Could Gen AI be the Next Big Disruptor for S2P Platforms?

Source-to-Pay (S2P), the all encompassing terminology for the Source-to-Contract (S2C) and the Procure-to-Pay (P2P) processes. S2P covers the end-to-end process for an organisation to ensure the smooth running of its purchases and supplier management. 

S2P platforms harness the data collected during the demand preparation, sourcing, bidding, decision making, payments, and billing, to help organisations cleanse, validate and classify their spend data to identify opportunities and provide end-to-end visibility. Other benefits of S2P platforms include: cost savings, stronger procedural; regulatory; and contractual compliance, increased collaboration, better price negotiations and cost reductions. 

So how does Generative AI fit into this? And what does it mean for the future of S2P platforms? 

Gaining significant traction in 2023, investments in Generative AI (Gen AI) have soared due to its simplicity and ability to quickly create high-quality content. Gen AI can produce various types of content including text, images, audio, video and synthetic data. 

The entrant of ChatGPT and other similar programs have made the technology much more accessible and adaptable to wider applications, including procurement. In a recent study by Deloitte, the consultant found that three out of four Walmart suppliers preferred to negotiate with AI over a human, “this strongly indicates that the ecosystem is ready to embrace this disruption,” noted the report. 

Coupled with the rise in disruption over the last 12 months - with high inflation pressures ranking as the number one risk putting added pressure on the function — CPOs are looking to risk evaluation tools, as well as advanced analytics and predictive solutions. Other challenges faced by procurement include risk management, operational efficiency, cost management, talent shortages and skills gap,  

“To address the challenges, CPOs have continually invested in enhancing digital capabilities. Digital transformation remains the no. 3 priority over the next 12 months, with 80% of CPOs reporting it as their organisation’s top priority,” explained Deloitte. 

Enter Gen AI…

More specifically, investment in Gen AI holds great potential for the S2P process, with its greatest potential being proactive risk management, process automation, and decision making. “In an increasingly uncertain world, instant access to accurate information is vital for mitigating and managing risk and empowering organisations,” said Deloitte. 

Addressing the above challenges, Gen AI has the ability to analyse large sets of data to process scenario-based results and reduce complex manual processes and intervention; as well as increase efficiencies with complex automation and reduce risks by monitoring procurement processes to identify and predict potential fraudulent activities or anomalies. 

The technology can also generate actionable insights based on historic trends, demand profiles, and supplier performance, and craft stronger negotiation strategies by combining internal data with external data to better meet the organisations need, as well as generate actionable insights for untapped data sources through textual data analysis and text mining. 

Textual data analysis can also benefit vendor evaluation, compliance monitoring, marketing intelligence and contractual risk management. While predictive modelling can help with detecting potential risks and offer proactive alerts, as well as help integrate procurement into other supply chain processes, empower procurement professionals with data-driven insights.

What lies ahead for Gen AI and the S2P process?

With the potential to digitally-disrupt the entire S2P process, from strategy through to governance, people, process and technology, Gen AI will no doubt transform the day-to-day operations of a function that continues to rely on manual activities. 

However, if organisations are to be successful in their implementation of Gen AI within S2P and the wider procurement function it will be essential for leaders to recognise the importance of implementing a change of this magnitude. 

Deloitte highlights a five step plan for those looking to embrace Gen AI:

1. Outline a clear strategy - Organisations will need to revise their strategies across all pillars of the operating model as well as value drivers. They will need to determine how generative AI will be integrated into sourcing and procurement. 

2. Build the infrastructure required to support the use of Gen AI - Organisations will need to identify and deploy new Gen AI enabled tools and update their technology landscape.
3. Improve data quality and governance - Organisation will need to implement new governance mechanisms and controls with security roles defined for AI agents, as well as profile, clean and convert data leveraging rigorous data governance policies.
4. Develop a robust talent strategy - Organisation will see new workplace structures emerge with a mix of human and AI and must be prepared to pivot talent to other strategic areas, optimising resources.
5. Priorities ethics and transparency - Organisations must ensure that they are being responsible in their use of synthetic data and be transparent about the limitations and/or biases of Gen AI models.

While mostly theoretical at this point in time, Gen AI — described as ‘a once-in-a-decade opportunity to transform procurement’ by Bain & Company — has potential. With many leading technology organisations working on the application of Gen AI in the procurement world, the Gen AI market is expected to evolve rapidly. Those that keep up the pace with innovation will surely reap the benefits. 

Time will tell, but “the arrival of generative AI marks a major leap forward in the value their teams can deliver to the business—paving the way to faster, more accurate decision-making, higher resilience, increased sustainability and lower operating costs,” stated Accenture.

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