Gartner: AI set to Dominate Procurement Contract Management

Gartner surveyed procurement leaders on the extent to which AI – particularly generative AI (GenAI) – is changing the way their departments operate

Half of organisations will use AI-enabled contract risk analysis and editing tools to support their supplier contract negotiations by the year 2027.

That’s according to the consulting powerhouse Gartner, which surveyed procurement leaders on the extent to which artificial intelligence – particularly generative AI – is changing the way their departments work. 

Researchers discovered fundamental changes are taking place, with sourcing and contract life cycle management the area where GenAI is expected to be most impactful on their business over the next 12 months.

What’s more, 58% of procurement leaders said they already are implementing, or plan to implement AI, during the same forthcoming period.

GenAI stands to boost procurement teams

During the recent Gartner Supply Chain Symposium/Xpo in Orlando, Florida, analysts discussed the importance of prioritising use cases and steps to effectively deploy in organisations.

“Interest in AI for procurement has increased dramatically and we expect to see a rise in use,” said Kaitlynn Sommers, Senior Director Analyst within Gartner’s Supply Chain practice. “AI-enabled risk and editing solutions will help procurement expedite business decision-making, decreasing time spent on the contracting process and increasing capacity for additional tasks.”

GenAI stands to help procurement teams take on more ownership in the supplier contract negotiation process by using automated editing tools that leverage legal department guidance and previously agreed-upon terms.

It can also add efficiency to the contract negotiation process by highlighting potential risks and offering risk reduction options.

Kaitlynn Sommers, Senior Director Analyst within Gartner’s Supply Chain practice. Picture: Gartner

“GenAI promises to empower procurement professionals to make informed, data-driven decisions that yield tangible results faster,” Sommers added. 

“Our research reveals procurement leadership anticipates a 21.7% increase in productivity from the use of GenAI in the next 12 to 18 months. Both procurement professionals and solutions providers should be taking action now or risk being at a disadvantage over the next three to five years.”

Gartner’s tips for procurement leaders

Gartner offers the following tips for procurement organisations looking to begin leveraging GenAI for contract management.

  • Move beyond a digital repository of contracts to a contract lifecycle management (CLM) solution that supports authoring and negotiation of contracts
  • Start quantifying risk in the contract clauses by using current contract templates to understand the main terms negotiated in various contract types.
  • Partner with legal on defining risk across terms that are not business-led and outline the roles and responsibilities of both groups with a more digitally-enabled, future-state negotiation process
  • Evaluate current partners and explore new vendors to identify those that will support the organisation’s ambition. These use cases are distinct and may not be offered by a single vendor.
Gartner's Tom Enright speaking at the recent Gartner Supply Chain Symposium/Xpo 2024 in Orlando, Florida. Picture: Gartner

More from the Gartner Supply Chain Symposium/Xpo

Also speaking at Gartner Supply Chain Symposium/Xpo was Tom Enright, VP Analyst in Gartner’s Supply Chain practice.

He used his opening keynote to warn Chief Supply Chain Officers (CSCOs) that they must expand their focus beyond cost management – or accept a relegated role within the enterprise.

“Stakeholders perceive that the worst of the supply chain crisis has receded and CSCOs now face the prospect of being allocated fewer resources with the expectation of returning to a role more confined within the enterprise,” explained Tom. 

“CSCOs’ own priorities centred on cost management may be contributing to a loss of influence, as their CEOs remain steadfastly focused this year on driving growth.”

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