AI is here and its promise is to reduce costs, improve your bottom line and generally automate every procurement workflow. The truth is that half of AI projects are failing per an IDC study. There is undeniably a huge opportunity to improve the results of your investment. 

Yet, it is clear that the potential impact of generative AI on enterprise applications and jobs could be massive. Successful applications of this technology have shown amazing impact. The market is predicting AI utilization will continue to increase, and every enterprise application vendor today is rethinking their software architectures to integrate this new technology. 

This marks a fundamental shift from traditional interfaces to dynamic, interactive systems powered by models like OpenAI Omni. For procurement professionals, this means a transformative shift in daily workflows. The future will demand not just familiarity but proficiency with new tools that guide decision-making, streamline operations, and enable strategic thinking and leadership. 

But where should you start?

What are the risks? How do you operate in this new reality? And where is AI going to actually add value vs. just be a distraction?

As procurement professionals are pondering these new questions and the tools are changing daily with almost endless options, it’s obvious they need help navigating these new waters. Yet most software companies are so busy trying to get to market with a quick solution, they haven’t had the time or resources to become fully educated on the many different use cases, relevant procurement applications, and intricacies of these new technologies. 

At Suplari, we see the need to continue to take advantage of technologies like LLMs and generative AI, and at the same time deliver results, and provide a guidewire for integrating AI into the procurement profession. 

Below is the first part of a multi-part series where we dive into the challenges and tough questions facing procurement leaders and teams across the globe. I will call on my experiences from originally founding Suplari, to my experience at Microsoft as a leader in the application of generative AI – to the re-founding of Suplari seven years later – along with knowledge and advice I’ve learned from colleagues and friends – as the foundation of this guidewire. As you follow along with us in this series, you will hear more details on how Suplari came into being with advanced and mature AI capabilities and customers leveraging them as a competitive advantage.

The challenges of modern procurement — and the promise and pitfalls of generative AI

As we embark on this new chapter of Suplari, the procurement landscape looks very different than it did when we started the original company in 2016. Today’s procurement leaders face a growing set of challenges. As consumers and regulators demand more corporate responsibility throughout the supply chain, supplier diversity and environmental and sustainability information must be considered. Procurement decisions must also include global economic and risk factors that even further complicate financial planning and supply chain management. While all of these new pressures and responsibilities are mounting, today’s procurement teams are also being asked to do “more with less”, as their budgets shrink and headcounts are reduced. These are the goals, but the truth is that 82% of companies missed their cost-reduction targets in 2023.

Enter generative AI. The emergence of large language models, driven by advancements in transformer-based architectures, has created a perception that this technology can act as a silver bullet to ramp up operational efficiency and worker productivity. For procurement teams, the expectation is that these new tools will allow them to achieve their goals with fewer resources by streamlining complex processes, automating routine tasks, and magically unlocking new insights from the vast amounts of data they must sift through on a daily basis.

That all sounds great, but we all know it is never that simple. The reality is that generative AI has many pitfalls in addition to its impressive capabilities. Below I outline the three main cautions you should consider as you embark on your generative AI journey.

Will you be able to trust the data?

While a model like GPT-4 can be incredibly powerful in certain use cases, “hallucinations” (false or non-applicable responses) can occur. Such instances can be especially problematic in a data-driven field like procurement, where teams can’t afford to risk making decisions based on inaccurate information. Hallucinations aside, your organization will still have the challenge of garbage in, garbage out. If these models are analyzing your dirty data across many different systems, there will inevitably be data issues that cause users to become distrustful of the results.

How will it impact your team?

Some experts caution that over-reliance on these tools can lead to skill degradation. Procurement leaders are already wrestling with workforce challenges including overall talent shrinkage and increased knowledge gaps.  As teams become more dependent on AI, they can lose touch with the critical thinking, nuanced understanding, and the problem-solving skills required of them. However, AI proponents point to its capability to handle mundane, repetitive tasks thereby freeing up human team members to focus on higher-order, complex work that leverages their unique capabilities and experiences. I believe that AI will not replace your human experts in the near term; instead, it can help generalists act like experts in many situations and enhance your specialists with more focused and sophisticated automation. 

Are these solutions safe?

Data privacy and security should be another concern. Because of the confidentiality of supplier spend and contract data, procurement leaders must think carefully about how to safely govern this information to protect against breaches and unauthorized use. The same goes for regulatory compliance. As AI regulations evolve, your internal AI implementations must remain compliant as well as the products and services you consume from your suppliers. It will become increasingly important to monitor AI use both internally and in your supply chain. Suplari can help you manage your AI risk by safely connecting your internal datasets to deep supplier compliance information and alerting to any vulnerabilities or other risk related insights. 

At this point there’s no doubt that generative AI promises to radically transform the enterprise, but we must be realistic about what it can accomplish and how it’s implemented. For procurement leaders, that means making thoughtful decisions that weigh potential benefits alongside limitations and risks. Procurement leaders should prioritize AI solutions that have proven ability to deliver real value while also ensuring safety and compliance and validate potential impact before making any team composition decisions.

Stay tuned for the next topic in our multi-part series where I dive into best practices of evaluating AI based solutions – Suplari’s blog.

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