A Practical Guide to Using ChatGPT in Your Procurement Role

Conversational AI ChatGPT hit the mainstream in 2023, with everyone from tech-savvy teenagers and busy parents, to forward-thinking business leaders taking to ChatGPT to unleash their creativity, solve daily problems, and even add a sprinkle of AI-driven magic to their daily tasks and decisions. 

And although it stirred controversy when it started encroaching on territories traditionally held by writers, journalists, and even customer service representatives, it seems there is no end to ChatGPT’s stellar rise, as well as its long-term implications for society.

In Case You Missed the ChatGPT Memo

Developed by OpenAI, ChatGPT is an AI model developed to understand and generate language that mirrors human conversational patterns. The model is so advanced that it is able to grasp the subtleties of language, maintain conversational context over several exchanges, and produce coherent and contextually appropriate responses. Its answers are thorough, informed, and surprisingly nuanced, often indistinguishable from those of a well-informed human.

All of this may go to explain why ChatGPT’s user base hit 100 million active users by January 2023, just two months after its launch, an uptake that surpassed all other apps in history. It’s not just individual users either, with a  2023 survey of 1000 businesses reporting that almost half of all companies were using ChatGPT, with an additional 30 percent noting plans to adopt it soon. 

The broad adoption of AI-driven communication tools underscores the technology’s utility in a range of areas – coding, content creation, customer support, and document summarisation to name just a few. ChatGPT isn’t the only conversational AI at your disposal, with Google’s Bard platform and Microsoft’s integration of OpenAI technologies into its Bing search engine just two other prime examples.

When using the tool in a work-based environment, the more instructions you can provide in a prompt, the more ChatGPT can do for you in return. After ChatGPT has responded you can then refine your prompt with further instructions. We’ve put a few examples below of key procurement areas and how AI-technology could assist you.

Supplier Sourcing and Evaluation

Supplier Sourcing

Gather and summarise information about potential suppliers, including company background, financial stability, and market reputation.

Prompt: Please research and provide concise summaries for the following list of suppliers, covering their company background, financial stability, and market reputation. Include essential details such as founding history, main products, financial performance, credit ratings, customer feedback, and their comparative standing in the industry.

Supplier Evaluation

Get assistance with the creation of a robust set of criteria for evaluating potential suppliers with a goal of developing a comprehensive, balanced, and fair approach in the supplier selection process.

Prompt: Develop a set of robust criteria for evaluating potential suppliers and include performance indicators, risk assessment, compliance with standards, and industry benchmarks. Include both quantitative and qualitative measures and outline a clear weighting system for each criterion. Also, provide guidelines for scalability, flexibility, and continuous improvement in the evaluation process. 

• Particular focus on [your industry/product] quality standards, expected delivery timelines, and cost-effectiveness within [your company’s] budget range. 
• Ensure that the criteria reflect the latest [your industry] standards and regulatory compliance requirements.
• Pay special attention to risk assessment criteria, including supply chain resilience in the face of [specific risks, e.g., natural disasters, geopolitical tensions, etc.].
• Assign higher weight to [specific criterion, e.g., sustainability practices] in line with our corporate social responsibility goals.

Contract Management

Contract Drafting and Review

Generate (or review) contract drafts, focusing on key clauses and terms. ChatGPT can also help in simplifying legal jargon.

Prompt: Create a draft for a standard contract and conduct a detailed review of its key clauses and terms. Emphasise areas like scope of services, payment schedules, termination rights, and liability limitations. In the review, break down legal terminology into simple, clear language. The aim is to produce a contract that is legally robust yet straightforward for non-legal professionals to understand.

Risk Assessment

Identify potential risks in contracts and suggest mitigation strategies.

Prompt: Identify and analyse potential risks in the provided contract, highlighting areas such as legal liabilities, compliance issues, financial obligations, and operational constraints. For each identified risk, suggest effective mitigation strategies or alternative clauses to minimise potential negative impacts. 
Ensure the suggestions align with legal best practices and protect the interests of all parties involved in the contract.

Procurement Strategy

Market Analysis

Conduct market research, analyse trends, and gather insights for strategic procurement decisions.

Prompt: Conduct comprehensive market research focused on the [specific industry/product]. Analyse current trends, key players, supply chain dynamics, and pricing fluctuations. Gather insights on market demand, competitor strategies, and potential risks or opportunities. 
Use this information to inform strategic procurement decisions, identifying areas for cost savings, quality improvement, or supplier diversification.

Policy Development

Develop procurement policies and guidelines, ensuring they align with current best practices and regulatory requirements.

Prompt: Draft a comprehensive plan for the development of procurement policies and guidelines. This plan should ensure alignment with the latest industry best practices and adherence to all relevant regulatory requirements. Include a review schedule to keep policies updated regularly and a protocol for incorporating feedback from stakeholders.

Communication

Stakeholder Communication

Create templates for effective communication with stakeholders, including project updates, proposals and reports.

