied by outdated processes.

The traditional sourcing cycle is outdated

Until now, the sourcing cycle has followed a fixed, linear process:

Define need
Build RFP
Wait for responses
Evaluate manually
Negotiate
Award

In an era of supply chain shocks, inflationary volatility, ESG expectations and geopolitical risk, this model is no longer viable. Decision speed and insight are the new currency.

GenAI introduces a more dynamic model, where steps are collapsed, insights are surfaced instantly, and sourcing professionals spend more time on strategy and supplier collaboration than operational mechanics.

What GenAI actually enables

Procurement teams using GenAI are seeing value in several key areas:

• RFP drafting: GenAI can generate customized RFPs based on previous templates, industry best practices and category-specific inputs. eProcurement platforms (like Coupa, SAP and others) now offer AI-driven sourcing event creation, significantly reducing lead times for event setup.

• Supplier response summarization: GenAI can instantly generate sourcing templates based on commodity type, risk thresholds and compliance needs. It can then evaluate vendor submissions, extract anomalies, summarize strengths and weaknesses, and rank responses based on defined sourcing criteria — all within minutes. Where teams once sifted through lengthy PDFs and spreadsheets, GenAI now summarizes supplier proposals, flags inconsistencies and highlights commercial or technical red flags.

• Contract drafting and risk review: Forget templated MSAs and endless redlining. AI can now draft contracts in context, pulling clauses based on buyer risk appetite, jurisdiction and deal structure. It flags deviations, suggests counter-clauses and aligns with internal policy libraries.

• Negotiation playbook: GenAI uses prior deal data, supplier profiles and current market indices to recommend bespoke negotiation tactics. If you want to push for early payment discounts or multi-year price locks, then the AI can simulate supplier responses and suggest optimal phrasing.

• Scenario planning: Sourcing teams can prompt GenAI with questions like: “What’s the cost impact of regional sourcing vs. global?” or “What’s the optimal mix of suppliers to reduce logistics risk?” These insights would take hours to model manually. GenAI can simulate these scenarios in real time, offering sourcing teams a powerful decision compass.

What GenAI doesn’t replace — And why that matters

Despite its impressive capabilities, GenAI doesn’t — and shouldn’t — replace some core sourcing responsibilities. Here’s where human insight remains irreplaceable:

• Contextual judgment: AI can analyze contracts, pricing data and supplier history. But it doesn’t understand why a business is willing to pay a premium to secure a relationship or reduce geopolitical risk. Human decision makers weigh internal dynamics, future plans and non-quantifiable variables.

• Relationship capital: Supplier trust, negotiation tone and long-term partnerships can’t be delegated to a machine. Emotional intelligence, reading the room and responding in real-time to subtle cues are human superpowers.

• Strategic trade-offs: AI can recommend the cheapest or fastest path. But decisions often require balancing cost with quality, sustainability, diversity or innovation. These are strategic calls, not algorithmic answers.

• Organizational influence: Aligning stakeholders, managing change resistance and influencing budget holders or legal teams requires soft skills, trust and storytelling — not just data models.

• Risk interpretation: While AI flags risk indicators, it cannot fully grasp the implications of reputational, political or ethical issues. Human judgment is essential in interpreting ambiguous threats and deciding when to escalate.

• Ethical guardrails: GenAI may recommend a supplier based on historical performance or pricing, but it won’t inherently recognize if that supplier has recently faced reputational issues, like labor violations reported in the media, unless connected to curated external risk feeds. Even then, human judgment is critical to interpret and weigh those factors against the organization’s ethical standards and risk appetite.

Human-in-the-Loop: The only sustainable model

No matter how advanced the tool, sourcing will always require human nuance, whether it’s assessing how much risk to take on with a new supplier or weighing ESG trade-offs that algorithms can’t fully contextualize.

That’s why leading procurement teams are adopting Human-in-the-Loop (HITL) models. In this approach:

AI accelerates — but humans decide

AI drafts — but humans negotiate

AI identifies — but humans interpret

This partnership blends the speed and scale of automation with the judgment and accountability only people can provide.

Industry experts predict that by 2027, more than 50% of enterprise contract negotiations will involve GenAI, but within auditable, human-led workflows that ensure compliance, control and strategic alignment.

What procurement leaders should do now

If you are leading a sourcing function, consider these five actions:

Define your AI use cases: Start with sourcing bottlenecks that drain time — tail spend, low-complexity RFPs, contract review backlogs.
Invest in AI literacy: Ensure your teams understand how to use AI, validate outputs and recognize limitations. Without fluency, tools will go underutilized.
Embed HITL frameworks: Establish workflows where AI outputs are reviewed and approved by humans — especially in regulated or strategic categories.
Upgrade governance: Design AI usage guidelines that address data privacy, explainability and auditability, particularly when using AI on supplier contracts or pricing data.
Measure what matters: Track not just time savings, but improved decision quality, faster cycle times and higher supplier engagement.

Procurement’s defining moment

GenAI is not a magic wand that automates procurement out of existence. While it can streamline the groundwork, strategic sourcing remains fundamentally human. Navigating complex supplier relationships, making nuanced trade-offs and influencing executive decisions all rely on judgment, context and trust — capabilities no algorithm can replicate.

The most successful sourcing leaders won’t fear GenAI — they’ll learn to lead it.

As a powerful co-pilot, GenAI can transform how sourcing teams operate: reducing friction, enhancing decision-making and freeing up time for higher-value work. But success in this new landscape won’t be defined by how many tools you deploy. it will be measured by how effectively you balance machine intelligence with human expertise.

Procurement leaders who view GenAI not as a replacement, but as an accelerator, will be best positioned to unlock value — smarter, faster and still grounded in the human relationships and strategic thinking that define great sourcing.

In the end, the winners won’t be those who automate the most — they’ll be those who stay the most human in a machine-powered world.

And visit our Meet AI in procurement series for use cases, AI capabilities and relevant solution providers. TechMatch will help you find the right providers.

As always, contact us to discuss any opportunities or to contribute your own thoughts and experiences to the discussion.