Predictive Procurement as Imperative: Balancing Risk and Opportunity with AI and Emerging Technologies

In today's rapidly evolving procurement landscape, the integration of AI and emerging technologies is a topic that commands attention. Our 2024 Global State of Business Procurement Report reveals that these technologies are perceived as both a risk and an exciting opportunity, generating significant interest and debate within the procurement community. Additionally, our data shows that leaders in this field are notably aggressive in their estimates about AI's readiness for implementation into procurement.

Predictive Procurement: Ready or Not

Predictive procurement is a strategic approach that leverages advanced technologies, data analytics, and artificial intelligence (AI) to forecast, anticipate, and proactively address procurement needs and challenges. It uses historical data, market trends, and predictive algorithms to make data-driven decisions and optimize procurement processes. Its goal is to enhance efficiency, reduce risks, and drive cost savings. By anticipating future demand, identifying potential supply chain disruptions, and optimizing supplier relationships, predictive procurement can help organizations move beyond reactive procurement practices and become more agile, resilient, and strategic in their procurement operations.

In 2024, Amazon Business conducted a proprietary survey of over 3,000 procurement decision-makers and C-level participants. Respondents belonged to a variety of industries across the public and private sectors, and are located in the US, France, Germany, Italy, Japan, Spain, and the UK. Our findings show that AI and technological change are top-of-mind concerns for a significant portion of decision-makers and senior leaders.

Without prompting, many respondents expressed concerns about the potential risks associated with these technologies, including security, accuracy, and complexity. These reservations indicate a cautious approach to the adoption of a predictive procurement strategy and related technologies. One US VP in the financial services industry stated, “We are talking in a world where now [generative] AI, all those things are reality. And it's all very new. That definitely is a challenge, meaning that companies need to get better insights into what that means for their business and then also what that means for the suppliers that they work with, whether it's from a risk standpoint, mitigation of risk, or also having better visibility in terms of improving the business processes.”

In keeping with this perspective, just under half (45%) of respondents said they would be willing to incorporate AI into their procurement efforts immediately or within a year – but 80% would be willing to do so within two years. Looking at industries, it’s no surprise the tech sector (52%), followed by telecom (51%) and medical/pharmaceuticals (49%), is leading the charge to adopt AI immediately or within a year. Healthcare services is the least likely to do so (38%), followed by government (39%).

Finding Efficiency Through Technology

Procurement’s role has changed significantly amid the challenges of the past few years. One VP at a British telecommunications company put it bluntly, “Two years ago, you never heard of a CEO on an earnings call talking about sourcing or supply chain. Now, it’s a big part of every earnings call. All of a sudden [procurement’s role] is geopolitical, it's economic.”

But many procurement leaders are finding that stepping into the spotlight brings with it a new set of challenges. Internal procedures, decision-making, and prioritization now require more strategic deliberation, additional steps, and greater input from stakeholders than ever.

It’s no surprise then that 47% of respondents listed efficiency and complexity as a significant challenge for their procurement organization, making it the number one challenge among respondents today. However, many decision-makers expressed a strong desire to invest in technology particularly for the purpose of increasing efficiency. Indeed, 98% of survey respondents are planning investments in analytics and insights tools, automation, and AI in the next few years.

It’s no surprise then that 47% of respondents listed efficiency and complexity as a significant challenge for their procurement organization, making it the number one challenge among respondents today. However, many decision-makers expressed a strong desire to invest in technology particularly for the purpose of increasing efficiency. Indeed, 98% of survey respondents are planning investments in analytics and insights tools, automation, and AI in the next few years.

A significant number of organizations are already taking advantage of advanced procurement technologies and recognize this crucial moment in time – but uncertainty remains. The VP at a British telecommunications company summarized the questions they are sorting through as they determine their way forward: “Which digital tools do I implement and how? They're coming very quickly—you've got everybody using automation, machine learning, and AI. Do I buy a tool now? Do I wait? Do I outsource those services?”

Despite lingering uncertainty, it is clear that time is of the essence. Doug Gray, VP of Technology of Amazon Business, recently observed, “By investing in tools that digitize, automate, and streamline core functions and processes, procurement leaders can shift their teams to focus less on function, and more on strategy. This realignment of priorities is beneficial for procurement teams, as well as for the rest of their organizations—and it’s an important milestone to reach for businesses looking to drive innovation and efficiency.”

Reassuringly, the survey responses underscored an interest in technology and widespread recognition of the need to keep pace. Virtually all respondents are interested in learning about the use of AI/machine learning (ML) in procurement, including opportunities for:

• Quicker or deeper data analysis (44%)
• Time savings (43%)
• Different systems to connect more seamlessly (43%)

Summary of Findings

In today's rapidly changing business environment, success hinges on an organization’s adept utilization of automation, data analytics, and, yes, AI. Our survey findings underscore the importance of investments in cutting-edge technology, advanced tools, and strategic partnerships that help procurement leaders foresee and navigate the complexities of an ever-evolving business environment. These investments can bolster confidence, enhance resilience, and amplify agility.

As organizations continue to invest in technology and embrace AI-driven solutions, it is vital to address concerns and challenges associated with these technologies. Moreover, the willingness of leaders and decision-makers to adapt and learn reflects a forward-looking approach to harnessing technology's full potential. By carefully navigating these challenges and striking the right balance between risk mitigation and technological advancement, organizations can harness the transformative power of AI and emerging technologies to thrive in the evolving world of procurement.