AI was one of the biggest trending topics of 2023, with the Gen AI solution ChatGPT taking centre stage. Investments in AI are expected to soar by up to US$200bn by the end of 2025 (Goldman Sachs), the world is racing to tap into the opportunities AI can provide.
In this Top 10 we take a look at some of the top uses of AI for procurement professionals.
10. Spend classification
One of the first use cases for AI in procurement, with leaders in the industry harnessing AI to automate the classification process, to improve accuracy levels. With the use of AI organisations can improve their data handling and categorisation of millions of unique transactions; shorten the spend analysis cycle time; and connect disparate spend data into a single hierarchy.
Those that harness AI in spend classification report a 97% accuracy in classification data, uncreasing precision and driving value.
9. Invoice data
A well established use of AI in procurement, professionals are using the technology to extract invoice data to streamline and automate the process, as well as control workflows and verify data. Typically, AI isintegrated into existing systems and used alongside natural language processing (NLP).
AI-based invoicing is also transforming and improving traditional accounts payable (AP) workflow from error-prone and manual to efficient and automated.
8. Contract data extraction
Similar to invoice data, contract data extraction harnesses AI allowing organisations to work with large volumes of contracts and extract key information. With the use NLP, organisations are improving compliance and risk miitgation, as well as identifying areas that require review.
The Use of AI also benefits cross-functional teams to process contract-data areas including preferential terms, conflicting commitments, performance thresholds, spending compliance, and supplier relationship viability within their contracts contributing to a more strategic supplier relationship.
7. Automated compliance
A core function of any procurement team is to create value and support the wider goals of the business and stakeholders, and compliance is central to achieving this.
This is why automated compliance solutions are becoming increasingly important, helping procurement professionals to follow approved processes, both for purchasing and also supplier engagement.
6. Global sourcing
A multinational organisation might have a supply chain comprising 10,000 or more vendors, this volume generates a mountain ofof data. By harnessing AI organisations can explore high-level sourcing strategies to identify shifts in global supply trends, as well as gaining insight into future trends, to help inform the wider sourcing strategy.
5. Anomaly detection
By applying AI technology to data management, procurement is able to gain greater visibility into anomalies. Receiving immediate notification of such anomalies and exceptions – and also being given suggestions on how to resolve issues – is a game changer.
AI can also be used for scenario planning, providing procurement leaders with end to end visibility.
4. Accounts payable (AP) automation
Streamlining and enhancing routine vendor invoice activities, accounts payable (AP) automation provides procurement leaders with safer, more efficient and cost-effective operations. AI provides a holistic, end-to-end payment process – covering everything from capturing data to accounting systems.
Procurement leaders are also benefiting from optimising vendor portfolios, reducing duplicates and errors, reducing the risk of fraud, and taking advantage of early payment discounts.
3. Contract lifecycle management
Supporting contract generation and negotiations, AI is being harnessed to help identify areas of risk in contract language. Such solutions help improve cycle times and streamline the management process through the use of standardisation, automated drafts, and workflow management.
2. Strategic sourcing
Being a disruptive industry, procurement – in order to be successful – needs to embed strategic thinking within its operations. By implementing AI into its operations, procurement can gather, analyse, and present massive volumes of data. This facilitates strategic decision making, as team members benefit from trend forecasting, and the ability to make proactive decisions.
Other benefits in this area include performance improvements, significant internal efficiencies, and faster times-to-market, thanks to a better understanding of markets and their associated risks.
1. Supplier risk management
Revolutionising supplier risk management, AI provides real-time data analysis, predictive analytics, and improved visibility – all of which help procurement teams manage risk and ensure smooth supply chain and procurement operations. As with other use cases, AI helps with proactive decision making, identifies risk, and helps monitor potential disruptions.
As a result of this, organisations can reroute shipments, avoid delays, identify patterns, predict future risks, source alternative suppliers, and improve efficiency and decision making.
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