AI in Procurement: Understanding its use for optimizing your spend management

Artificial intelligence (AI) is rapidly transforming the business world, and the field of Procurement is no exception. And though there’s a narrative of adoption hesitancy, the truth is that 79 percent of people in the workforce have already had at least some exposure to AI, according to a survey from McKinsey. As interest and adoption of AI tools continues to increase, taking advantage of this opportunity can help Procurement teams improve efficiency, gain valuable insights, and make stronger spend decisions. 

What is the use of AI in Procurement?

Procurement processes are often inundated with tedious and repetitive tasks, transactional documents, and immense amounts of data. Adopting AI with procurement in mind can ease the lift of many of these tasks and drive further operational efficiency. 

AI allows Procurement organizations to solve complex problems more seamlessly and effectively. This can be achieved by embedding AI into a variety of software applications or opting into tools with AI capabilities, from spend and contract management to strategic sourcing. Proper integration can result in automating and simplifying many time-consuming processes in procure-to-pay and sourcing cycles, resulting in cost savings and higher productivity. 

The right AI tools can help Procurement experts gain greater insight into complex and large sets of data that would otherwise take much longer to analyze. Getting the answers you need in a more timely fashion can make it significantly easier to put your data to action and make better spend decisions. 

What is the role of AI in procurement? 

With so much data available to procurement teams, there’s enormous potential to be found with AI adoption. As this volume of data is likely to only increase with time, having the correct tools in place to manage it is critical for optimizing business decisions. 

Utilizing AI in tandem with a Spend Management Platform can allow you to identify gaps you might not otherwise see as quickly. For instance, if you’re looking for clarity between two applications in your portfolio, but are having trouble distinguishing their offerings, consider interacting with embedded AI. It can help provide additional details and data points that you might’ve otherwise spent hours searching for. 

It can also help with: 

• Intake and renewals. AI can help you streamline your intake processes and understand when certain contracts are ending by giving you the tools and data you need to better negotiate contracts and never miss a renewal.
  
  
• Contract management. While seamless contract management is every Procurement professional’s goal, employees are often signing contracts without Procurement’s knowledge. This results in a lack of awareness around auto-renewals, duplicative subscriptions, or deals that aren’t beneficial to the company. AI can help analyze your portfolio to ensure that all subscriptions and contracts are accounted for. 
  
  
• Access to information.  Most Procurement teams have to work across multiple systems — from contact management, spend reporting, and collaboration — and maintaining the correct information can be complicated. And often, you just want a quick answer. AI can provide the relevant information without employees needing prior knowledge of where it is stored.  
  
  
• Data extraction and insights. By extracting data from invoices and contracts, AI can help speed up processes and provide a more accurate picture of your spend.

How can AI help in procurement? 

Artificial intelligence thrives on tackling intricate problems involving vast amounts of data, especially when success metrics are well-defined. While specific challenges and opportunities vary across organizations, there are several key areas within procurement that can benefit significantly from the power of AI.

The key areas where AI can support Procurement:

• Make better spend decisions
  • One of the benefits of AI is its ability to provide real-time analytics and insights to support your spend decisions. Whether you’re looking for usage, pricing, or upcoming renewals, pairing AI with a Spend Management Platform can help drive better productivity. 
    
    
• Get purchasing assistance
  • Understanding which team members are using what applications can streamline operations, reduce SaaS sprawl and shadow IT, and assist with purchasing. AI that is built in with your spend management solution can quickly analyze your entire SaaS portfolio and provide you with concrete insights so you can cut costs and make better purchasing decisions. 
    
    
• Gain time back
  • By getting the answers you need, quickly, you can ramp up your productivity and recapture the time to focus on more creative and strategic tasks. By automating reporting, analyzing data, and summarizing contract details, AI can provide actionable insights so you can spend your time on high level tasks instead of mundane (although important) steps. 
    
    
• Optimize vendor relationships 
  • Strategically managing all of the vendors in your portfolio can be a laborious endeavor. With AI, you can level up your vendor management with easy to understand data sets that can assist with general management, negotiations, and renewals. 

When debating whether or not to use AI in your procurement strategy, consider potential challenges you may be facing and how an AI tool  can provide an easy solution. 

Potential spend management challenges and solutions with AI 

From the complexities of categorizing millions of transactions, to the ever-growing volume of dispersed data, procurement teams often struggle to maintain efficiency and derive valuable insights from their spend. AI can offer innovative solutions, paving the way for a more streamlined and data focused approach to spend management.

• Spend categorization: Procurement organizations must categorize millions of unique transactions, a task made even more challenging by the sheer variety of transaction data flowing from invoices, purchase orders, and more. While complex category hierarchies are created with good intentions, they are difficult to manage, hindering data quality and the efficient classification of new information.
  Correctly classifying spend into procurement categories is a huge rock for Procurement. Spend classification holds a large use case for artificial intelligence as AI can greatly help with automating the classification process. 
  
  
• Need for better, quicker data: Procurement spend analysis has been historically confined to annual or quarterly cycles, limiting agility and responsiveness. Automation through AI can revolutionize this process, reducing the cycle time. This empowers leading Procurement teams to make decisions based on actionable data that aligns with evolving business needs.
  
  
• The amount of data is growing: Procurement organizations face a growing challenge in unifying their spend data. While data volume across source systems like enterprise resource planning systems (ERPs), purchase-to-pay solutions, and other finance platforms continues to rise, each system often holds only specific data points. Integrating these sources with AI can help create a single, cohesive source of spend data. 

As use of AI continues to grow, its impact in the procurement space feels invaluable. By automating tasks, analyzing vast amounts of data, and providing real-time insights, AI coupled with a Spend Management Platform empowers procurement teams to optimize spend, strengthen vendor relationships, and make smarter spend decisions. As the technology evolves, embracing AI will be essential for organizations seeking to gain a competitive edge in today’s dynamic marketplace.

About Productiv: 

Productiv is the only Spend Management Platform built for bringing teams together. From new purchase requests to renewals, and everything in between, Procurement, Finance, and IT work in Productiv to align around trusted data, get AI powered insights, collaborate, make smarter decisions, and have confidence in every investment, at scale.

Learn more today.