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AI in Procurement: 2024


The integration of Artificial Intelligence (AI) into various industries has revolutionized traditional processes, bringing about a paradigm shift in efficiency, accuracy, and innovation. One such field benefiting from AI advancements is procurement. In this article lets focus on AI in Procurement, and explor the fundamentals of AI and ChatGPT, particularly Computer aided design (CAD) GPT, in procurement.

Enhancing Performance and Efficiency

AI in procurement is not just a futuristic concept but a present-day reality that significantly boosts performance. By automating repetitive tasks, AI frees up human resources to focus on more strategic activities. This enhancement in efficiency is particularly evident in tasks requiring creativity, analytical thinking, and decision-making. For instance, AI can swiftly analyze vast datasets, identify patterns, and provide insights that would take humans considerably longer to uncover.

Practical AI Applications in Procurement


Sourcing Strategy and Market Research

AI can streamline the sourcing strategy by analyzing market trends, supplier performance, and risk factors. For example, AI tools can evaluate historical data and predict future supplier performance, helping procurement teams make more informed decisions. Similarly, for market research, AI can aggregate data from multiple sources, providing comprehensive insights into market dynamics, competitor strategies, and emerging opportunities.

RFI/RFQ Processes

The Request for Information (RFI) and Request for Quotation (RFQ) processes are crucial in procurement, and AI can enhance these stages significantly. By using AI-driven tools, procurement professionals can automate the creation and distribution of RFI/RFQ documents, analyze responses efficiently, and identify the best suppliers based on predefined criteria. This not only speeds up the process but also ensures a more thorough and unbiased evaluation.

Negotiation and Contracting

AI can assist in negotiation by providing real-time data and analytics, which can be used to develop better negotiation strategies. For example, AI can analyze previous contracts and negotiations to suggest optimal terms and conditions. In contracting, AI can automate the drafting and review of contracts, ensuring that all necessary clauses are included and compliance requirements are met. This reduces the risk of errors and legal issues.

Supplier Relationship Management

Effective supplier relationship management (SRM) is critical for long-term success in procurement. AI can monitor supplier performance continuously, track compliance with contract terms, and alert procurement teams to any potential issues. This proactive approach helps in maintaining strong relationships with key suppliers and mitigating risks before they escalate.

Effective Prompt Engineering


The Importance of Well-Structured Prompts

One of the critical aspects of using AI effectively in procurement is prompt engineering. Well-structured prompts are essential to guide AI tools in generating precise and useful outputs. For instance, when using ChatGPT to draft a contract, the prompt should include all necessary details, such as the type of contract, key terms, and any specific clauses required. This ensures that the AI-generated document meets the specific needs of the procurement process.

Examples of AI Prompts

  • Market Research: “Analyze the current market trends for [specific product/service] and provide a summary of key competitors and their strategies.”

  • Supplier Evaluation: “Evaluate the performance of [Supplier X] over the past year, focusing on delivery times, quality of goods, and compliance with contract terms.”

  • Contract Drafting: “Draft a contract for the procurement of [specific product/service], including standard clauses, delivery timelines, payment terms, and penalties for non-compliance.”

Common Mistakes to Avoid


Not Anonymizing Sensitive Data

One common pitfall in using AI is failing to anonymize sensitive data. This can lead to privacy breaches and compliance issues. It is crucial to ensure that any data used in AI-driven processes is anonymized to protect sensitive information.

Insufficient Context in Prompts

Another mistake is not providing enough context in prompts, which can result in inaccurate or irrelevant outputs. For example, when asking AI to draft a contract, it’s essential to include detailed information about the specific requirements, scope of work, and any unique terms.

Not Using Personas

Using personas can help AI understand the context better and generate more relevant outputs. For example, specifying that the AI should respond as a procurement manager can ensure that the outputs are tailored to the perspective of someone in that role.

Challenges and Solutions


Proper Prompting

One of the challenges in using AI effectively is ensuring proper prompting. This involves not only crafting well-structured prompts but also iterating and refining them based on the outputs generated. Continuous learning and adjustment are key to optimizing AI performance in procurement.

Understanding Biases

AI systems can inherit biases from the data they are trained on. It is essential to understand and address these biases to ensure fair and unbiased decision-making. This involves regularly reviewing and updating the data and algorithms used in AI tools.

