Revolutionising Procurement: A Deep Dive into Generative AI in Asia & Australia
Source - Alt: A female employee checking the inventory of a steel supplier
There's no denying that the world currently rocks with the influx of generative AI technology.
While AI has been implemented throughout the tech industry for years, it's only with the explosion of ChatGPT, other GPT models, and related, competing applications that it's been blown into the spotlight.
It's a technology that has transformed so many industries, from healthcare to marketing, and the procurement world hasn't been left in the dark.
Asian and Australian procurement professionals today are no longer just number crunchers and contract managers. They're now leveraging powerful AI technologies to stay ahead of the curve and optimise and streamline their ventures in unprecedented ways.
Generative AI is reshaping their approach to procurement – making way for predictive analytics, strategic planning, and optimised operations. According to a McKinsey study, just under 20% of procurement functions could be eliminated completely thanks to generative AI technology, making it the third most affected industry behind software engineering and customer operations.
How this works and what today's industry looks like is what we're covering today, so let's explore how this impressive tech is helping propel a slicker, more future-focused world of procurement.
What is Generative AI?
Source - Alt: A shot of a computer screen displaying the ChatGPT Plus login screen
Generative AI is a branch of artificial intelligence that leverages machine learning algorithms to "learn" from data and produce new content or predictions - think data-driven forecasts, created supply chain models, or simulated negotiation strategies.
This allows us to transform procurement by using machine learning to analyze data, predict trends, and streamline supply chains through conversational prompts, leading to actionable insights that allow for efficient decision-making and a competitive edge.
And this works - with figures showcasing that the market for generative AI in procurement is projected to grow from USD 130 million in 2022 to USD 2,097 million by 2032, indicating its critical role in the industry's future.
By automating and enhancing complex processes, Generative AI is becoming an essential tool for procurement professionals, driving significant advancements in the field.
How Generative AI is Used in Procurement
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It wasn't too long ago when procurement transitioned from manual processes to embracing digitisation. The introduction of AI and, more specifically, Generative AI has been a game-changer.
Traditionally, procurement was a reactive function within businesses.
Purchasing decisions were often driven by demand, resulting in last-minute decisions, potential oversights, and inefficiencies. With the advent of Generative AI, procurement has become far more proactive and predictive.
Fast forward to 2024, and let's look at the adoption of Generative AI in the procurement scene across Asia.
It's thrilling to note that Asia isn't just keeping pace with the AI wave but is also emerging as a leader, allowing procurement operations access to all kinds of benefits, including:
- Data-driven decision-making
- Automation of repetitive tasks
- Improved supplier selection
- Price optimisation
- Risk management
- Enhanced negotiation strategies
- Production Scheduling & Transportation Routing
- Demand forecasting
- Sustainability and compliance
- Real-time insights
And the statistics back this up. We're talking about improvements such as;
With these benefits, Generative AI is revolutionising procurement and transforming the industry to become more efficient, cost-effective, and strategic.
Generative AI: A New Dawn in Procurement
Source - Alt: A supply chain warehouse filled with boxes and plastic trays
As you can see, Generative AI is, without a doubt, redefining procurement processes. Let's unpack the top three ways it's revolutionising the industry.
Championing Data-Driven Intelligence
Generative AI transforms data, analyzing sales data, market trends, and external factors for real-time decision-making. This unleashes accurate forecasting models that predict demand, product sales, and customer behaviour.
In the words of Ter Long Tay, Group Director, Contracts & procurement, JTC Corporation, "Generative AI - access to information is not restricted; all of the things can be done. Give a subscription license to AI and let them plug in."
An Accenture report confirms this: businesses utilizing AI for forecasting saw revenue and profit increases of 6.1% and 5.6, respectively. Also, 81% of firms enhanced their sales and revenue forecasting accuracy. This highlights AI's profound impact on forecasting accuracy, transparency, and market adaptability.
Streamlining Supply Chain Optimization
Generative AI significantly streamlines supply chain processes for harmony and efficiency.
- Optimizes key elements:
- Production schedules
- Transportation routes
- Inventory levels
- Outcomes include risk minimization and profit maximization.
Utilizing AI within supply chain management allowed early adopters to report striking improvements, according to McKinsey:
- Logistic cost reductions of 15%
- Inventory level reductions of 35%
- Service level increases by 65%
These statistics demonstrate Generative AI's role in fostering substantial cost savings and elevating productivity, promising an even more profound impact in the future.
Ensuring Smooth Compliance Management
Finally, we can't understate how Generative AI is transforming compliance management.
Rather than viewing compliance as an afterthought, Generative AI embeds it into the procurement process. It keeps an eye on the ever-changing regulatory environments and ensures businesses stay compliant.
Generative AI isn't just a technological update to the procurement industry; it's a paradigm shift, and those who don't adopt it will be the ones who are left behind.
It's transforming procurement from a reactive function to a strategic, data-driven powerhouse at the heart of businesses.
Spotlight on Success: Microsoft & Generative AI
Source - Alt: The Microsoft offices in Canada
Microsoft embraces Generative AI for both its external applications and internal operations, fully understanding the tool's potential for efficiency, cost control, and better business decisions in a rapidly evolving tech era.
They’re a leader when it comes to AI adoption and are well worth looking at as a shining example.
Want to learn more about integrating Generative AI for your business operations in procurement?
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