How is Gen AI different from the progress the industry has seen in using Machine Learning and AI over the last 5-6 years?

Significant progress has been made in recent years in terms of the evolution of data driven decision making in procurement. One of the prime areas which has seen rapid evolution is on how disparate, siloed organizational data is stored, integrated, reconciled and visualized to understand anomalies and trends and ultimately lead to better evaluate business scenarios. While spend classification with limited descriptive data about the purchases has improved accuracy due to these advances, many procurement/AI systems have lagged behind in terms of other key steps in an end to end procurement process. Though in infancy, GenAI, brings promise of a disruptive change in organization’s view of procurement from a tactical function focused on ensuring a business decision around a purchase moves through the needed compliances to a strategic role driving significant value leveraging strong internal and external relationships. The human-machine models that AI prescribed would further be augmented and feedback loops drawn shorter through greater penetration of GenAI in procurement.

Shortlisting Usecases specific to your organizational context

The continuum of usecases relevant to be exploited with GenAI depends on the context of every company. Companies which are still relatively decentralized with non-standardized data sets or policies would potentially benefit lesser from use of GenAI compared to companies which have already a clear rule-exception protocols guided centrally or in a hybrid model.

In our view, developing siloed use cases around use of GenAI is of little merit. Together with IT and business teams, it is critical to understand an overarching strategy around the use of GenAI across the value chain of business and plan on key use cases within procurement embedded within the overall value stream.

It is critical to baseline understanding of areas across procurement, where the benefit potential is the highest broadly across the areas of i) Process adherence/compliance, ii) productivity improvements and iii) enhancing skill/knowledge/impact of procurement buyers.

Should you jump on to the band wagon of new and shiny tools or stick to your digital transformation roadmap?

We recommend companies should progress on their planned procurement digital transformation journey, rather than changing the course or looking at bolt-on GenAI capabilities. Any change in process or ways of working has an associated bull-whip impact in terms of adoption. An ideal case would be to latch-on to your strategic tool partner’s roadmap to bring in GenAI functionality. Proven ROI on investments on GenAI in procurement is still non-existent, therefore, it is useful to invest budget reserved for innovation/exploration into piloting/POC of GenAI in procurement, rather than to buy into the next salesman around the block.

As a CPO/Procurement leader, what could you realistically commit as enhanced impact with introducing GenAI into procurement tool landscape?

While many use cases around virtual negotiator, automated supplier communication/training, significantly reduced procurement helpdesk staffing, interactive analytics around spend data and contract creation/renewals are well known, our position is that the differential benefit of GenAI in procurement is very limited, though, as an experimentation, investment in GenAI is critical to understand the best there is in driving step change in procurement practices.