Data Privacy

Data privacy is a significant concern when using AI in procurement. Ensuring compliance with data protection regulations and implementing robust data security measures are critical to mitigating risks associated with data privacy.

Tools and Integration

Staying Updated with AI Tools

The rapid evolution of AI technologies means that procurement professionals must stay updated with the latest tools and trends. Continuous learning and adaptation are essential to leverage AI’s full potential in procurement.

Integrating AI into Workflows

Effective integration of AI into existing workflows is crucial for maximizing its benefits. This involves identifying areas where AI can add value, training procurement teams on using AI tools, and continuously monitoring and optimizing AI-driven processes.

Procurement Policy

Establishing Guidelines for AI Use

Establishing clear guidelines for AI use in procurement is essential for consistent and ethical application. These guidelines should cover aspects such as data privacy, bias mitigation, prompt engineering, and compliance with regulatory requirements.


AI’s capacity to improve performance across various tasks, from creativity and analytical thinking to efficiency and persuasion, is evident. The insights from studies, practical examples, and future trends underscore AI’s crucial role in enhancing productivity and innovation in procurement.

By addressing challenges such as proper prompting, understanding biases, and ensuring data privacy, procurement professionals can effectively leverage AI to drive better outcomes and stay ahead in the competitive landscape.


Read this twice:  You don’t respond to hard bargaining tactics and strategies.  *You plan for and prevent them*. A hard bargainer is akin to an onion.  Ever try cooking an entire onion whole?  It doesn’t work. You have to peel all the layers off to find out what is going on inside with the hard bargainer.


From where do they derive their bargaining power?  Keep peeling.  What exactly is it that allows them to derive negotiating leverage?  Keep peeling until you are sure you understand it.  Here are some examples:

  • Supplier relationships with internal end users
  • Perception or belief that you are too married to them as the incumbent and can’t or won’t switch.
  • Proprietary material, technology, or intellectual property that they feel you can’t live without.
  • Business units have told them they love their product/service and no other company is acceptable.
  • Shortage of supply
  • Perceived product/service superiority
  • Extremely short timelines inside your company
  • Difficulties in qualifying another supplier

All of these and more are reasons that you may have a hard bargainer on the other side.  But you have to research and diagnose exactly which it is. That is what you are getting paid to do in procurement.   

Then, once you are sure you know what the source of their bargaining power is, you devise strategies to decrease their leverage to level the playing field – or even put it in your advantage. As long as you do this ethically and legally, and as long as you are not trying to take advantage of the other party, there is nothing wrong with doing this. 

Let me give a real example. A colleague of mine was working with a company that had a huge problem: the supplier was completely aligned with all the business units. Very, very deep knit relationships were in place. It made it nearly impossible to switch suppliers and the supplier knew it and took advantage of it – they were always the hardest bargainers ever at the negotiation table. 

So procurement mapped out their internal business units, determining which ones were most contributing to this source of negotiating leverage for the supplier. They then ranked all the business unit representatives, from greatest allegiance to the supplier to least allegiance to the supplier.

They then made a case for putting out the business to bid, something that hadn’t been done in perhaps more than a decade.They started with the business unit lead with least supplier allegiance and easily got their agreement.  

Then they successively went to each business unit lead that had the least remaining allegiance, and started to use the Social Proof principle: “all these other business unit leads have already signed up, so we are asking for you to join them. “

By the time they got to the most supplier aligned business unit leads, almost all the business units were already on board. The remaining business units really had no choice but to agree.  And so the business went out to bid, shocking and mortifying the incumbent supplier, who didn’t see this coming.

But procurement didn’t stop there. Once they had all the business unit leads on board, they then went to the in the same order, asking them to sign a letter addressed to all suppliers in the bid process, stating that if they contacted other than procurement during the bidding and negotiation process, they would be immediately disqualified. 

Once again, they went in the same order and succeeded. All those signatures were obtained from the business unit leads, and the powerful letter was sent to the suppliers in the bid – including the incumbent. All of them complied.

Now, the source of that supplier’s bargaining power was taken away. Once bids were in and procurement started holding At The Table negotiations with the incumbent, it was a totally different personality on the other side. Compromising. Appeasing. Hungry. Unsure. And most of all, totally willing to negotiate.

That is how you deal with hard bargainers. The CPSCM™ Certification Program shows you exactly how to be a Negotiation Godfather. 

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