How CPOs are Approaching AI in Procurement and Sourcing

In a blog post on Deloitte's website highlighted the results from the 2024 Global CPO GenAI survey, undertaken by the company.

Speaking with over 100 Chief Procurement Officers (CPOs) from across Europe, North America and Asia-Pacific in early 2024.

People who responded showcase a wide range of industries and organisations. Deloitte found that many companies have faith that GenAI will unlock value through enhanced insights and decision-making, productivity gains and cost optimisation.

With many already seeing promises early on with their GenAI investment, although there have been implementation challenges – procurement executives are taking a very serious look at this new technology.

The blog post explores how GenAI is allowing procurement to not only "do things differently," but also to "do different things."

With AI allowing procurement to transcend routine transactions, driven by intelligent technology-enabling strategic decisions. Using AI and its prompts, document summaries can be created, innovation can be found as the transformative potential of GenAI is highlighted – making procurement smarter and more proactive.

Making investments and planning to invest more

Results from the survey show that 92% of CPO respondents are monitoring GenAI capabilities in 2024.

With only 8% of respondents saying they have no plans to assess its capabilities in 2024.

This highlights how organisations are using their investment commitments – with 11% currently spending more than US$1m of their yearly funds on GenAI offerings for sourcing and procurement in 2024.

By 2025, it is expected that this figure will double. 22% of CPOs are making arrangements to invest US$1m or more in GenAI and its capabilities.

Some of the elements allowing procurement to do things differently are factors like automating the generation of the RFX documents, reviewing contracts and the generation of PR.

While "do different things" like setting up an intelligent category workbench that provides actionable recommendations based on market data and the organisation's spend pattern.

Recognising value in artificial intelligence and procurement

92% of CPOs are starting to see the new opportunities that GenAI will bring and make plans to invest in it – only 37% were either deploying or piloting the technology in their procurement operation at the time of the survey.

Looking at the investment plans, this figure is anticipated to expand quickly over the next few years.

For those already in the door, areas like data, analytics, contracting and sourcing are headlining the agenda for the realms in which GenAI can explore, with 38% piloting or deploying Generative AI in the spend dashboard.

Another 19% focus on automating RFI/RFP/RFQ generation.

Procurement values unlocked by GenAI

This value derived from enhanced analytics and decision-making surpasses that of productivity gains and cost optimisation combined.

In addition, many CPOs recognise that Generative AI will enable greater integration with other functions, such as supply chain planning and finance.

Navigating challenges

There are still challenges that come with such leading and new technologies.

GenAI is coming along with a steep learning curve, with more than 20% of respondents having a good to extensive understanding of the technology, while nearly 71% have limited to moderate knowledge and 9% have very little understanding, showing a need for upskilling talent. CPOs are still assessing the risk-reward trade-offs as they begin deploying Generative AI.

There are a number of obstacles being faced, from data quality, with CPOs fearing poor data will lead to inaccurate outcomes and misinformed decisions. While CPOs put data privacy and security as the biggest external threat associated with implementing GenAI in procurement.

GenAI's time is now

One survey respondent noted: "The potential for the use of Generative AI is a game changer for procurement. The opportunity to finally move away from transactional, low-value activity and apply real strategic business partnering has huge potential to deliver additional value and change the perception of procurement forever."

AI now is looking to have the chance to widen the gap between the Orchestrators of Value and other procurement organisations.

CPOs need to start acting now and deploy it in the right way.

Deloitte highlights how it understands the transformative value of GenAI and has built AIOPS.D, a tailored, AI-driven, plug-and-play modular platform focused on core business processes to provide a connected experience.

The platform is a launchpad with prebuilt use cases that are configurable to the specific needs of each organisation.

For organisations ready to embark on their Generative AI journey, Deloitte highlighted some key steps to help steer innovation and future-proof a Generative AI-enabled procurement function:

1. Explore the art of the possible: reimagine sourcing and procurement
2. Formulate your vision: identify your goals and aspirations
3. Prioritise use cases: specify where you will (plan to) capture value
4. Build the foundation: technology, data and people
5. Activate your vision: identify and set up the technology, prepare data and pilot use cases

You can read the full blog post here.

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