Generative AI in Procurement Market Size, Share, and Industry Analysis, By Type (Direct Procurement, Indirect procurement, Goods Procurement, and Services Procurement), By Application (Supplier Management, Spend Analysis, Risk Management, Category Management, Product/Service Recommendation, and Others (Predictive Modelling)), By Enterprise Type (Large Enterprises and Small & Medium Size Enterprises), By Industry (BFSI, Healthcare, IT & Telecom, Retail, Manufacturing, and Others (Energy & Utilities, Government)), and Regional Forecast till 2032

The global generative AI in procurement market is expected to develop significantly, owing to companies using AI to automate procurement operations and optimize supply chain management. Generative AI allows firms to model different procurement strategies, perform better expenditure analysis, and increase supplier engagement by extracting intelligent insights from vast datasets. The growing use of digital procurement platforms by major industries such as BFSI, healthcare, and IT/telecom is likely to drive market growth.

With increased demands for efficiency and cost reduction, generative AI in procurement has become critical for navigating complicated supply chain ecosystems.

Impact of Generative AI on the Global Procurement Market

Generative AI is transforming the procurement landscape by providing systems that can produce contract templates autonomously, forecast supplier performance, and optimize risk management tactics. Generative AI improves decision-making by evaluating large procurement datasets, allowing firms to stay ahead of risks, optimize procurement cycles, and improve transparency throughout their supply chains.

• In September 2024, Microsoft launched a generative AI-powered procurement tool that improved supplier performance prediction by 40%, allowing for real-time decision-making in high-stakes procurement activities. This was a watershed moment for the procurement business, showcasing the practical implications of generative AI in contract negotiations and risk management.

Generative AI in Procurement Market Driver

Rising Procurement Demands Ignite AI-Driven Efficiency Revolution

The increase in procurement complexities, along with the need for speedier, data-driven decision-making, is driving generative AI adoption across procurement functions. As organizations strive for more efficiency, generative AI is redefining procurement by automating difficult procedures, providing predictive insights, and improving spend management. This automation lowers costs, increases supplier involvement, and improves contract governance.

• In August 2024, IBM deployed generative AI models for procurement, resulting in a 40% improvement in expenditure visibility and a 25% acceleration in contract processing for important clients, demonstrating AI's critical role in enhancing procurement's strategic potential.

Generative AI in Procurement Market Restraint

High Initial Investment and Expertise Gaps Slow AI Integration

The high implementation costs and the requirement for specialized AI skills are significant hurdles to the general deployment of generative AI in procurement. Small and medium-sized businesses (SMEs), in particular, encounter difficulties in deploying advanced AI technologies due to restricted budgets and a scarcity of experienced individuals to handle complicated AI-driven systems. This has hampered the adoption of generative AI in small procurement departments.

• In May 2024, a study by industry experts found that 50% of SMEs were unwilling to integrate generative AI into their procurement processes, citing initial investment costs and a lack of experienced people as major barriers.

Generative AI in Procurement Market Opportunity

Revolutionizing Procurement Through Smarter Spend and Risk Management Solutions

Generative AI has considerable potential for growth via improving spend analysis, risk management, and contract optimization. As enterprises prioritize agility and efficiency, AI-powered procurement systems are expected to play an increasingly important role in procurement strategies. Companies that invest in generative AI solutions are better able to decrease operational risks, boost supplier collaboration, and streamline procurement procedures.

• In September 2024, IBM announced a USD 700 million investment in generative AI procurement research, with a focus on risk management and spending efficiency capabilities. This investment demonstrates the growing need for sophisticated AI-driven procurement solutions.

Segmentation

Key Insights

The report covers the following key insights:

• Micro Macro Economic Indicators
• Drivers, Restraints, Trends, and Opportunities
• Business Strategies Adopted by the Key Players
• Impact of Generative AI onGenerative AI in Procurement Market
• Consolidated SWOT Analysis of Key Players

Analysis by Type:

The market for generative AI in procurement is classified into four types: direct procurement, indirect procurement, commodities procurement, and services procurement. Direct procurement refers to the acquisition of raw materials and components required for production, and generative AI improves supplier collaboration and negotiation techniques. Indirect procurement refers to items and services that are not directly related to manufacturing, with the goal of increasing operational efficiency and lowering costs. Goods procurement refers to the acquisition of tangible things, whereas services procurement involves the sourcing of services such as consultation and maintenance. Generative AI technologies are rapidly being used to expedite these procedures, improve spending visibility, and boost decision-making skills.

• In May 2024, GEP Worldwide launched a novel generative AI platform that automates 75% of the supplier onboarding process for goods procurement, cutting time-to-contract from weeks to days.

