Hello everyone and welcome to ‘Procurement in the Park’. I’m Christian Shu and in today’s episode, we are unpacking the exciting intersection of procurement and generative AI and how it’s shaping the future of business operations.
Corporate America’s AI adoption has been remarkable. A recent deep dive by The Economist into the S&P 500 companies offers revealing insights into AI’s increasing prominence across industries. Whether it’s shop listings, patents, or earnings reports, AI is not just a trend; it’s transforming into a business norm. Here’s what the numbers have to say:
Approximately two-thirds of the firms have mentioned AI skills in job advertisements over the past three years. Current job listings specifying AI skills now account for 5.3 percent more than double the average over the last three years. In retail, this figure has jumped from three percent to eleven percent. In Silicon Valley, among chip makers, it’s risen from nine percent to a whopping 19 percent.
Patent registrations equate to strength, and there has been a substantial rise in AI-related patterns between 2020 and 2022. The dialogue around AI during earnings reports has also surged. In this year’s first quarter alone, mentions of AI more than doubled from the previous quarter.
So, what are the implications for procurement? According to a recent report, generative AI is expected to deliver the most value in four key business areas: research and development, software engineering, marketing, and customer service. What’s interesting is how seamlessly procurement fits into this framework, alongside marketing and customer service, as an outward-facing function.
Procurement, after all, is a communication bridge vital for conveying customer needs to suppliers, fostering desired supplier behavior, and ensuring organizational requirements are met. Leading companies have begun segmenting suppliers based on strategic potential, finding that a staggering 95 percent of suppliers don’t offer any strategic value. Intriguingly, it is this 95 percent that also consumes 95 percent of procurement resources.
But, enter the magic of generative AI. Tools like Chippity can automate team-supplier communications, unlocking precious human hours. The objective is to automate interactions with these 95 percent of suppliers, largely freeing up our procurement specialists to concentrate on the strategically valuable ones. This is where procurement is headed.
Yet, the full integration of AI into corporate strategies is far from uniform. The Economist’s early adopters index indicates a clear divide between those effectively leveraging AI and the laggards. This presents an unparalleled opportunity for chief procurement officers. Procurement can become a standard function within the organization, contributing significantly to business outcomes and making headlines for the CEO’s next earnings score.
Success, however, hinges not just on AI adoption, but its strategic application. A combination of AI and human expertise is the formula for informed strategic procurement decisions that yield substantial results.
Thank you for watching. I am Christian Shu, and this is ‘Procurement in the Park’.
