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AI is Changing the Supply Chain and How Procurement Works

作者： Hailey Lynne McKeefry 2024-12-27

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We do not need a crystal ball to predict that artificial intelligence (AI) will continue transforming electronics manufacturing. Some say it will positively impact worker efficiency, while others worry it will create unforeseen challenges. Regardless, things are changing quickly.

Procurement leaders may find AI particularly useful in getting tasks done with greater accuracy, efficiency, and speed, allowing them to focus more on strategic activities. Supported by extensive real-time data, they can be nimble in risk mitigation, attentive to supplier interactions, and adaptive to changing market conditions.

US leads in AI spending for procurement

Worldwide, AI use in procurement is growing at a rapid clip, with value projections for 2033 reaching $22.6 billion, up from $1.9 billion in 2023.¹ This represents a remarkable compound annual growth rate (CAGR) of 28.1% over the forecast period (2024–2033). In 2023, AI software within the procurement market held a dominant position relative to hardware, capturing more than 69.5% of the market share. Last year, the North American market claimed the largest share, representing 38% of the total for 2023 (Figure 1).

AI is Changing the Supply Chain and How Procurement Works Figure 1 : In 2023, revenues for AI in procurement in North America represented $0.7 billion, driven by rapid adoption and technological advancements. (Image source: Market.us)

Other sources are echoing these optimistic findings. According to research from AI consulting firm Zipdo, 57% of procurement professionals believe that AI will significantly impact the industry by 2025.² More than a third of organizations across all sectors already use AI in some capacity. Procurement is leading the charge, and the adoption of AI in this capacity is expected to increase by 55% over the next two years.

Doing the work of procurement

While its use will grow rapidly, 96% of procurement professionals are already using AI for day-to-day tasks, according to a survey by Airbase. The most common use cases include:

Market intelligence gathering and analysis (77%)
Automated data entry and processing (74%)
Predictive analytics (57%)
Inventory and supply chain logistics optimization (53%)
Supplier risk management (52%)
Contract analysis and management (42%)
Automated supplier selection and negotiation processes (36%)

Soon, adoption rates of more than 97% will be the reality for the most common activities that AI can currently perform.³ Organizations are universally planning to use AI for procurement's most popular AI applications (Figure 2). Even supplier selection, the least adopted capability for AI, is on the to-do list for all but a handful of those surveyed.

AI is Changing the Supply Chain and How Procurement Works Figure 2 : Organizations are universally planning to use AI for the most popular applications in procurement. (Image source: Airbase)

Generative AI

In the meantime, AI technology will keep progressing in ways that further enhance procurement capabilities for electronics OEMs. For example, Generative AI (GenAI) can learn from large amounts of data and mimic it to create new content based on prompts or inputs. The result could be human language, programming languages, art, chemistry, biology, or any complex subject. For procurement professionals, agentic reasoning, multimodality, and AI agents are the advancements that are most likely to shape how procurement operates, according to market research firm Gartner.⁴

Agentic reasoning in GenAI, as the name implies, allows procurement systems to perform advanced decision-making processes that mimic human-like cognition. Complex procurement scenarios need human intervention, but AI can combine data from various sources and analyze it to make informed decisions quickly and accurately.

Multimodality, which refers to the ability of AI to integrate and process multiple forms of data, such as text, images, and audio, promises to make GenAI capabilities more intuitive for users. Procurement will be able to gather and analyze a greater diversity of information sources for more comprehensive insights and well-informed business strategies.

AI agents automatically perform tasks and make decisions on behalf of humans. These agents can perform basic procurement functions and activities, freeing procurement professionals to solve problems or perform complex assignments.

While the potential for productivity improvements is clear, privacy issues remain. OEMs must grapple with evolving data governance and privacy policies and practices to ensure their implemented AI has appropriate safeguards. There will likely be much activity around this in 2025.

As AI evolves, it will unquestionably continue to enhance procurement activities in the supply chain. Soon, machine buyers will be the norm, and procurement teams will be free to focus on strategic and critical activities in the supply chain.