Enterprises must explore AI-powered platforms to transform procurement processes

Procurement leaders often face challenges in navigating the lengthy value chain, entailing manual intervention, compliance, and supplier inefficiencies. Leadership must manage numerous vendors, diverse contracts, and complex global supply chains, contributing to higher operational costs. Given the dynamic market conditions, geopolitical instability, and the rise of agentic AI, many enterprises are now considering the potential of AI-enabled transformational procurement platforms.

AI-driven innovations are transforming the procurement landscape by improving sourcing decisions, managing suppliers, and streamlining transactional procurement. By integrating targeted technologies throughout the value chain, service providers play a pivotal role for leaders to reduce inefficiencies, strengthen supplier relationships, and gain deeper insights into spending and performance.

AI startups are transforming procurement into a strategic enabler of business success

HFS Research explored a few innovative AI-led technology platforms (see Exhibit 1) that are shaping the procurement ecosystem. From streamlining requisitions to enhancing payment receipt functions in procurement, these platforms use modern solutions to address pain points, enabling leaders to move from operational execution to strategic enablement. Service providers can benefit from effective partnerships with such companies to further drive end-to-end solutions across the source-to-pay (S2P) value chain.

Exhibit 1: AI-enabled platforms and startups disrupting procurement processes

Source: HFS Research, 2024

AI platforms are enhancing strategic sourcing—a key aspect of the supply chain

Strategic sourcing has evolved beyond focusing on cost savings and efficiency to now building resilient, data-driven supply chains. AI-powered procurement contributes to enterprise-wide outcomes, including supply chain resilience and alignment with environmental, social, and governance (ESG) standards.

Companies such as Archlet and Tropic improve strategic sourcing by enhancing decision-making and optimizing supplier relationships. For instance, Daily Harvest, a direct-to-consumer food company, reduced software spending by 20% and saved time using Tropic’s platform, allowing it to focus on core business activities.

Emmi Group, a Swiss dairy company, adopted Archlet’s platform to standardize sourcing processes, enhancing collaboration and decision alignment. This strategy enabled Emmi to focus on in-depth analysis of their offerings, resulting in improved sourcing decisions considering both commercial and sustainability factors.

Streamlining and centralizing the procurement workflows for each category is crucial

Category management is crucial in procurement—it organizes related goods and services into specific categories, enhances supplier collaboration, ensures compliance, and improves overall efficiency. SaaS platforms improve category management by automating workflows, centralizing supplier information, and providing real-time insights for better decision-making.

For instance, McAfee, a global cybersecurity firm, adopted Omnea’s platform to centralize procurement workflows and supplier data. This significantly reduced task completion times, enhanced procurement process transparency, and improved team collaboration. The streamlined approach boosted efficiency while delivering a more user-friendly experience across the organization.

Smart contract management simplifies compliance and improves data accuracy

Contract management ensures that supplier agreements align with business objectives and compliance requirements. Monitoring performance and enforcing terms help reduce risks, lower costs, and maximize procurement value. AI-powered platforms enhance this efficiency for enterprises.

For instance, Form3, a payment technology provider, struggled with manual contract processes, leading to data accuracy issues and resource-intensive workflows. After implementing Terzo’s AI-driven Contract Intelligence platform, it achieved 99% data accuracy and 100% renewal compliance.

Using AI-powered supplier management reduces risks and fosters innovation

Effective supplier management is crucial for building strong partnerships, driving innovation, and ensuring supply chain resilience. It helps companies manage risks such as supplier insolvency and compliance breaches while optimizing costs. AI-based platforms have enhanced supplier management by providing comprehensive analytics and data solutions.

For example, Havila, an offshore and shipping group, faced inefficiencies due to fragmented data. After implementing the Ignite Procurement platform, it achieved an 80% increase in efficiency, streamlined processes, and centralized data management, screening 1,500 suppliers and achieving 100% visibility of its spending.

Automating the procure-to-pay (P2P) process can help save both time and costs

Automation is crucial in transforming transactional procurement by eliminating manual tasks, reducing errors, and accelerating workflows. Companies such as Airbase unify accounts payable, expense management, and corporate cards, resulting in faster processing and lower overhead costs.

OpenGov addressed inefficiencies in its manual accounts payable processes by adopting Airbase’s spend management platform. The solution saved the company 15 hours per week, enhanced efficiency, improved compliance, and provided real-time visibility into spending, ensuring adherence to budget constraints and financial policies.

OneEcosystem in procurement—the synergy of startups, enterprises, and service provider relationships

Adopting AI-led procurement platforms presents challenges such as fragmented data, talent shortages, and security concerns. Enterprises should focus on integrating data, upskilling teams, and implementing strong cybersecurity measures. Tailoring partnerships with AI vendors can align solutions with workflows, while pilot projects provide measurable results to gain stakeholder buy-in and allow for gradual scaling. This approach ensures effective adoption and enhances the transformative potential of procurement.

HFS’ Sourcing and Procurement Horizons 2024 report highlights the importance of technology partners in procurement. Collaboration among tech startups, enterprises, and service providers is vital for turning procurement into a strategic asset. By combining innovative AI platforms with service provider expertise, organizations can enhance efficiency, sustainability, and resilience.

• Startups as innovators: Startups bring agility and niche AI solutions such as risk management and ESG sourcing. Enterprises can pilot these innovations, customizing them to align with workflows.
• Enterprises as enablers: Large organizations test solutions at scale, providing data and insights to refine offerings. As seen with Emmi Group and OpenGov, strategic adoption drives cost savings and efficiency.
• Service providers as integrators: Service providers bridge startups and enterprises, ensuring seamless AI implementation while tackling data integration, security, and compliance challenges.

The Bottom Line: Enterprises must utilize new AI-driven platforms to enhance procurement and effectively measure, track, and report.

Utilizing AI-enabled platforms can significantly boost productivity and cost savings for enterprises while helping them meet their strategic goals throughout the procurement value chain. However, organizations must focus on data cleansing, integration, and protection to enhance productivity, improve predictive accuracy, and facilitate personalized service offerings that are essential for practical measurement, tracking, and reporting.