From Data to Decisions: Navigating Procurement through Generative AI

The Next (re-)evolution in Procurement

Generative AI (Gen AI) has gained significant attention across the world with the advent of tools like ChatGPT, which can produce human-like responses. People and companies are looking at this technology as a platform for change, and it is anticipated that over time AI will be integrated naturally into many business operations.

The current market research points to the positive and disruptive potential of Gen AI:

According to research conducted by Forrester, 100% of AI Leaders rate Gen AI as critical to their organization’s business strategy in the next 12 months (2025).
Gartner predicts that 80% of new enterprise procurement apps will use AI by 2025.
McKinsey & Company estimates that there is more than $9bn worth of procurement savings, which can be unlocked with AI by 2025.

The adoption of AI in procurement has evolved significantly in recent years, with organisations exploring basic automation and analytics tools, to remove inefficiencies related to time-consuming and error-prone manual processes. Procurement functions across organisations are also transitioning in role and form, from support-based, “back-office orientation” to strategic drivers of growth in the organisation. Procurement today, has even further accountability for cost savings, risk management, sustainability imperatives and supplier relationship management.

Business leaders and organisations more generally are fully aware that the world of procurement is evolving, with the effects of technology advances and digital transformation becoming more evident. Gen AI is poised to be the next game-changer in procurement, by introducing a new era of efficiency and people (or user) centricity.

The Generative AI Differential

Gen AI is not just about automation, it is about creating a smarter, more efficient, and user-friendly procurement experience. Organisations that make the shift to Gen AI should have clear competitive advantage and benefits in the following three areas:

Enhanced User Experience for Everyone Improved Compliance & Governance
Increased Efficiency and Productivity for Power Users

The following sections unpack each of these transformation areas, using the Zycus Procurement solution* to explain some of these points.

Enhanced User Experience for Everyone

Procurement teams deal with a multitude of stakeholders, each with different interest of needs. Gen AI allows interactions with these stakeholders to be more conversational, more simplified. Using the illustration below, the transformation can be explained as follows:

From Complex to Suggestive or Conversational

Reflecting on procurement IT systems, organisations typically think about the picture on the left, driven by point and click type interfaces login screens, searching for catalogue items and matching vendors. Gen AI allows organisations to transform the interface into platforms which users are more familiar with, towards more seamless natural language interactions.

Examples of the enhanced user experience are prevalent in working environments using MS teams, and in various industries such as banking, which make use of Chatbots and Virtual Assistants. In most instances, the back end of the platform holds the business logic, the relevant policy, user tracking and reporting history.

When applying Gen AI to procurement environments, it is suggested that the following be considered:

Moving from the Web UI to new UI, allowing for Intuitive Conversational Intake Management, with User-friendly interface within flow of work that simplify navigation and making procurement systems accessible for everyone.
Skills requirements and impact on working professionals, especially with the next generation ‘mild addiction’ to screens and chat platforms, as well as user needs pertaining to mobile, interactive, and real-time stimuli.
A change in the training approach for users as these types of interfaces do not have a high training need compared to the point and click type interfaces.
Gen AI allows personalised recommendations to be presented, leveraging historical data and user preferences, Generative AI provides tailored suggestions, enhancing decision-making and user satisfaction.
AI-driven chatbots and support tools offer immediate responses to user queries, significantly reducing wait times and improving the overall user experience.

Improved Compliance & Governance

The second transformation area is improving compliance and governance. There are numerous real-world examples suggesting that there is increased pressure on procurement to align with Audit, Risk Management and Regulatory requirements, in a dynamic operating environment.

Reactive to Proactive

What Gen AI allows organisations to do in platforms such as Zycus, is to drive compliant purchasing. Zycus has invested in technology that trains the AI engine to look for buying behaviour that deviates from policy. As an example, only contractually agreed products from approved suppliers can be purchased. Using a more complex example, Gen AI engines can interrogate the text contained in supplier contracts and compare text clauses to leading practices contained in the systems’ clause database. The AI Engine then highlights specific contract conditions that may pose a risk to the business.

Below are a few additional examples where Gen AI is having an impact on buying organisations:

Guided Buying: Gen AI guides users towards compliant purchasing decisions by recommending preferred suppliers and contractually agreed products, minimizing maverick spend and ensuring policy adherence.
Risk Assessment and Mitigation: AI algorithms proactively identify potential supply chain risks and suggest mitigation strategies, helping procurement teams address issues before they escalate.
Automated Compliance Monitoring: Gen AI continuously scans transactions and processes for adherence to regulations and internal policies, instantly identifying and alerting on deviations to ensure compliance.

