What Impact Will AI Have on Procurement in 2025
With the huge impact AI is having across all elements of procurement every day, that trend is likely to continue – according to a number of reports and studies with procurement leaders.
Studies by Deloitte and McKinsey & Company both highlight how procurement leaders expect AI to continue revolutionising procurement as well as plans to continue investing in the technology to enhance their own operations.
“GenAI can already enhance many different workflows in procurement and 73% of procurement leaders at the start of the year expected to adopt the technology by the end 2024," said Kaitlynn Sommers, Senior Director Analyst with Gartner’s Supply Chain Practice.
According to Gartner, 65% of procurement leaders are betting big on AI to sharpen their productivity and decision-making prowess
2025 looks set to be another year where AI is poised to significantly transform the procurement landscape.
Deloitte: Plans for AI investment
To understand the current adoption of Generative AI in procurement, Deloitte surveyed over 100 chief procurement officers (CPOs) from Europe, North America and Asia-Pacific in early 2024, with the findings published in August. The respondents represented a cross-section of industries and organisations.
Deloitte's survey found that organisations believe GenAI will unlock value through enhanced insights and decision-making, productivity gains and cost optimisation.
Most have seen promising early returns on GenAI investments despite implementation challenges. Procurement executives are taking a very serious look at Generative AI.
92% of CPO respondents were planning and assessing Generative AI (Gen AI) capabilities in 2024 - with that being seen with a number of new platforms, programmes, tools and advancements announced over the past 12 months.
Close to 11% of the organisations are currently spending more than US$1m of their annual budgets on Gen AI capabilities for sourcing and procurement in the year 2024.
By the year 2025, this number would be more than double, where 22% of the CPOs are planning to invest US$1million+ in GenAI capabilities.
While 92% of CPOs are beginning to envision the possibilities of this new technology and plan to invest in it, only 37% were piloting or deploying GenAI in procurement at the time of the survey.
Based on the investment plans, this number is expected to grow rapidly in the next few years. For the early adopters, data and analytics, contracting and sourcing are the top areas for exploration, with 38% piloting or deploying Generative AI in the spend dashboard. Another 19% focus on automating RFI/RFP/RFQ generation.
Among those who have piloted or deployed artificial intelligence in procurement, about 50% noted a doubling of return on investment (ROI) compared to traditional methods, with some advanced implementations seeing ROI of more than 5 times.
Driving superior value through digital procurement
McKinsey's 'Driving superior value through digital procurement' report found that by 2025, AI-powered procurement solutions are expected to increase transaction speeds by up to 40% and significantly reduce operational costs.
According to the Economist Impact Survey, sponsored by SAP Ariba, Across the procurement-verse: changing trends in the procurement function, it shows that digitalisation has become a pressing priority for procurement leaders.
Accelerating digitalization ranks highest among procurement priorities for the next 12 to 18 months. With 44% of leaders emphasise AI adoption.
A report from Roland Berger has suggested that the new technology could prove crucial in the months ahead – with many optimisation approaches in the industry to boost efficiency and productivity having often already exhausted their potential.
It suggested that AI could help improve compliance by up to 100% by 2025.
A poll of the experts found that 56% of respondents identified source-to-contract agreements as the top area where GenAI could be effective for them.
In particular, 16% said they felt contract management would be the best use, along with 14% who said supplier market screening and tender handling would be enhanced by the use of AI.
Gen AI reshapes procurement
Ivalua's Future of Work in Procurement survey, a US-focused study found that:
- 75% of respondents reported increased investment in generative AI,
- 67% noted increased automation
- 72% observed improved data analysis and insights.
- 60% of leaders believe Gen AI will transform the job landscape by creating new roles and redefining existing ones.
- 48% of respondents view this change as an opportunity
- 11% see it as a threat
- 41% taking a neutral stance.
With these responses demonstrating an optimistic or balanced outlook toward using Gen AI in the future.
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