Procurement teams across various sectors—whether hospitality, construction, real estate, or manufacturing—face unrelenting pressure to deliver cost savings and mitigate risks.
Management expects Chief Operating Officers (COOs) to establish digital procurement processes that play a more strategic role in the business.
But how can they achieve this? Achieving these goals requires agility, proactive planning, and efficient data utilization.
This is where Procurement AI comes in.
The procurement process involves vast amounts of both structured and unstructured data, from contracts and invoices to supplier reports and market trends.
Traditional software often struggles to analyze this data effectively, but AI-driven procurement-as-a-service platforms can quickly process this information and provide valuable insights.
This makes AI a powerful tool for driving data-driven decision-making within procurement teams. Here are some use cases where procurement AI can make a significant impact:
Intelligent Sourcing
Intelligent sourcing platforms can analyze extensive datasets, including supplier databases, market trends, and historical data. Businesses can thus identify the suppliers that align with their unique business needs.
AI can also improve visibility and decision-making; it can help businesses maintain sustainability and compliance across supply chains.
According to a report by the IBM Institute of Business Value, 77% of procurement leaders believe that generative AI can help identify geopolitical and climate risks and recommend proactive risk mitigation strategies.
AI can detect seemingly hidden patterns and anomalies that might signal potential risks. So, procurement teams can anticipate and mitigate risks before they disrupt operations.
Predictive Analytics
Procurement AI can analyze historical data and market trends to forecast future demand. It can predict demand fluctuations by evaluating various factors like weather conditions, economic indicators, and consumer behavior.
Predictive analytics allows procurement teams to better plan inventory, anticipate needs, and avoid overstocking or shortages.
According to a recent survey by Deloitte, more than 60% of procurement leaders used advanced analytics.
Spend Analysis & Classification
For procurement teams, understanding how funds are allocated across different categories is a must. They rely on this information for:
- Streamlining processes
- Ensuring compliance
- Identifying cost-saving opportunities
Traditional methods of spend analysis often struggle with accuracy, especially when dealing with vast amounts of line-item details across various business units. But, procurement AI can classify and analyze spend-data with remarkable precision.
Automated Contract Analysis & Compliance
Managing contracts is a critical, yet time-consuming part of procurement. Procurement AI with machine learning algorithms and NLP (Natural Language Processing) tools can automate analysis of contracts to:
- Extract key terms/information
- Flag potential risks
- Identify non-compliant clauses
- Eliminate redundant clauses
- Manage contract lifecycle events
For instance, a leading pharmaceutical company used AI to optimize its clinical trials process. According to the case study published by GEP, AI-driven contract management helped it significantly reduce drug development timelines and cut operational costs.
AI tools can also assist in drafting RFX documents, such as requests for proposals (RFPs) and quotations (RFQs). Such tools can automate the drafting process and make it easier for procurement teams to develop supplier lists, key questions, and proposal formats.
Automated Purchase Order (PO) Processing
Specialized procurement AI models can quickly extract information from POs and offer item recommendations.
With Lilo’s custom order guides, for instance, employees in hospitality and commercial real estate companies are guided toward preferred suppliers and products. This speeds up procurement processes, reduces manual errors, and improves compliance.
Data Extraction & AP Automation
Procurement AI can streamline workflows, reduce manual tasks, and improve accuracy by extracting details from contracts, invoices, and purchase orders.
This is particularly useful in accounts payable (AP) processes, where AI can help speed up invoice processing and approvals.
Error Detection & Fraud Prevention
Procurement AI tools can detect irregularities that may indicate fraud, compliance breaches, or other risks throughout the supply chain.