Prompt: Craft a set of template outlines for stakeholder communications that streamline the sharing of project updates, proposals, and reports. These templates should be designed for clarity, conciseness, and impact, ensuring all relevant information is communicated effectively. The templates should be customizable for different stakeholder groups and project types, and include guidance on incorporating data visualisations and clear calls-to-action where appropriate.

Issue Resolution Communication

Develop a protocol for timely and transparent communication with stakeholders regarding issue resolution in procurement processes.

Prompt: Construct a protocol outline for communicating effectively with stakeholders about resolving issues that arise during procurement processes. This protocol should include steps for initial notification, ongoing updates, and final resolution communication. Ensure the guidelines focus on timely, transparent, and factual reporting of the issue’s status, expected impact, and corrective actions taken. The communication should be sensitive to the urgency and severity of the issue and include strategies for maintaining stakeholder trust and confidence throughout the issue resolution process.

Vendor Performance Feedback

Establish a feedback system for communicating vendor performance evaluations to internal teams and external suppliers.

Prompt: Design a feedback system that efficiently conveys vendor performance evaluations to relevant stakeholders. This system should outline the procedure for collecting performance data, synthesising it into digestible feedback, and communicating this information constructively. Ensure that the feedback templates allow for both quantitative data presentation and qualitative commentary, facilitating clear, actionable discussions with suppliers and encouraging a two-way feedback loop, offering vendors the opportunity to respond or propose improvements.

Sustainability and Ethical Sourcing

Sustainability Guidelines

Generate guidelines and strategies for incorporating sustainability and ethics into procurement processes.

Prompt:  Create a detailed guide that outlines the procedures and criteria for evaluating the sustainability and ethical practices of suppliers. This guide should cover environmental impact assessments, labour and human rights practices, and the supplier’s adherence to ethical business standards. Provide a clear scoring system or checklist that procurement teams can use to rate suppliers and make informed decisions. 
The guide should also suggest strategies for engaging with suppliers to encourage and support improvements in their sustainability practices.

Supplier Compliance

Create frameworks for assessing and ensuring supplier compliance with sustainability and ethical standards.

Prompt: Devise a blueprint that outlines a step-by-step approach to ensure suppliers adhere to predefined sustainability and ethical benchmarks. This framework should include methods for initial due diligence, continuous monitoring, regular reporting, and compliance verification. Incorporate tools for documentation review, on-site audits, third-party certifications, and key performance indicators relevant to sustainability and ethics. The blueprint should provide guidance on addressing non-compliance, including corrective action plans and potential sanctions, while also promoting positive reinforcement strategies for compliant suppliers. 
Ensure the framework aligns with international standards and best practices to uphold integrity and corporate social responsibility throughout the supply chain.

Negotiation Support

Negotiation Preparation

Prepare key points, strategies, and background information to support effective negotiation with suppliers.

Prompt: Assemble a detailed framework that procurement teams can follow to prepare for supplier negotiations. This guide should instruct on how to gather critical background information on suppliers, including historical performance, pricing benchmarks, and market positioning. Include a section on developing key negotiation points, such as pricing, payment terms, delivery schedules, and quality standards. Outline effective negotiation strategies that account for various scenarios and supplier motivations. 
The framework should also suggest ways to establish rapport and build a collaborative dialogue, ensuring a balance between achieving cost efficiencies and fostering long-term supplier relationships. Provide recommendations for training in negotiation skills and the use of role-playing exercises to simulate negotiation scenarios.

Scenario Planning

Create various negotiation scenarios to help procurement professionals prepare for different outcomes.

Prompt: Draft a guide that presents a variety of negotiation scenarios, each tailored to different possible developments in discussions with suppliers. For each scenario, detail the context, objectives, potential challenges, and strategic responses. The scenarios should range from best-case to worst-case situations, including cooperative negotiations leading to mutually beneficial agreements, as well as tough negotiations with significant disagreements. Include contingency plans for unexpected demands or concessions and guidelines on maintaining negotiation leverage.

Warning – Don’t Lose Your Judgement

AI tools like ChatGPT are incredibly useful but be mindful that they are just that – tools. Building them into your workflow will make you significantly more efficient and productive, but you, as the human in the process, must always review and refine any outputs. 

As few useful things to consider are:

• ChatGPT is useful but not always truthful. A phenomenon known as ‘AI hallucination’ will see it throw up wrong answers confidently and convincingly. Always keep a critical eye on any AI-generated content.
• AI tools can provide information, suggestions and analysis, but when it comes to the full complexity of nuanced business scenarios, they can fall short.
• Be mindful of the sensitivity of the data you share. AI interactions aren’t typically designed for encrypted or secure information exchange.
• Conversational AI is made to support human decision-making, not replace it. Critical decisions should remain in the hands of experienced professionals.
• AI models are based on the data they were trained on and are not always looped into the latest industry trends or news.

It doesn’t matter how smart these AI tools appear to be, nothing beats the power of your own finely honed human judgement and expertise. Just don’t forget to exercise it!