GenAI in Procurement

As organisations worldwide seek to stay competitive in the modern and mercurial business arena, procurement functions are increasingly looking to technology for an edge. Generative AI (GenAI) is fast emerging as the transformative tool, offering procurement teams the ability to work smarter, faster, and more strategically. With 73% of procurement organisations planning to implement GenAI by the end of 2024, it is clear that the technology’s impact is only just beginning.

H&Z’s latest briefing paper, GenAI in Procurement: First Use Cases, presents over 40 key use cases that demonstrate how GenAI is delivering measurable results across procurement functions. From automating repetitive tasks to enabling data-driven strategic decisions, GenAI is empowering procurement professionals to unlock new levels of efficiency and innovation. Here, we explore key insights and practical applications, encouraging those interested in the full spectrum of possibilities to download the comprehensive briefing paper.

The Evolution of GenAI with Procurement

GenAI’s potential in procurement lies in its versatility. By processing vast data sets, recognising patterns, and generating insights, GenAI supports procurement functions at every stage. The H&Z Procurement Process House framework identifies specific areas where GenAI can deliver value, from early-stage planning to contract management and supplier relationship management.

Key Benefits of GenAI in Procurement

Research shows that integrating GenAI into procurement functions can bring substantial improvements in efficiency, decision-making, and operational effectiveness. Early adopters report:

• 30% faster decision-making: GenAI processes data rapidly, enabling faster, more informed decisions that respond to market dynamics in real time
• 40% reduction in routine tasks: Automation of repetitive tasks—such as data entry, report generation, and contract drafting—frees up time for teams to focus on strategic initiatives
• Enhanced strategic capabilities: GenAI enables procurement teams to proactively manage supplier relationships, assess risks dynamically, and refine long-term planning strategies

Key Use Cases for GenAI in Procurement

Here is a sample of some examples of how GenAI is delivering tangible benefits across different procurement processes:

Plan-to-Strategy (P2S)

The planning phase of procurement is critical, as it sets the foundation for cost management, supplier strategy, and overall procurement efficiency. GenAI provides tools that can analyse and categorise spending, helping teams identify savings opportunities and generate actionable category strategies. By continuously monitoring market trends, pricing, and competitor behaviour, GenAI supports more dynamic and responsive strategic planning.

• Spend Transparency: AI categorises and cleanses procurement data, uncovering areas where cost savings are possible
• Market Intelligence: GenAI analyses market conditions, regulations, and competitive activity to inform procurement decisions
• Category Strategy Monitoring: AI-driven insights enable ongoing strategy adjustments, aligning procurement with business goals

Source-to-Contract (S2C)

The source-to-contract process often involves time-intensive tasks, from generating RfX documents to negotiating contract terms. GenAI enhances this process by automating document drafting, evaluating complex bids, and even suggesting negotiation strategies. It can also generate ‘should-cost’ estimates for products, giving procurement teams a benchmark for cost negotiations.

• RFX Generation: AI helps draft RfX documents by suggesting relevant sections and questions, reducing time spent on document creation
• Contract Management: GenAI assists in contract creation, ensuring compliance, identifying risks, and simplifying renewals
• Negotiation Support: AI provides real-time suggestions on strategies and counteroffers, helping teams maximise value in negotiations

Purchase-to-Pay (P2P)

The P2P cycle covers everything from purchase order creation to payment processing, and it’s an area where GenAI excels at streamlining workflows. By directing users to preferred suppliers, automatically matching invoices, and optimising approval workflows, GenAI eliminates errors and reduces processing time, ensuring smooth transactions.

• Guided Buying: AI directs users to approved products and suppliers, aligning with organisational policies
• Autonomous Matching: GenAI matches purchase orders, confirmations, and invoices, reducing errors in reconciliation
• Approval Workflow: AI suggests optimal approvers and highlights key decision points, accelerating the approval process

GenAI’s Role in Strategic Procurement Transformation

As these use cases illustrate, GenAI is not only enhancing operational efficiency but also enabling procurement teams to take on a more strategic role within organisations. By reducing time spent on routine tasks, procurement professionals can focus on value-driven activities, from improving supplier collaboration to innovating sourcing strategies. The ability to manage procurement functions dynamically, informed by real-time data and insights, is transforming the way organisations approach their supply chains.

The potential for GenAI in procurement is vast, and as the technology evolves, so too will its applications. Organisations that embrace GenAI now will be well-positioned to navigate the complexities of modern procurement and gain a competitive advantage.

‘Unveiling the Future’

For further examination of the Technology and Automation trend in procurement, read our article drawn from the findings in our essential guide, The Procurement Pathfinder 2024: Unveiling the Future: Technology & Automation