Since its launch at the close of 2022, OpenAI’s ChatGPT has catalyzed a transformative wave of generative AI. Procurement and supply chain teams have already started to identify generative AI use cases that help them drive down costs, optimize supplier relationships and reduce risks. In fact, 37% of supply chain leaders are either already using AI or planning to deploy it in the next 24 months.
Companies are still in the early days of leveraging generative AI, however, and we are bound to see the technology drive even more positive change within the procurement function before the turn of the next decade. The technology landscape is evolving at a record pace. In just two years, 30% of new software applications will use AI to drive personalized adaptive user experiences, such as chatbots and natural language interfaces, a significant increase from just 5% today.
Two Big Changes for the Better
Where will AI take us by 2030? Here are several areas in which AI and automation are bound to revolutionize the procurement space even further.
1. Strategic Work Will Be Most of the Job
If we’re all so busy, why is so little high value work getting done? It’s a frequently posed question in procurement departments (and elsewhere). Everyday tasks, such as responding to emails, answering questions from colleagues, putting together documents and other routine responsibilities take up valuable time and distract from priorities. Procurement has struggled with these inefficiencies for decades. It’s not uncommon for sourcing teams to spend at least 11-20 hours per week on creating and sending RFPs alone. Supplier and category management teams can easily spend 21-30 hours per week communicating with suppliers about capabilities, sourcing needs, invoicing and payments.
Within six years, procurement teams will likely feel considerable relief. We’ll see full automation across the end-to-end procurement function, which will empower procurement to be smart with their time and focus on the most important initiatives. Many teams are already actively automating payments, purchase order management, inventory optimization, invoice processing and approvals and other mundane tasks and are unleashing tangible productivity gains. We’ll start to see companies go further and invest more in automating and applying AI in other strategic areas such as supplier identification and selection, supplier negotiations and contract management. We’ll also see ‘no user interface’ experiences, including voice-activated and automated interactions with procurement technology become more commonplace. The more procurement teams progress in their automation and AI journey, the less bogged down they’ll feel at every stage and will be able to make a bigger impact on the company.
2. Procurement Decisions Will Come Faster and Easier
Many procurement teams complain that they are drowning, not wading, in a sea of data. There’s lots of it everywhere but it’s a hindrance, not an asset. The data is difficult to manage. It doesn’t inform. It’s hard to find the relevant data that you need. Procurement teams are excited about generative AI in large part because of the way it can process, analyze and answer questions on large amounts of data. Organizations are already starting to leverage generative AI for these capabilities. Some are training large language models (LLMs) on relevant internal and external data so that they can get immediate answers about their suppliers. Instead of digging through data, procurement can use chat-based interfaces to ask which existing suppliers are the best to work with given specific factors (cost, ESG, quality and more) and which suppliers are performing against sustainability and other key performance indicators. The immediate responses accelerate decision making and improve outcomes because teams can optimize supplier selection based on their unique needs.
By 2030, these AI-powered decisions will become standard practice for procurement. The function will also have stronger demand forecasting and supplier negotiation abilities because of the technology’s ability to make accurate predictions based on historical data and market patterns.
What Won’t Change?
The human touch remains indispensable, even as AI transforms various aspects of procurement. Several areas will be driven by the combination of AI with human emotional intelligence.
Tasks such as complex negotiations that require human judgment or building and nurturing strong, trust-based relationships with key suppliers will remain less affected by AI. The development of a high-level, long-term procurement strategy requires alignment with an organization’s goals to be effective. Creation of these strategies will always require human input and critical thinking given the people within the organization have a deep understanding of corporate culture and objectives. Generative AI technology will support humans in these processes but won’t fully take over.
While AI is an invaluable tool for supplier evaluation and selection, there are cases where organizations will need to ensure that humans are in the loop. One example is selecting ESG-friendly suppliers and evaluating their ethical practices. Human judgement is better than AI at considering the broader context, societal implications and nuances around ethical issues and will make a sounder decision than AI.
Finally, market research and trend forecasting will require human input. While AI can certainly analyze historical data and provide insights, human expertise and emotional intelligence is essential for interpreting market trends, understanding the evolving competitive landscape and predicting future market developments.
Even as technology continues to advance over the next six years, AI will never completely replace humans. AI will be a widely used and powerful tool that will augment humans and enable them and their organizations to be more productive and successful in their roles.
An Exciting Future
Generative AI will play a key role in transforming procurement into an undeniable powerhouse, but the value of human emotional intelligence will endure. Procurement will have an even greater impact on the organization over the next few years with more time and decision-making power to drive forward business imperatives.
