Sourcing and Procurement

The Gen AI revolution: Leading the way to intelligent supplier management

Gen AI is the buzzword in all business transformation initiatives. With the growing investment in Gen AI, it is clear that tech investors and service providers don’t want to miss out on the opportunities they see in the procurement space. Generative AI possesses the capability to transform the entire Source-to-Pay process and there are multiple use cases that leaders and service providers talk about in different forums. Supplier management is one of the key areas wherein generative AI can be leveraged by augmenting teams on mundane tasks like vendor onboarding and master data management and by acting as a subject matter expert to category and sourcing managers through real-time insights and enabling informed decision-making and risk management as well.

The success of a supply chain depends on multiple elements: the more effective your supplier is in delivering the goods and services, the more efficient your supply chain. As per a Hackett study out of all the opportunity areas for leveraging Gen AI in procurement, 360-degree supplier management has emerged as a popular area of its application. By leveraging Gen AI's capabilities, professionals can create more inclusive, efficient, and transparent supply chains with enhanced collaboration and timely supplier feedback. This article explores how Gen AI can revolutionise supplier management along with its applications, benefits, and challenges.

Enhancing supplier management with Gen AI

Generative AI, characterised by its ability to generate new content and insights, offers a transformative solution to enhance the supplier management process in procurement. By leveraging advanced algorithms, machine learning techniques, and vast datasets, generative AI can:

• Identify suitable suppliers through data mining and analysis: Generative AI algorithms can sift through extensive datasets to identify potential suppliers based on various criteria such as geographical location, supplier capabilities, catalogue, pricing information etc. By analysing multiple sources of information including past purchase history and current market intelligence, Gen AI can provide a comprehensive view of the supplier landscape.
• Assess and evaluate suppliers: Evaluating suppliers based on various performance metrics can be complex. Gen AI can streamline this process by analysing historical data, such as supplier performance records, financial stability, and compliance regarding quality and regulatory requirements. It can generate comprehensive profiles and risk assessments for each supplier, helping procurement professionals identify the right suppliers to work with and manage risk accordingly.
• Enhance supplier onboarding: The onboarding process for new suppliers can be time-consuming and resource-intensive. Gen AI can automate this process, from initial contact and information gathering to compliance checks and contract generation. This accelerates onboarding and ensures suppliers meet compliance standards and other requirements.
• Optimise sourcing strategies: Gen AI can analyse procurement data and market trends to suggest optimal sourcing strategies by focusing on preferred or diverse suppliers as per company policy. Generative AI powered predictive analytics enable organisations to forecast trends, risks, and opportunities in price or contract negotiations. It can recommend suppliers for specific categories, regions, or projects by analysing historical procurement data and external factors such as market trends, regulatory changes, and socioeconomic indicators. Additionally, Gen AI can simulate different sourcing scenarios, helping procurement teams evaluate the impact of various strategies on cost, risk, and diversity goals.
• Monitor and report: Continuous monitoring and reporting are crucial for maintaining supplier performance and relationships with constant feedback. Gen AI can automate the tracking of key metrics, such as on-time deliveries, contract renewals, performance evaluations and spending with diverse suppliers. It can generate real-time reports and dashboards, providing insights into the S2P process. This transparency facilitates better decision-making and accountability.
• Bias mitigation: Generative AI can be designed in such a way to mitigate biases inherent in human decision-making processes by focusing on objective data analysis and algorithmic reasoning. By standardising evaluation criteria, minimising subjective inputs, and promoting transparency, AI can help ensure fairness and inclusivity in supplier selection processes, thereby fostering transparency and innovation.

Generative AI holds immense potential to transform supplier management in sourcing and procurement. By harnessing Gen AI's capabilities, professionals can identify and engage with suppliers more effectively, streamline procurement processes, and achieve greater efficiency, innovation, and compliance. While challenges like data quality, ensuring bias mitigation, information leakage, etc. have to be addressed, the benefits of Gen AI in enhancing supplier relationships and management are significant. As technology continues to evolve, organisations that embrace Gen AI will be better positioned to create more resilient supply chains.