When most people think of generative AI, they think of the current popular applications, like creating text, images, video, and music with near-human skill. But AI has many applications beyond these uses that can be game-changers in the procurement space.

In procurement, generative AI can analyze current spending trends, predict future needs, prevent delays, and identify cost-saving opportunities without sacrificing autonomy or strategic decision-making. It can successfully manage busywork and catch issues that fall through the cracks, allowing procurement teams to spend less time putting out fires and more time creating value. 

Let's look at the strengths of an AI-enhanced procurement experience and the surprising ways it's helping organizations achieve their goals in less time.

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What is generative AI in procurement?

Generative artificial intelligence (GenAI) in procurement leverages advanced algorithms and pattern analysis to produce accurate contextual search results, optimize inventory selection, and identify top suppliers. Its ability to consolidate and make inferences makes it ideal for streamlining decision-making for procurement and finance leaders. With AI tools, you can analyze data, predict market trends, and automate routine tasks, boosting efficiency while reducing costs and errors.

While some have been reluctant to make the leap, there’s a strong case for thoughtful adoption of AI-driven tools into the procurement tech stack. 

• AI offers unprecedented efficiency improvements that allow procurement leaders to focus on strategic decision-making rather than getting bogged down in administrative work. 
• AI's predictive capabilities make it easier for procurement organizations to anticipate market shifts and adjust their strategies accordingly, keeping them ahead of changes that could disrupt operations or increase costs. 
• AI advancements in procurement technology also make it easier to surface insights about supplier performance and build better supplier relationships. With AI, teams can choose vendors based on total value and take a data-driven approach to negotiating costs and terms. 

How generative AI eliminates procurement inefficiencies

Agentic AI and generative AI in procurement use complex reasoning and learning capabilities to make the most of your data and tailor their functionality to your specific business needs. AI helps eliminate many common frustrations procurement teams deal with daily. 

Clumsy product sourcing

Some of the difficulties in maintaining strong procurement arise from the limitations of traditional procurement systems and practices. Sourcing products requires time and careful consideration to ensure selection of high-quality items that meet requirements. The process causes procurement professionals to waste valuable time sifting through irrelevant options or increases the risk of purchasing incorrect items. 

With the improvements in generative AI and machine learning, a high-quality AI agent can do the heavy lifting on strategic sourcing, shortlisting items based on your requirements, location, and past shopping trends. AI removes the frustration of dead ends and unclear processes, increasing efficiency in the procurement function.

Manual invoice processing

Manual invoice processing is notably costly and time-consuming, as clerks are limited in how many invoices they can accurately key per hour. Manual processing not only slows down financial operations but also increases the risk of errors, leading to potential discrepancies and operational delays.

AI transforms the tedious aspects of manual invoice processing by automating data entry, validation, payment scheduling, and more. This automated approach accelerates workflows, reduces human error, and enhances capital efficiency so you can grow. 

Poor supplier management

Manual vendor management practices often lead to inefficiencies and misunderstandings, which can translate to costly delays and additional fees. Manually tracking contracts and agreements opens the door to errors, making it difficult to monitor compliance and assess supplier performance. 

AI technology excels at organizing and managing the details of agreements. It can ingest contract data and check transactions, deliveries, and payments against established contract terms. This enables precise analysis, reduces non-compliance, and enhances supplier performance evaluations.

Lack of visibility and insights

Traditional procurement methods often fail to leverage analytics, impacting budget forecasting and capacity planning. Without digital tools, aggregating historical data and identifying trends becomes cumbersome, leading to less accurate predictions. This deficiency hampers strategic decision-making and resource optimization, negatively impacting the bottom line.

Third-party supplier risk management

AI helps mitigate third-party risk in procurement operations by monitoring and analyzing real-time supplier behavior, financial impacts, and contract compliance. AI tools allow you to stay ahead of potential disruptions, enabling informed choices amidst changing conditions. 

For instance, AI might identify possible shipping delays from one vendor and suggest a viable alternative to prevent downstream problems. AI can even make vendor due diligence processes easier by helping evaluate benchmarks and uncover negotiating insights.

