Generative AI can transform procurement, says Roland Berger

As the search continues for AI’s best use cases, a new report has suggested it could prove highly effective in the world of procurement. According to the report, generative AI in particular could have a key impact on strategic procurement functions.

With the world still in the grips of multiple supply chain crises, the role of technology has long been touted as a lifeline for the procurement function. Over the past 12 months, companies have turned to AI to automate processes, create content, and uncover new insights. But in the world of procurement, this can mean predicting disruptions long before humans can spot them or optimising inventory to meet fluctuating demand.

Building on this premise, a new report from Roland Berger has suggested that the new technology could prove crucial in the months ahead – with many optimisation approaches in the industry to boost efficiency and productivity having often already exhausted their potential. Against this background, using established data analysis technologies becomes “a must”, as does deploying chatbots and negotiation bots to allow users to interact with data using natural language.

Manual contract processing costs UK businesses alone £10 million a year, so the ability to delegate such tasks to a digital assistant shows just how relevant such GenAI strategies are to the future viability of procurement.

Professionals in procurement seem aware of this, too. A poll of the experts found that 56% of respondents identified source-to-contract agreements as the top area where GenAI could be effective for them. In particular, 16% said they felt contract management would be the best use, along with 14% who said supplier market screening and tender handling would be enhanced by the use of AI.

Commenting on the opportunity, Felix Mogge, senior partner with Roland Berger, said, “In the face of unprecedented market volatility and changing demands in the automotive sector, GenAI emerges as a transformative force in procurement, taking sourcing efficiency and supplier innovation to new levels."

The benefits do not end there, though. According to Roland Berger, procurement leaders are also looking to accelerate their processes to a number of other ends. By the firm’s estimations, GenAI could also heighten compliance by 100% – an important change as firms continue to struggle to keep pace with new regulatory burdens.

At the same time, the firm posited that GenAI could help lower CO2 emissions resulting from the procurement process. By the firm’s reckoning, GenAI can help to “consolidate scattered and often only indirectly available information” to better-analyse a firm’s indirect emissions – and build predictive models to enable plans tackling those emissions.

Whether those calculations will involve the huge amounts of energy used by GenAI to process even minimal queries is unclear. With a single ChatGPT answer using as much electricity as it takes to power a lightbulb for 20 minutes – 10 times as much as a Google search – GenAI is not going to be without its own problems in its current form.

At the same time, there is a possibility that investing in GenAI capabilities now would be sinking capital into a bubble primed to burst – curtailing much of the apparent breakthroughs that the current generation of the technology claims to be on the cusp of. Shareholder exoduses across a number of the world’s largest technology companies – many of which are keeping the unprofitable AI sector on life-support with their investments – suggest that there may be at least a halt to the so-far limitless spending on the development of AI as a practical tool for business.

However, Pieter Nieheus, a partner with Roland Berger, is unconcerned. Insisting that “the use of GenAI is inevitable”, he warned that those who do not adopt it will “fall behind in competition and will be replaced – not by GenAI, but by those who embrace it."