Artificial intelligence (AI) is transforming procurement and supply chain risk management, with companies leveraging AI for supplier assessment, risk scoring, and predictive analytics. Deloitte’s survey reveals a significant focus on AI-enabled supplier management, highlighting the use of NLP and machine learning to enhance due diligence procedures and decision-making processes.
AI Enhances Procurement and Supply Chain Risk Management
Artificial intelligence (AI) is revolutionizing procurement by enhancing supplier assessment, predicting disruptions, and tightening spending control. Deloitte’s 2023 Global Chief Procurement Officer survey highlights that AI-enabled supplier management is a major focus, with 80-85% of companies aiming to boost supplier relationship management through AI.
AI uses natural language processing (NLP) and machine learning to analyze supplier data, contract performance, and compliance across various metrics, including environmental, social, and governance (ESG) factors. This technology aids in real-time financial health assessments of suppliers, leveraging data from credit rating agencies and social media trends to foresee potential issues.
According to the same survey, 75% of leading procurement organizations use AI for supplier risk scoring, incorporating big data and NLP to enhance due diligence procedures, helping businesses make informed decisions and recognizing smaller, high-performing suppliers.
Amazon’s 2024 State of Procurement Data Report states that while less than half (47%) currently use AI-driven purchasing optimization, nearly all (98%) intend to invest in AI and analytics tools soon.
AI’s predictive capabilities, combined with big data, enable identification of disruptive weather patterns, commodity price fluctuations, and supply chain issues. Currently, 25% of organizations can promptly identify such issues to a large extent, and 63% to some extent.
Moreover, AI can highlight unusual internal activities, mitigating fraud exposure, and assist in strategic procurement decisions like bulk-buying, fixed-price contracts, or hedging.
Internally, AI can streamline procurement by analyzing historical and predictive data, reducing unauthorized spending through systems like Amazon Business, and generating powerful management information. This facilitates informed decision-making, bulk discount negotiations, and efficient supplier consolidation.
Automation through AI, such as extracting data from invoices, can save significant time and focus on value-adding activities, enhancing the procurement function’s appeal as a career.
These advancements demonstrate AI’s pivotal role in managing supply chain risks, offering procurement professionals tools for comprehensive analysis, strategic planning, and operational efficiency.