Increased Efficiency and Productivity for Power Users

The last area of impact would be step-changes in efficiency and productivity. Most of our clients have seen how the traditional procurement process has a number of sequential steps, some manual, some automated, that reply on human intervention to drive the process and other players, such as suppliers, to collaborate in completing these processes.

From days and hours to minutes and seconds

Gen AI allows procurement professionals to experiment with, more efficient procurement processes, where the AI engines simplify the process steps for the users. This happens because back-end data (for example products, contracts, suppliers, market trends) are analysed according to trained data models, and interpreted for the procurement professional, creating the space to drive more value-adding ‘human-touch’ activities, such as supplier relationship building, strategic planning, etc. This leads to significant reduction in effort and time.

This can be applied to the ways of work of procurement staff. For a typical sourcing event, a strategic sourcing manager would spend hours if not days to undertake supplier research – either contracted or new. Following this, they would generate an RFP. If the sourcing manager is not too experienced in a category, this would entail having to build expertise or seeking mentoring from other colleagues. Post RFP submissions the tedious job of analyzing all the submissions, generating contracts, and supplier negotiation follows. The process culminates with the supplier being onboarded, after the necessary approvals have been obtained. It is evident that the process is manual, and a large portion of the exercise is repetitive. In addition there is a risk of human error.

Using the same example above, Lets describe how the activities will be executed with Gen AI:

Efficient Supplier Engagement and Discovery:
- Gen AI facilitates proactive supplier collaboration and discovery by intelligently analyzing procurement needs and market trends to recommend the best-fit suppliers, streamlining the sourcing process.
- Using Zycus, features like iSource and Autoscore RFP leverage Gen AI to automatically evaluate supplier responses, generating RFQs and aiding in quick, unbiased decision-making.
Contract and Supplier Management Simplification:
- 1000s of contracts need not be scanned the data lake of Gen AI offers detailed contract summaries and extract key line items, significantly reducing the time needed for contract review and management.
- Zycus iSupplier and Zycus Supplier Network (ZSN) powered by Gen AI functionalities automate the supplier onboarding process and address onboarding queries, enhancing the supplier experience, and accelerating the integration of new suppliers into the procurement system.
Streamlined Approval Workflows:
- Gen AI optimizes approval workflows based on the type of purchase and other factors, reducing bottlenecks, and enhancing process efficiency.

All of these could be achieved in the matter of minutes

Navigating Procurement through Generative AI

Despite the progress detailed above, procurement professional will need to navigate around some new AI challenges emerging. AI comes with its own limitations as described below:

Bias and Fairness: AI systems are trained on data sets created by humans, and these data sets can reflect societal biases. This can lead to AI perpetuating these biases in its outputs, raising concerns about fairness and equal treatment.
Explainability and Transparency: Understanding how AI arrives at its conclusions can be difficult. This lack of transparency makes it challenging to trust AI decisions, especially in critical areas.
Data Privacy Challenges: Even with anonymization techniques, there’s a risk that enough details could be pieced together to re-identify individuals. This raises questions about how much anonymization is truly effective for protecting privacy in the context of powerful Gen AI models.

Implementation Challenges: As with the introduction of new technologies and services, integration with existing systems, talent shortage for AI expertise and resistance to change within organisations have impacted on organisations ability to introduce Gen AI effectively.

Additionally, the complexity of AI implementation and the need for significant upfront investment can deter some organisations from fully embracing the technology.

What next for Gen AI in South Africa

It is widely known that that South African and African companies are already embarking on digitising their procurement capabilities. However, there is an emerging trend around the interesting problem statements that are emerging that are well suited to the application of Gen AI. Letsema is currently interacting with companies about four core challenges surrounding Gen AI, which are Regulation, Investment, Ecosystems and Data.

Gen AI is transforming procurement into a powerful hub of innovation and strategic change, and it is becoming more evident that procurement professionals need a culture of experimentation and curiosity, to harness the prowess of AI and analytics to take Procurement to the next stage in its technological evolution.

* Letsema has partnered with Zycus, leaders in AI-driven procurement transformation, to create strategic roadmaps for Generative AI integration that maximizes value. Based on our extensive experience in eProcurement implementations and innovative approaches to introducing Gen AI,

For those looking to delve deeper into how AI-driven transformations can craft a better procurement strategy for your enterprise, engage with our experts and schedule a meet & greet session to learn more about Letsema’s eProcurement offerings and how they can be tailored to support your business objectives.