Seth Catalli
A new report from technology research and advisory firm Gartner Inc. — “Predicts 2024: CPOs Adjust to Technology’s Impact on Procurement” — suggests that significant developments are on the horizon for AI in procurement.
Let’s see how.
According to Gartner, procurement is constantly evolving to address increasingly demanding requirements from the business that go well beyond cost savings. A key finding in the report is how technology, especially AI and automation, is starting to help.
Specifically, AI-based e-sourcing or autonomous sourcing solutions can increasingly take on the tasks and decision-making that traditionally would require experienced sourcing professionals to do.
This widening will allow organizations to effectively “consumerize” sourcing events. As a result, non-professional sourcing (i.e., line of business) staff can scope requirements, identify best-fit suppliers, and set up and run sourcing events. In effect, sourcing is becoming a skill, not a function.
How AI will play a bigger procurement roll
And it’s a skill that AI technology will massively support. According to Gartner, by 2026 virtual assistants and chatbots will gain traction, as 20% of organizations use them to handle internal and vendor interactions. By 2027, non-procurement specialists will execute 40% of sourcing events. By the same date, 50% of organizations will support supplier contract negotiations through AI-enabled contract risk analysis and redlining tools.
That makes sense, as interest in AI use cases for procurement has increased dramatically in 2023, by 17 times in 2023 versus 2022. This will result in a high number of AI pilots in 2024, the Gartner team predicts, as procurement functions embrace the power of this game-changing technology to increase their value across the wider business.
Technologies such as generative AI will take over most communication-focused tasks, forcing procurement staff to learn more hard technical skills to stay relevant. GenAI use cases will proliferate the full procurement process and have the potential to improve both speed and efficiency across the department.
Rest assured; procurement professionals will continue to be central decision-makers. According to the analysis, by 2029, 80% of human decisions will be augmented by GenAI. However, we will maintain our comparative advantages in human ingenuity, creativity and knowledge. The new thing GenAI adds is that it can generate new content, fill in missing information or even create sample outcomes or scenarios to situations that will ultimately play a supporting role in strategic decision-making.
Procurement pros will have to adapt to AI
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 at a premium. Procurement organizations will want to rapidly automate repetitive tasks, such as PR approvals, internal and external communication, and supplier approvals, with virtual agents, enabling teams to focus on other areas.
And as the Gartner report highlights, the basis for all AI models is good data, so organizations need to cultivate those skills. From a tech skills point of view, identifying key data elements that drive decision-making will help ensure that the AI is factoring in the best data for what we want to use it for. But the human will also absolutely matter, Gartner says; procurement staff creativity will be even more valued than today, as AI’s weakness is understanding problems where there is no data or precedence.
What happens if procurement organizations choose not to adopt these strategies? Gartner’s message is clear: compared to their competitors, organizations that do not embrace AI technologies will find themselves at a cost and agility deficit.
Therefore, procurement leaders need to embrace all kinds of game-changing technology and develop closer and mutually supportive supplier relationships. They also need to start to think long-term and work to attract top talent, as skills such as critical thinking, delivering presentations and persuading stakeholders, will soon be in high demand.
By 2026, the report says, advanced proficiency in data and technology competencies will be as important as social and creative competencies (i.e., soft skills) for procurement staff.
You also need to keep your eyes on the prize: earning credibility in the C-Suite. To cite management consultancy McKinsey, procurement leaders who demonstrate value to the enterprise can rapidly become full-fledged strategic partners to CEOs, CFOs and COOs.
That’s a great route to travel. On a final note, I’d like to highlight the practical applications of AI in procurement and the fact that real-world organizations are already using AI to make a procurement difference. UK telco giant BT, instead of just talking about GenAI, says GenAI is embedded into its sourcing platform and providing substantial value — driving double-digit cost savings across billions of pounds of annual spend.
That’s definitely a future I want a part of.
About the author
Seth Catalli is the chief revenue officer at Globality Inc., a provider AI-powered technology applications designed to improve procurement and sourcing systems.
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The post Why Gartner is right about AI taking the lead in procurement appeared first on Digital Commerce 360.