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How procurement teams are already using AI to eliminate hidden costs

AI empowers procurement teams to identify and eliminate hidden cost drivers through enhanced analytics and trend forecasting. It uncovers strengths and opportunities within your current procurement practice to provide the agility necessary to adapt to a quickly shifting procurement landscape.

Here are a few ways procurement teams are already leveraging AI assistance to streamline workflows and make better buying decisions. 

Stronger approval processes

AI helps expedite procurement processes like approvals by routing requests based on the specific details of each deal. Smart allocation ensures relevant stakeholders are involved where needed, reducing bottlenecks and improving cycle times. 

AI also enhances the approval process by providing concise, at-a-glance deal details to ensure every purchase meets policy requirements. Clear data and parameters enable quick decision-making, allowing approvers to move forward with confidence that transactions comply with interdepartmental standards. 

Faster invoice processing 

AI automates the time-intensive task of processing invoices for payment. It handles the complexities of invoice verification, matching, and payment, eliminating errors and streamlining workflows. 

The power and speed of AI make the process scalable, so companies can grow without bottlenecks. With improved accuracy and procurement process automation, procurement teams can focus on strategic initiatives instead of routine activities.  

Streamlined supplier sourcing

AI uses the information in datasets alongside predictive analytics to identify high-quality vendors that match requirements. Using an AI-powered procurement platform, buyers can search based on supply chain factors like product quality, price, sustainability, and logistical needs to understand the total value of a contract or transaction. This targeted approach eliminates manual supplier vetting, making sourcing more efficient and cost-effective. 

Better spend controls

Unauthorized or “maverick” spend is costly, as transactions that fly under the radar or fail to meet procurement policies can damage the bottom line and sap capital needed for growth. The potential risks of bypassing established procurement protocols range from lost negotiating leverage and higher per-unit costs to quality issues and lower performance. 

AI centralizes all data sources and transactions into a single source of truth. With an AI-enhanced guided purchasing workflow, buyers always know which products and purchases fall within a company's procurement and purchasing policies. AI can also recommend procurement strategies that help businesses unlock discounts, such as meeting volume purchase agreements for additional savings. 

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Getting started with generative AI in procurement—without the overwhelm

Inefficiency isn’t just frustrating—it's also costly. More importantly, the impacts of lagging procurement practices compound over time, leading to more strain on capital and fewer opportunities to grow. Generative AI gives procurement teams the power to get ahead of traditional, manual processes with a low barrier to entry and a quick return on investment. 

Fortunately, you don’t have to reinvent the procurement wheel just to unlock the benefits of AI. As with any new procurement technology, it’s best to take a step-by-step approach to using AI in your tech stack. Look for opportunities to integrate trusted, AI-powered procurement tools into your procurement automation strategy. 

Choose AI platforms and tools that offer a balance of functionality and security: 

• Find options that provide an easy-to-understand user experience and a short implementation time.
• Choose from platforms that allow you to maintain your current procurement functionality and enhance results without rebuilding.
• Look for tools built on proprietary AI rather than open-source large language models (LLMs) that may compromise sensitive information.
• Explore options that use internal operating systems to customize the platform experience and streamline procurement activities over time.
• Select procurement software that integrates with other necessary components of your procurement tech stack, such as accounting tools and enterprise resource planning (ERP) platforms. 

The right AI tools meet you where you're at and scale as you grow. They allow your procurement team to gain user buy-in, experience early wins, and increase functionality as needs change and confidence builds.

Order.co provides all the insight and functionality of an advanced, proprietary AI-powered platform while creating value and savings for your business. Its features allow procurement teams to source the most cost-effective products through high-quality vendors, avoid costly stockouts and substitutions, realize early pay discounts and manage capital efficiency through AP automation and variable net terms capabilities. 

If you’re interested in learning how Order.co’s new AI features can help you unlock value without disrupting day-to-day operations, schedule a demo of Order.co today.