Artificial Intelligence in Procurement:
3 Areas To Implement AI in Procurement in 2024 & Beyond

AI in Procurement Summary:

1. Using AI in Demand Forecasting 

Chipotle Real Life Example for Using AI in Demand Planning! 

2. Using AI When Doing Spend Analysis! 

IBM’s Real Life Example in Using AI in Spend Analysis

3. Using AI in Supplier Onboarding

Real Life Example: SAP Ariba 

Artificial Intelligence (AI) has transformed various industries across the globe– and procurement is not different. Artificial intelligence in procurement helps automate repetitive tasks, analyze large amounts of data, and enhance strategic sourcing.

As artificial intelligence in procurement continues to gain traction globally, procurement professionals are seeking innovative ways to leverage AI and unlock unprecedented value for their businesses.


Did You Know? According to Market Research Biz "Global Generative AI In Procurement Market Report" Global Generative AI in procurement market size is expected to be worth more than $2 billion by 2032.


Here are 3 areas where you can implement artificial intelligence in procurement this year: 

1. Using AI in Demand Forecasting 

Demand Forecasting basically refers to the process of predicting future demand for a particular product or service. Traditionally, this process has been performed manually using historical data and expert opinions. 

However, the use of AI in demand forecasting has made this process more efficient and accurate. You can now use artificial intelligence in procurement to analyze vast amounts of data– both structured and unstructured– much faster than human experts. 

By employing an AI-driven demand forecasting solution, you can quickly analyze sales data, market trends, and customer behavior to gain valuable insights. You can subsequently use these insights to make more informed decision-making to optimize your overall procurement processes. 

Also read: The 7 Step Strategic Sourcing Process

Chipotle Real Life Example for Using AI in Demand Planning! 

A prime example of artificial intelligence in procurement with regards to demand forecasting is the restaurant chain Chipotle, which has implemented AI-powered demand forecasting to optimize its inventory management. The solution uses POS data, forecasting models, and AI algorithms to predict demand at each restaurant location. 

Moreover, artificial intelligence (AI) also predicts inventory needs, which helps in ensuring that all the necessary supplies are ordered, and there is no understocking or overstocking of crucial materials for Chipotle. 

Here’s what you can learn from this:

  • AI algorithms and forecasting models can significantly enhance the accuracy of demand predictions.
  • Accurate demand forecasting by implementing artificial intelligence in procurement can significantly help in minimizing waste and reducing holding costs.
  • AI-powered systems can quickly adapt to changes in demand patterns, enabling you to respond swiftly to unexpected shifts in the market.

2. Using AI When Doing Spend Analysis! 

Spending analysis involves gathering, organizing, and examining an organization's spending data. Implementing artificial Intelligence in procurement can significantly enhance spend analysis by leveraging natural language processing (NLP) and computer vision

These technologies enable the extraction and classification of data from a wide range of sources, including invoices, contracts, purchase orders, receipts, and more. 

AI also utilizes machine learning and deep learning techniques to detect patterns and irregularities in spending data, including instances of fraud, duplicate payments, overcharges, and more– all of which are critical in preventing financial losses before they occur.

IBM’s Real Life Example in Using AI in Spend Analysis:* 

A real-life example of AI in spend analysis is of IBM’s Watsonx. The technology giant uses AI to analyze its $57 billion annual spend across 150 countries and 15,000 suppliers. 

IBM's AI system can process millions of documents in multiple languages and formats, and provide insights into spending trends, risks, opportunities, and best practices.

Here’s what you can learn from IBM’s example:

  • AI tools can greatly help automate the extraction and classification of data from diverse sources.
  • Insights gained from AI-powered spend analysis can positively inform strategic sourcing decisions to negotiate better terms with suppliers
  • Encouraging a culture of innovation within the procurement team by adopting AI can lead to more efficient processes, cost savings, and a competitive advantage.

3. Using AI in Supplier Onboarding

Supplier onboarding involves the registration of new suppliers into an organization's procurement system. When it comes to supplier onboarding, it's important to thoroughly verify the supplier's identity, compliance, and performance. 

Supplier onboarding is crucial as it plays a vital role in guaranteeing the quality of the supply chain. Artificial intelligence in procurement makes supplier onboarding more efficient by utilising NLP and optical character recognition (OCR) to scan and verify important supplier documents like certificates, licences, tax forms, and more. 

In addition, artificial intelligence in procurement in the form of supplier onboarding also utilizes machine learning and sentiment analysis to evaluate the supplier's reputation, reviews, ratings, and more. 

Also read: Selecting A Vendor: Your Vendor Selection Criteria

Real Life Example: SAP Ariba 

An excellent illustration of AI in supplier onboarding is SAP Ariba. The cloud-based procurement platform uses AI to streamline and simplify the supplier onboarding process for its customers. 

The AI system of SAP Ariba is capable of verifying supplier information, conducting compliance checks, matching suppliers with relevant opportunities, and offering feedback and support to the suppliers.

Here are the key takeaways you can take from this real life example:

  • AI can significantly speed up the verification of supplier credentials by automating the scanning and validation of certificates, licenses, tax forms, and more.
  • With AI, compliance checks can be conducted more thoroughly and efficiently as AI systems can automatically ensure that suppliers meet all regulatory requirements.
  • AI systems can provide immediate feedback and support to suppliers during the onboarding process.

Artificial Intelligence in Procurement is a Game-Changer! 

AI is certainly a game-changer in procurement if implemented effectively. It can optimize operations, enhance performance, and ultimately deliver more value to organizations and stakeholders.

The three areas discussed in the article– demand forecasting, spend analysis, and supplier onboarding offer great opportunities for businesses to start their AI adoption journey. 

With AI-powered solutions, businesses will continue to streamline their procurement processes and create significant value in the next few years.

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