AI is changing procurement for the better

by Seth Catalli

AI is changing how procurement operates. New research will help chief procurement officers understand how the technology is impacting the future of procurement.

In this discussion, I want to walk through the significant predictions of a new report from Gartner, Predicts 2024: CPOs Adjust to Technology’s Impact on Procurement, and how the chief procurement officer (CPO) needs to make plans now to address AI’s imminent impact on processes, staffing, and delivery.

AI will dramatically change how work is carried out. AI-based e-sourcing or autonomous sourcing solutions are increasingly capable of taking on the tasks that were traditionally the sole purview of experienced sourcing professionals. According to Gartner’s analysis, by 2026 virtual assistants and chatbots will be used by 20 percent of organizations to handle internal and vendor interactions. By 2027, 50 percent of organizations will support supplier contract negotiations through the use of AI-enabled contract risk analysis and redlining tools, it also predicts.

GenAI will fuel the growth in automated supplier communication as the limitations on traditional programmatic chatbots fall away. This widening will allow organizations to effectively “consumerize” sourcing events. As a result, non-professional sourcing (i.e., line of business) staff will soon be able to directly scope requirements, identify best-fit suppliers, and set up and run sourcing events. In fact, by 2027, the analyst group states, 40 percent of sourcing events will be executed by non-procurement specialists.

What will that mean to the CPO and the procurement function? Procurement staff will get great help from AI—but will still be in control. As technology changes the nature of their work, procurement professionals will need to adapt. As AI becomes more prevalent in everyday operations, certain skills will be more important.

Organizations that can generate and maintain large amounts of clean procurement data will have an advantage over their competitors, so data skills will be in demand. By 2026, says the report, advanced proficiency in data and technology competencies will be as important as social and creative competencies (i.e., soft skills) for procurement staff.

According to the analysis, by 2029 80 percent of human decisions will be augmented by GenAI, but human ingenuity, creativity, and knowledge still matter.

GenAI adds the easy generation of accurate new procurement and RFP content. It also adds productivity boosts like being able to fill in required fields, or even create sample outcomes or scenarios to situations that will play a supporting role in strategic decision-making.

Useful capabilities, but creativity, critical thinking, delivering presentations and talking to customers and stakeholders will still be in high demand, however, as these are not AI’s strengths. Rest assured; procurement professionals will continue to remain the central decision-makers.

Procurement organizations that do not embrace AI will be at a competitive disadvantage. Gartner’s message is clear: organizations that do not embrace AI technologies will find themselves behind. Therefore, procurement leaders need to embrace all kinds of game-changing technology.

I can reassure you that it’s not just the analysts saying we need to move in this direction. Prominent global firms like adidas, BT, Tesco, and Santander Bank are already leveraging AI-powered spend management platforms to optimize their indirect spend, spanning billions of pounds, euros and dollars on annual sourcing, particularly for services.

CFOs need to start working with CPOs to introduce AI-powered procurement and so navigate the challenges of today’s uncertain global economy – and also swerve the cost and agility deficit Gartner identifies.

Seth Catalli is chief revenue officer at Globality, Inc.