Analysis by Application: 

Generative AI finds applications in several procurement functions, including supplier management, spend analysis, contract management, risk management, category management, and product/service recommendation. Supplier management applications help organizations enhance relationships with suppliers through predictive analytics. Spend analysis provides insights into spending patterns, enabling better budgeting and resource allocation, while risk management applications assess potential risks associated with suppliers and contracts. Category management helps optimize procurement strategies by analyzing purchasing trends, and product/service recommendation leverages AI to suggest optimal purchasing decisions based on historical data and market trends.

• In June 2024, Oracle announced a new spend analysis feature that uses generative AI to analyze vendor performance across various parameters, enabling companies to achieve a 20% reduction in procurement costs within the first quarter of implementation.

Analysis by Enterprise Type: 

The market is divided into two segments: large enterprises and small and medium-sized organizations (SMEs). Large organizations lead the generative AI in the procurement market due to their broad procurement requirements and large IT budgets, which allow them to invest in advanced AI-driven solutions. SMEs are rapidly adopting generative AI technology, particularly cloud-based solutions, as a means of improving procurement efficiencies and lowering operational costs without making major upfront expenditures. The adoption rate difference reflects SMEs' growing realization of the use of AI in streamlining procurement procedures.

• In July 2024, Coupa Software revealed that their generative AI procurement tools helped 40% of SMEs who used them to streamline their operations and reduce overhead expenses by up to 15%, demonstrating the influence of AI on smaller organizations.

Analysis by Industry:

Generative AI in procurement has applications across a variety of industries, including BFSI, healthcare, IT & telecom, retail, manufacturing, and others. The BFSI industry is a big adopter due to too stringent regulatory requirements and the need for better risk management in procurement processes. Healthcare firms use artificial intelligence (AI) to optimize medical supply and equipment procurement, assuring compliance and efficiency. The IT and telecom industries employ generative AI to manage complicated supplier networks and improve service delivery. Other industries, such as retail and manufacturing, are increasingly relying on AI-powered procurement solutions to optimize processes and strengthen supplier relationships.

• In August 2024, Microsoft disclosed that their generative AI procurement platform helped healthcare companies increase supplier compliance by 35% and achieve a 25% decrease in procurement cycle times.

Regional Analysis

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In terms of geography, the global market is segmented into North America, Europe, Asia Pacific, South America, and the Middle East & Africa.

North America dominates the global generative AI in the procurement market, accounting for the maximum market share by 2024, largely attributed to high technology adoption rates, substantial investment in AI-driven solutions, and the presence of major industry players, such as IBM, Accenture, and Microsoft. The region's leadership is fuelled by the widespread adoption of AI technology in procurement, particularly in industries, such as BFSI and IT & telecom. North America benefits from a strong technology infrastructure and major investments in artificial intelligence by market leaders.

• In July 2024, IBM stated that it would invest USD 700 million in AI-driven procurement capabilities for its North American clients, with the goal of improving contract management and supplier collaboration.

Europe's generative AI procurement market is rapidly expanding, fuelled by strong legal frameworks such as GDPR and the region's emphasis on improving supply chain transparency. Industries in Europe are prioritizing risk management and cost efficiency, resulting in greater investment in AI procurement technologies. The BFSI and healthcare sectors are particularly active in implementing AI for procurement optimization.

• In March 2024, a poll revealed that 70% of European enterprises were utilizing generative AI solutions in procurement, with an emphasis on enhancing regulatory compliance and lowering operational risks.

Asia Pacific is projected to witness the fastest growth in the generative AI in procurement market due to rapid digitization and the increasing use of AI in procurement across key industries such as manufacturing, healthcare, and IT. Countries, such as China, India, and Japan are leading the way with government initiatives aimed at modernizing procurement processes and improving supply chain management through AI-driven solutions.

• In August 2024, the Chinese government allocated USD 1.5 billion to enhance AI procurement technologies as part of its Digital Economy Development Plan, with a focus on improving procurement efficiency in state-owned enterprises.

Key Players Covered

• SAP SE (Germany)
• IBM Corporation (U.S.)
• Microsoft Corporation (U.S.)
• Oracle Corporation (U.S.)
• Coupa Software Inc. (U.S.)
• JAGGAER (U.S.)
• GEP Worldwide (U.S.)
• Ivalua Inc. (France)
• Basware Corporation (Finland)
• Informatica (U.S.)

Key Industry Development

• June 2024: JAGGAER rolled out a generative AI-powered supplier risk management tool, which allows companies to predict supplier risks and mitigate potential disruptions in their procurement supply chains. This tool has been adopted by leading manufacturers to enhance supply chain resilience.
• May 2024: GEP Worldwide introduced an AI-enhanced contract management module within its procurement platform, improving contract compliance by 30% and streamlining supplier negotiations for global enterprises.
• April 2024: Coupa Software Inc. launched its new AI-driven spend management solution, which helped clients reduce procurement cycle times by 18% through predictive insights and automated supplier selection processes.