The Limitless Possibilities of ChatGPT in Procurement
With the explosion of generative AI, learn how to utilize ChatGPT in procurement to conduct research, analyze spend data, and communicate better with suppliers.
By Hugo Britt | June 6, 2023
The exciting thing about ChatGPT is its accessibility. Everyone, in every role, at every level of the organization, has access to this free tool, and it’s fascinating to watch how people are reacting to it.
Perhaps there are colleagues on your procurement team who prefer to pretend it doesn’t exist. Others may have experimented with ChatGPT as a toy (“Rewrite this article in the voice of Homer Simpson!”) but may not have been able to see how it can be applied to their role.
ChatGPT in Procurement
Some people, however, are truly taking the plunge into the possibilities offered by ChatGPT. They are acting as trailblazers, exploring where and how the technology can help procurement professionals work smarter and faster. One such experimenter is Joshua Palacios, Senior Sourcing Manager at Ro. Josh joined Kelly Barner for a fascinating discussion about ChatGPT in episode 113 of Una’s Sourcing Hero podcast.
“I think generative AI is an incredible tool,” Josh enthuses. “It’s really going to help us. I fundamentally believe that, if we utilize it correctly, it will 10x our skills and 100x our output. We just need to be able to adapt to the technology.”
Don’t miss out on this podcast episode. It’s impossible to listen to Josh without becoming inspired to log on to ChatGPT and take it for a test drive. Below, we share some general advice about leveraging ChatGPT in procurement, along with some specific use case examples from Josh.
As generative AI continues to evolve, ChatGPT offers a unique way for procurement professionals to adapt with the technology to work smarter and faster.
How can procurement use ChatGPT to get ahead?
- Doing rapid research such as analyzing huge amounts of data or searching for new suppliers
- Create the first draft of documents such as RFPs, SOWs and other contracts
- Cleansing and analyzing spend data.
- Inventory analysis and supplier risk monitoring
- Predictive analytics to help anticipate demand and optimize inventory levels
- Helping communicate with suppliers
- Automating risk management and track supplier performance
Understand how prompts work
“One of the things that I think is most valuable [for procurement professionals to understand] is prompt engineering,” recommends Josh. “Essentially, prompt engineering is understanding how to communicate effectively with ChatGPT or any kind of AI tool out there. Prompting is key. Prompting is your friend! The more you understand how to communicate with something like ChatGPT, the better the output is going to be.”
Basically, the more instructions you can give ChatGPT, the more it can do for you in return. Say you need to write an email to stakeholders about a new supplier. Your prompt could include:
- Context (“We’re a large organization. There’s a looming recession”)
- Tell the AI what its role is (“Imagine you’re a procurement professional”)
- Describe the task (“Write an email about the importance of buying X product from Y supplier only. The email should include the following…”)
- Describe the audience (“The readers are time-poor and do not know much about procurement”)
- Set the tone (“Use an authoritative and educational tone”)
- Give parameters (“Don’t exceed 400 words”)
See what ChatGPT comes up with, then refine your prompt with further instructions. (“Keep the structure, but use a more lighthearted tone. Mention at least two potential benefits for the audience, for example…”)
ChatGPT in procurement as a negotiation training tool
On his podcast episode, Josh explains how he built what he calls a “negotiation simulator” with ChatGPT by using a simple prompt. “The scenario is that I am the buyer and ChatGPT is the supplier. I communicated that to ChatGPT. I gave a real-world example of what a typical negotiation might be when it comes to the dreaded cost increase from your supplier. It took the form of email communication.”
“I said, ‘You are going to act as a supplier. I am going to be the buyer. Your name is Supplier. My name is Buyer. Let’s start the negotiation simulation.’”
Then, Josh would say something like, “Hi Supplier! I noticed that you increased your prices by 15 percent within this product or category. Can you shed some light into the factors for the cost increase?”
Long story short, a very professional back-and-forth communication evolved with ChatGPT. “ChatGPT would come back and say things like they were tracking certain commodities and commodity prices increased within the market,” says Josh. “I went back and said, ‘Well, in our contract agreement, we have levers in place that mitigate any kind of cost increase. We are supposed to be held to a certain cost, and you are not honoring that. Can you shed some more light on that?’ Eventually, ChatGPT said, ‘Okay. I understand your frustrations with the cost increase. Let’s explore ways that we can mitigate this cost increase together.’”
But that’s only the beginning. Josh is also keen to explore the possibilities around taking snippets of email communications with suppliers, running them through ChatGPT and having the tool analyze the rep’s communication and negotiation style. “We could use that to better prepare ourselves for a future negotiation; to predict certain scenarios that might happen in the future when we are dealing with that specific account rep. We develop a profile [for that person] and be better prepared.”
“We could use ChatGPT to better prepare ourselves for a future negotiation, predict certain scenarios, and develop profiles [for specific people].”
- Josh Palacios, Senior Sourcing Manager, Ro
ChatGPT can write the first draft of your category strategy
“If we think about what a category strategy is,” says Josh, “it’s like a piece of content. You just need to understand how to communicate with ChatGPT to make it output an effective category strategy.”
Josh communicated to ChatGPT: “You are Category Manager GPT – an AI tool that generates effective category strategies for complex businesses. What do you need from me to begin drafting a category strategy for my business?”
Why is this prompt so effective? Because Josh told ChatGPT its role, then asked ChatGPT what it needs from him to deliver the foundation of an effective category strategy. In response, the tool told Josh it needed his business objectives, product service portfolio, market analysis, customer analysis, sales and distribution channels, pricing strategy, promotion and advertising, and financial analysis.
Josh inputted the requested information, and bingo – ChatGPT churned out a category strategy.
“It was broad,” says Josh, “but that’s what I expected. I don’t think the tool is there to be [very] specific, but it’s great for the foundation; for the framework of the category strategy. It helps get our wheels turning; to maybe see things that we weren’t really considering in the strategy; and really to speed up the process because we know that developing a category strategy does take time. ChatGPT helps us brainstorm when we’re not sure how to start.”
Remember: embrace new tech but stay human
Josh’s advice is to embrace the incredible possibilities of AI and other technology, but don’t neglect your soft skills.
“I think we need to understand that tech is going to be more important in our daily work routine,” he says. “We need to accept that. We cannot be resistive or stubborn. We need to embrace it. At the same time, don’t lose sight of being human. We still run on emotions. Emotions sometimes burn us, so we need to be conscious of the fact that we need to still massage our soft skills as well as implement new technologies into our skill set.”
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