Assess AI’s impact:
Determine where Gen Al will add value, both within the procurement function and enterprise-wise. Define specific use cases that the organization can explore through proof-of-concept efforts.
The Future of Procurement: Gen AI’s Impact
Robust new AI can revolutionize procurement by automating most tasks, but some challenges remain. Here’s how to get ahead of them.
Estimated read time: 4 minutes
Gen AI gets a lot of buzz for its potential to reimagine how businesses work, so it can be hard to separate close-in opportunities from what-if aspirations.
But one area of the business where the attention is definitely warranted is procurement. Indeed, we believe Gen AI will transform the procurement function—quickly, unequivocally, and for the better.
The technology will reshape procurement’s operating model, automating tasks and enhancing efficiency. It will also elevate the status of procurement within the organization, as its accelerated transformation becomes a guiding light for others to follow. This, in turn, will give procurement leaders (finally!) a seat at the strategy and innovation table.
Many Gen AI use cases within large organizations are fraught with uncertainty related to how to integrate the technology safely and responsibly. Within procurement, leaders don’t see as many obstacles: A new KPMG survey of 400 procurement and outsourcing executives found that an astonishing 96 percent have already made progress toward implementing Gen Al.
That said, challenges and risks still exist, including a quickly changing regulatory landscape and the lack of skilled talent to develop, implement, and scale Gen AI. That’s why it’s essential that leaders begin by building an institutional framework that aligns with the organization’s risk tolerance, cultural complexity, and investment appetite.
Here’s what procurement leaders need to know to prepare—and benefit from—the quickly emerging Gen AI revolution.
96%
The percentage of procurement and outsourcing executives that have already made progress toward implementing Gen Al, according to KPMG research.
Procurement’s mandate broadens
Why are procurement leaders so bullish on Gen AI?
For starters, KPMG simulations have found that the technology has the capacity to automate 50 percent to 80 percent of current procurement work. This will equip procurement organizations with more time and resources, enabling them to negotiate more effectively (and with better insights), exert greater influence on each transaction, and reduce costs.
Gen AI will also enhance the management of supplier relationships, optimize performance, and mitigate risks. Interactions will be guided, intuitive, and streamlined, as Gen Al will be able to automatically populate much of the information that users manually enter into systems today.
In addition, procurement will expand its reach into areas that it doesn’t support today because of bandwidth, capability, or credibility. With Gen Al, procurement will be positioned to deliver deep insights into category and sourcing strategies, process improvement ideas, and supplier development plans.
Along with transforming itself, procurement will play a leading role in the organization’s broader adoption of Gen Al, helping internal stakeholders manage their AI implementations and realize efficiency gains as well.
As a result, procurement—long thought of as a shared service—will earn greater influence on decision-making, positioning it to lead all negotiations and support a wider range of spend-related activities. In addition, Gen AI will enable procurement to influence more of the organization’s requirements and demands, develop deeper sourcing insights across a broader array of spend categories, and help the organization arrive at better sourcing decisions.
Gen Al also enables procurement to foster innovation within the company’s products and services, providing insights into supply market trends, technology disruptions, and emerging value chain models. Additionally, it will expedite sourcing and onboarding, facilitating the inclusion of new suppliers with innovative capabilities.
50-80%
The amount of work within the procurement function AI has the capacity to automate, according to KPMG simulations.
But first, some essential steps
To successfully implement Gen AI within procurement—and fulfill on the promises above—leaders must rise above the day-to-day and assess the strategic direction of the overall organization.
The implementation and application of Gen AI within procurement must map to a larger institutional framework that considers the organization’s risk tolerance, cultural complexity, and investment appetite for technology-led transformation. Here are six initial steps to take:
Start small:
Once you’ve scoped a few use cases, build them. Then expand their scope as you prove out the value. Scoring some quick wins will help build momentum within the larger organization.
Consider build versus buy:
Some organizations require specific capabilities and are leveraging off-the-shelf Gen Al solutions to accelerate their execution. The major downside of buy is that multiple AI assistants can quickly lead to a fragmented user experience.
Double-check readiness:
Many organizations will need to make foundational improvements in data quality, completeness, and integration to effectively scale Gen Al solutions and realize full value.
Assume a leadership posture:
Procurement executives often complain they lack a “seat at the table” and are seen more as a compliance and transaction processing group than as a strategic partner. This is your chance to change that.
Ensure responsible Al:
A successful Gen Al implementation must proactively address risks and security implications, including accuracy of outcomes, data protection and privacy, and loss of intellectual property.
Overcoming obstacles
There’s little doubt that Gen AI can transform the procurement function. But getting from here to there will require companies-and procurement teams-to first clear institutional and regulatory hurdles.
In our latest report, “How generative AI will transform procurement as we know it,” we outline the challenges, present practical solutions, and reveal a responsible AI framework that will help procurement leaders mitigate the threats and make the most of the technology now and into the future.
Unleashing the power of generative AI in procurement
Explore more in our full report, including practical solutions and responsible AI framework.
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Meet our team
Len Prokopets
Advisory Managing Director, Procurement & Outsourcing Advisory, KPMG US
Dipan Karumsi
Principal, US Consulting Sector Leader for Life Sciences, KPMG LLP
Len Prokopets
Advisory Managing Director, Procurement & Outsourcing Advisory, KPMG US
Dipan Karumsi
Principal, US Consulting Sector Leader for Life Sciences, KPMG LLP
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