Keeping up with the ever-evolving landscape of procurement has always been challenging. Evolving for omnichannel; ensuring sustainable solutions; adapting to changes in logistic chains. And most recently? The rise of AI negotiation bots.
Companies are increasingly integrating these digital negotiators into their buying departments, changing the way deals are struck and prices are agreed. But while these bots promise efficiency and cost savings, they also present new challenges - especially for the sales teams that find themselves up against automated adversaries.
Alogorithmic benefits
Imagine this: a bot armed with algorithms, data analytics, and scripted prompts is negotiating a contract on behalf of a company. It can sift through mountains of data in seconds, analyse previous negotiations, and make decisions based on real-time market conditions. You don’t need to imagine it – it’s already happening.
As Katie Shonk reported in September this year for Harvard Law School, “Chatbot negotiations are undoubtedly the way of the future, but they’re just getting started.”
Walmart is the go-to example having embraced AI to negotiate with suppliers of goods for its stores since 2021. Shonk reports “As of late 2022, the Walmart chatbot had closed deals with 68% of suppliers with an average saving of 3%.”
The chatbot is relentless in its pursuit of the best deal, pushing forward the most favourable terms and price for its side of the table. Add that to the cost savings from freeing up time from procurement executives – it’s a perfect solution, right?
The risk of dead-lock
Well, it is, until it isn’t. I recently witnessed the outcome of two chatbots negotiating head-to-head…algorithm-to-algorithm?
There was of course no reading the room; no non-verbal cues; no emotional connection; no relationship building. Just data-driven decision making. Would it lead to a rapid optimisation of terms and conditions?
With both sides of the table programmed to act as if they held the upper hand, the negotiation became an endless loop of counter-offers, as each bot tried to put the ball on its park. The outcome was a stalemate, with neither party willing to back down - deadlock 101.
In the end, the negotiation had to be resolved in the traditional way.
With a conversation.
Between two humans.
A human/AI collaboration
But this incredible technology is here to stay. And suppliers and procurement negotiators need to embrace the possibilities for improving value and outcomes. It’s not all down to the machines just yet. Using data analytics to enhance negotiation tactics while maintaining the emotional intelligence that bots can’t replicate feels like the right path for now.
I think it’s something called the human touch!
Based in Spain, with a multitude of languages at his fingertips, Jaime Martinez Aguirre has a wealth of experience in sales and negotiation with a truly international perspective. To talk more about the role of AI and other negotiation considerations, get in touch jaime@newbeginningsconsultation.com