Unlocking Gen AI Potential in Procurement

In this episode of the Business Excelleration^® Podcast, Vin Kumar, Tim Yoo and Jeff Gilkerson explore the growing interest in generative artificial intelligence (Gen AI) among procurement companies. They highlight the challenges companies face in understanding what they require to effectively integrate Gen AI into their operations, and discuss its potential impacts on efficiency, effectiveness, contract management and the necessity for enhanced skills training.

Welcome to The Hackett Group’s “Business Excelleration Podcast,” where week after week we hear from experts on how to avoid obstacles, manage detours and celebrate milestones on the journey to world-class performance. This episode is hosted by Vin Kumar, lead of Gen AI Advisory Program at The Hackett Group. He is joined by Tim Yoo and Jeff Gilkerson, leaders of the Procurement Supply Chain Transformation practice at The Hackett Group. Today’s episode will discuss their perspectives on how generative artificial intelligence (Gen AI) is impacting procurement organizations.

To begin, Tim shares that everyone is interested in learning more about Gen AI, although not many understand what they need to do to prepare for taking it on. Although procurement routinely lags behind other functions in terms of staying up to date, they are just beginning to catch up with Gen AI. They are urged to ask themselves what their current providers will be doing to embrace Gen AI. Procurement has used some sort of AI for some time in terms of data cleansing. Tim defines AI as the machine attempting to emulate human reasoning. What the industry is now calling predictive AI emulates left brain activities by giving it instructions to follow. New AI emerging on the market is making probabilistic decisions using unstructured data.

Then, Jeff shares how Hackett’s clients are using this new Gen AI. What is so exciting about procurement now is that Gen AI allows you to move into more strategic activities. We can now create information that used to require a human gut feeling or former experiences. Building applications based on existing contracts is a common use case for Gen AI. All research on the topic points toward AI making business operations more seamless and efficient. Jeff doesn’t expect that this will manifest in major layoffs, but will help employees be more strategic. Organizations will likely choose different paths to navigate this increase of efficiency, depending on what is core to them. With cybersecurity threats, there will likely be an increase in diligence around data privacy. There are many governance regulations currently in the works at a national level. However, Tim doesn’t expect that these regulations will stifle most models or capabilities. It is highly recommended that people use privatized capabilities, rather than those in the public domain, to avoid data breaches and other risks.

Before wrapping up, Jeff highlights the need for proper training within procurement to address gaps in the most basic capabilities. While Gen AI can help with some of this, it will also open up a whole other set of skills lacking within procurement. We will be asking procurement to embrace more strategic activities and modeling.

Time stamps:

0:49 – Welcome to this episode hosted by Vin Kumar.

1:37 – How leaders are currently thinking about Gen AI.

3:45 – What differentiates Gen AI from regular AI?

6:33 –  How are clients using new Gen AI?

9:28 – The expectations of procurement officers for adopting AI.

17:29 – Data privacy concerns with AI. 

23:32 – The need for proper training and strategic work.