Wayne Clark, Vice President of Consulting at GEP, delves into the three phases of procurement transformation.
Artificial intelligence (AI) is reshaping industries by enhancing efficiency, improving accuracy and enabling data-driven decision-making.
Its transformative power lies in its ability to automate complex processes, streamline workflows and open doors to innovative strategies across various sectors.
In the procurement industry, AI has proven particularly impactful. It enables organisations to optimise supplier selection, predict market trends and explore sustainable practices such as adopting circular economy models.
Yet, despite its promise, scepticism remains about AI’s potential.
Wayne Clark, Vice President of Consulting at GEP, is unequivocal in his belief that AI will revolutionise procurement.
“AI is not hype,” he asserts. “It’s already a US$200bn industry and projected to grow to US$1.2tn by 2030.
“From voice assistants to fraud detection, AI is everywhere and it’s evolving at an astonishing pace. […] As AI-driven innovations mature and more disruptive use cases emerge, procurement as we know it today will be upended, replaced by something more powerful, efficient and integrated with AI systems.”
HOW IS AI USED IN THE PROCUREMENT INDUSTRY?
- AI-driven contract management tools to catalyse drug development and streamline vendor integration
- Access and identify alternative suppliers
- Centralise procurement activities
- Analyse consumer behaviour
- Demand forecasting
Driving procurement transformation with AI
AI is steadily reducing inefficiencies by automating routine tasks like contract management, invoice processing and supplier selection.
As businesses increasingly embrace digital transformation, procurement teams are leveraging AI to make informed decisions, anticipate market shifts and identify cost-saving opportunities through real-time analysis of large datasets.
AI’s capabilities go beyond automation, fostering collaboration by generating actionable insights. This evolution turns procurement into a strategic advantage for organisations. According to Wayne, the operating model for procurement will shift significantly alongside AI’s growth.
“AI will create more empowered procurement teams equipped with advanced tools, fundamentally reshaping the system of roles, workflows and controls,” Wayne explains.
“This new model will greatly exceed today’s standards in quality, speed, value and cost efficiency. It will be a major boon to leadership teams and also require new roles, including ones that don’t even exist yet, to design, train, validate and control AI systems.”
The three phases of procurement evolution
As procurement grapples with digital disruption, agility demands and regulatory complexities, AI emerges as the key to staying competitive and relevant.
Embracing AI allows organisations to effectively manage risks while focusing on strategic initiatives by automating repetitive tasks. Wayne identifies three phases of AI-driven transformation in procurement:
The Assist Phase
In this initial stage, AI tools are used to boost productivity, though reliance on human judgment remains high. Procurement teams grapple with low AI fluency and ongoing concerns about data privacy.
“Chatbots assist with supplier queries, while AI tools help score RFP responses, analyse bids and suggest award scenarios,” Wayne notes. “However, human judgment remains critical. In phase 1, the tools aren’t useful enough to meaningfully replace humans.”
The Perform Phase
In this phase, AI capabilities expand, enabling more comprehensive automation and integration of procurement processes. Digital centres of excellence begin to take shape, focusing on workflows driven by AI. Capabilities in this phase include automating category strategy development, contract renewals and invoice reconciliations while mining data for deeper value and improving risk mitigation.
The Empower Phase
The final stage sees procurement teams shift their focus to complex, strategic initiatives, leaving routine tasks to business users equipped with powerful AI tools. AI enables value-chain optimisation, proactive risk management and strategic supplier engagement.
“AI will empower end users to handle common procurement tasks with minimal human intervention,” Wayne observes. “Procurement’s outcomes will shift toward value-chain optimisation, proactive risk management and strategic supplier engagement.”
A vision for the future
AI’s transformative journey in procurement is far from over. As organisations harness its potential, the procurement function itself will evolve into a smarter, more agile operation centred on data and digital tools.
Wayne concludes with a compelling vision of this future: “AI will render the procurement function as we know it obsolete. What will emerge is a smarter, more agile operation with data and digital tools at its core. This new model will allow procurement teams to focus on high-value activities while empowering business users to manage simpler tasks themselves.”
