How GenAI Will Shape Future of Procurement Contracts

Kaitlynn Sommers, Senior Director Analyst, Gartner, shared how GenAI will impact the procurement function with the audience of Gartner Supply Chain Symposium/Xpo in Orlando (Credit: Gartner)
AI will continue to shape the future of procurement supplier contract negotiations, according to a Gartner survey of procurement leaders

By 2027, 50% of organisations will support supplier contract negotiations through the use of Artificial Intelligence (AI)-enabled contract risk analysis and editing tools, according to Gartner, the leading research and advisory company.

This is according to a survey of 101 procurement leaders. GenAI is expected to be most impactful on the sourcing and contract lifecycle management of businesses over the next 12 months.

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How AI is reshaping procurement

GenAI solutions are fundamentally transforming the method by which procurement organisations work. At the Gartner Supply Chain Symposium/Xpo, analysts discussed the importance of prioritising use cases and steps to effectively deploy in organisations. With analysts discussing the importance of prioritising use cases and steps to effectively deploy in organisations.

"Interest in AI for procurement has increased dramatically, and we expect to see a rise in use. In our survey, 58% of procurement leaders said they already are implementing or plan to implement AI in the next 12 months," says Kaitlynn Sommers, Senior Director Analyst, Gartner Supply Chain Practice when speaking to attendees.

"AI-enabled risk and editing solutions will help procurement expedite business decision-making, decreasing time spent on the contracting process and increasing capacity for additional tasks."

How GenAI is given control back

The technology is helping procurement teams to take more ownership in their supplier contract negotiation process - by using automated editing tools that utilise legal department guidance and terms previously agreed upon. GenAI can also add efficiency to the contract negotiation, with its ability to highlight potential risks and offer risk reduction options.

"GenAI promises to empower procurement professionals to make informed, data-driven decisions that yield tangible results faster," adds Kaitlynn.
"Our research reveals that procurement leadership anticipates a 21.7% increase in productivity from the use of GenAI in the next 12 to 18 months. Both procurement professionals and solutions providers should be taking action now or risk being at a disadvantage over the next three to five years."

Gartner held its Supply Chain Symposium/Xpo in Orlando

How procurement can leverage GenAI

Gartner recommends several steps for taking advantage of GenAI in contract management, including:
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Key facts
  • Move beyond a digital repository of contracts to a contract lifecycle management (CLM) solution that supports authoring and negotiation of contracts
  • Start quantifying risk in the contract clauses by using current contract templates to understand the main terms negotiated in various contract types
  • Partner with legal on defining risk across terms that are not business-led and outline the roles and responsibilities of both groups with a more digitally enabled future-state negotiation process
  • Evaluate current partners and explore new vendors to identify those that will support the organisation’s ambition. These use cases are distinct and may not be offered by a single vendor.

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