Breaking New Ground: Could Generative AI Transform Procurement Activities for Buyers and Vendors?

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Breaking New Ground: Could Generative Ai Transform Procurement Activities For Buyers And Vendors? 2

Introduction 

The world of procurement is changing rapidly, and companies that want to stay ahead of the curve need to embrace new technologies and innovations.  

One such technology is generative AI, which has the potential to transform procurement activities.  

By enabling more efficient processing of routine tasks, expediting supplier matching, automating contract and proposal analysis as well as assisting in risk management, generative AI could be a game-changer for companies looking to optimize their procurement operations. 


What is generative AI? 

The development of AI has continually made remarkable progress through several iterations, with generative AI being the latest generation.  

The first generation consists of early AIs that relied heavily on pattern recognition using knowledge bases maintained by human experts. These AIs had to be tailored to specific problems and had a low capacity for abstraction. Examples of these AIs include early chatbots. 

The second generation refers to statistical learning AIs, which utilized machine learning to analyze large amounts of data to generate their own models. This generation of AI is gaining maturity, and is found in many common applications such as speech recognition and voice assistants such as Siri and Google Assistant. However, they lack the ability to generate novel content, such as song lyrics and art. 

The latest and third generation of AI is generative AI. This type of AI can create new outputs based on the data it has been trained on. While the term generative AI is often associated with ChatGPT, this umbrella term encompasses any AI technology that can create something on its own, such as writing articles and generating art. It also includes learning algorithms that can help make predictions. 


What can generative AI do for procurement?  


Challenges for generative AI in procurement 

Nevertheless, the implementation of AI in procurement is still in its early stages and faces several challenges. Some of these hurdles identified by the World Economic Forum include data governance, leadership and ethics.  

  1. Data governance – This refers to the process of managing and leveraging data in a way that is both secure and efficient. Different organizations have varying levels of data maturity, and this can make it difficult to successfully implement AI in procurement without compromising data security.  
  1. Leadership – The adoption of AI requires a multidisciplinary team, technical expertise, and partnership between buyers and vendors. The skills gap in AI procurement is potentially much bigger than conventional procurement, which means that it may take longer to get up to speed. Mindset shifts and a greater appetite for risk are also needed to address this challenge. 
  1. Ethics – Transparency, interpretability, and auditability are important considerations when using AI in procurement. Ensuring that AI solutions adhere to ethical guidelines is critical to building trust between the buyers and vendors. This is particularly of concern as lawsuits have already been filed against generative AI that was trained on art without the artists’ permission. 

Conclusion: The future of procurement with generative AI 

The transformative potential of generative AI for procurement is clear. By streamlining routine procurement processes, supplier matching, contract analysis and risk management, generative AI has the power to revolutionize procurement operations and bring significant benefits to buyers.  

However, as with any emerging technology, there are challenges to overcome. The implementation of AI in procurement is still in its early stages and requires careful consideration of issues such as data governance, leadership and ethics. 

Despite these challenges, the future of generative AI in procurement looks bright. As a Microsoft Partner, our WeManage team is looking forward to further developments in the field, especially as Microsoft is actively partnering with OpenAI. Already, generative AI like ChatGPT is being made available through Microsoft’s Azure OpenAI Service. As the technology matures, we look forward to exploring new tools to help improve our users’ experience. 

*Cover Image by Freepik. 

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