AI in Procurement

What is meant by AI in procurement?

Procurement plays a critical role in any modern organization, thanks to its influence on driving efficiency, optimizing spend, mitigating risks, and enabling strategic growth. Just how successful the procurement function is, however, depends on various strategic, operational, and technological factors.

One such factor is digitization.

As procurement continues to evolve from a transactional function to a more strategic one, it’s unsurprising that more and more leaders are implementing technologies such as AI to transform their processes.

The benefits of using AI in procurement

Increased efficiency

Procurement functions typically need to do more with less. A challenge that’s made all the more difficult as tech stacks increase – companies now use in excess of 130 tools – and the complexity of managing these systems grows, leading to inefficiencies, human error, and a strain on procurement resources.

The use of AI in procurement is therefore crucial for not only maximizing efficiency, but for ensuring more agile and scalable processes. AI can specifically:

• Streamline approval processes, routing approvals to the right stakeholders, at the right time.
• Speed up the process of contract reviews, automatically flagging key information to the relevant teams.
• Enable effective renewal management, ensuring procurement teams have sufficient time to review subscriptions.

Greater cost savings

AI can also help procurement teams achieve maximum cost optimizations and savings. There are a number of ways this can be achieved:

• Providing support in negotiations – Certain AI procurement tools will be able to analyze contracts to recommend better terms or flag unfavorable clauses. This insight can be leveraged during negotiations, helping procurement teams to secure the best possible deal on any contract.
• Spend analysis – The best platforms will also analyze spend, helping to identify inefficiencies such as instances of duplicate or redundant software. In addition to this, they can provide user-level insights, highlighting over-commitment and wastage across your entire SaaS stack, pinpointing areas where you can make immediate savings. As an example, you may find that certain tools are being under-utilized, which is often the case with IT management software and content management systems.
• Price benchmarking – With many software vendors opting to obscure their pricing, there is often a huge disparity between what any two companies are paying for the exact same offering. An AI-powered procurement platform such as Vertice tackles this problem by providing invaluable intel into the pricing and discounting information for more than 16,000 providers worldwide. This allows organizations to drastically reduce their spend by an average of 30% – often substantially more.

‍See how one vacation rentals company saved $155,000 on a single SaaS contract

Risk mitigation

Organizations that leverage AI within their procurement processes also stand to minimize risks, such as:

• IT compliance risks – AI procurement software automatically sifts through contracts, providing CIOs and CISOs with easy access to the most useful materials for all major vendors. This not only includes their certifications, but also highlights their compliance with frameworks such as GDPR, ISO27001, and SOC2. In addition to this, the best AI procurement management platforms will detect instances of shadow IT, in turn enabling companies to minimize the risk of cybersecurity threats and data breaches.
• Financial risks – AI-powered procurement platforms that detect shadow IT can also inadvertently prevent unauthorized purchases and therefore unbudgeted spending. Their renewal management capabilities can further prevent organizations from paying for unwanted auto-renewals.
• Legal risks – By highlighting and extracting key data privacy and security clauses from vendor contracts, platforms such as Vertice can ensure compliance with regional data protection laws. In fact, Vertice’s contract analytics feature can also ensure that everything is above board and that nothing critical has been overlooked or misinterpreted.

‍Learn more about Vertice’s Diligence Insights functionality

Data-driven insights

When it comes to procurement, data is power. Fortunately, AI-powered procurement tools can provide this data, often in the form of:

• Usage analytics – Having an understanding of how each tool within your tech stack is being utilized, you can make more informed decisions on whether to reduce licenses, change plan types, or even terminate the contract. ‍
• Purchasing inefficiencies – While procurement data can help you pinpoint where the inefficiencies exist within your approvals process, the right platform will also provide recommendations on how to resolve these issues.

Examples of how AI is being used in procurement

‍Speeding up the procurement process

Organizations that leverage AI within their procurement function can significantly expedite approvals – a common bottleneck that often results in delayed project timelines, weakened purchasing power in negotiations, and reduced operational agility.

When companies rely on manual handoffs between stakeholders, delays are somewhat inevitable. By automatically routing purchase requests to the appropriate stakeholders based on predefined rules – and re-routing if the required stakeholder hasn’t responded to the request within a certain timeframe – AI ensures that approvals happen faster, helping to achieve more streamlined procurement cycles.

See how one company was able to speed up its procurement processes by as much as 55% with Vertice

Securing the best possible deal on any contract

One of the ways procurement teams can gain buyer power is by finding out what other companies are paying for the same subscriptions. The problem is, pricing transparency remains a huge issue across the SaaS sector, making it difficult for companies to know whether they’re getting a good deal on their subscriptions, let alone the best possible deal.

Top AI procurement and spend management platforms can provide valuable pricing intel to help tackle this issue. As an example, Vertice enables this by obtaining the pricing and discounting data for more than 16,000 software vendors across the globe, using it to inform negotiations.

That’s not the only way that AI can help procurement leads get better software deals though.

By sifting through the contents of any software contract, platforms such as Vertice can also benchmark key terms against the contracts of other customers using the same provider. This allows companies to negotiate more favorable terms, such as introducing caps on price rises at the point of renewal.

Improve your procurement processes with Vertice

Many companies are already using Vertice‘s procurement orchestration tool to automate, accelerate, and streamline their purchasing.

See for yourself how one tech talent software provider partnered with Vertice and saved 115 hours on contract negotiations, and achieved more than $330,000 in savings in just three months.

Alternatively, take a self-guided tour of our platform.