The Future of AI in Procurement: From Cost Control to Value Creation 

In today's rapidly evolving business landscape, the future of procurement is shifting from traditional cost control measures to a focus on value creation. This transformation is largely driven by the integration of artificial intelligence (AI) into procurement processes, which automates tedious tasks and allows procurement teams to concentrate on strategic decision-making and collaboration. 
 
AI in procurement has the potential to significantly reduce costs, with estimates showing a reduction of 15% to 45%, according to data from the Boston Consulting Group. This can be achieved through data-driven insights that optimise supplier negotiations and procurement strategies. The adoption of AI may also result in leaner procurement teams, enhancing cost savings and allowing teams to focus on strategic tasks, as noted in BCG's report.

Procurement Challenges to Drive Your AI Business Case

Through our procurement solutions team’s extensive discussions with roundtable participants across the globe, a recurring theme has emerged: some organisations seem inclined to adopt AI because of its trendiness rather than having a clear business case. 

To address this, our team is committed to educating organisations by first outlining the four areas where procurement can be challenging before identifying specific scenarios where AI could provide substantial value: 

• Shortening lengthy and time-consuming processes: The request for proposal (RFP) process involves extensive paperwork and a significant investment of time. 

• Managing substantial and labour-intensive tasks: Manual handling, processing and analysing large volumes of data is crucial for informed decision-making, but it can be overwhelming and lead to errors and omissions. 

• Ensuring compliance and risk management: Adhering to regulations and mitigating risks are essential aspects of procurement.

3 Ways AGS Helps Organisations Prepare for the Future of AI in Procurement

It is predicted that over the next few years AI in procurement will continue to evolve, suggesting that procurement professionals should embrace AI to stay ahead. Here is a breakdown of AGS’ approach to helping organisations identify the role of AI in procurement processes:

Mapping the Procurement Process

We begin by thoroughly analysing an organisation’s procurement process, breaking it down into its core steps and sub-activities. This detailed mapping allows us to identify specific areas where AI could potentially add value.  

By meticulously charting each segment, we uncover inefficiencies and opportunities for automation, enabling a clear understanding of how AI can streamline operations. This process involves close collaboration with key stakeholders to ensure all critical aspects are considered, from the initial request for proposal to contract management and compliance monitoring. Through a comprehensive evaluation, AGS empowers organisations to leverage AI effectively, transforming procurement into a more efficient and strategic function.

Defining the Value of AI

It is crucial for us to move beyond vague assumptions about AI’s capabilities. In an effort to explicitly understand how AI can contribute to the procurement process, we categorise the potential roles of AI into four distinct areas: 

1. Tasks AI can perform quicker: Identifying activities within procurement that AI is capable of handling at a speed that a human can’t. 
2. Tasks AI can perform better: Pinpointing areas where AI outperforms human capabilities, such as accuracy, scalability or the handling of complex data.  
3. Tasks only AI can perform: Recognising tasks that are beyond human ability but well-suited to AI, such as advanced data analysis or predictive modeling. 
4. Tasks that require human leadership: Acknowledging the parts of the process that should always remain human-led, such as strategic decision-making or relationship management. 
   

This structured approach helps us clearly identify where AI can play a meaningful role in procurement, the specific value it can deliver, its limitations and any ethical considerations or concerns.

Addressing Stakeholder Concerns

While many stakeholders we have met with are enthusiastic about the potential of AI, some have expressed nervousness about its implementation. By focusing on a balanced approach—highlighting both the strengths of AI and the irreplaceable value of human expertise—we have been able to alleviate some of these concerns. 

Through our discussions, stakeholders recognise the importance of AGS’ thoughtful, structured approach to integrating AI into business processes. By breaking down the procurement process and categorising the roles of AI, we have created a roadmap that maximizes value while maintaining the human touch where it matters most. 

Balancing Human Expertise and AI in Procurement

AI’s integration into procurement processes, as demonstrated by AGS, can deliver significant advancements in efficiency and accuracy, while preserving crucial human expertise. This balanced approach ensures that businesses can harness AI’s potential without compromising the values and insights that only human leadership can provide.