AI in procurement

Modern procurement needs have far surpassed transaction management; procurement is now a critical component in driving strategic value across businesses and AI has become a key tool in procurement teams’ back pocket.

Across industries, AI is capable of reshaping procurement, making it smarter, more predictive, and highly efficient. In this article, we will highlight some of the key changes AI has made to procurement strategies in the following industries: manufacturing and industrials, life sciences and healthcare, and the public sector.

Manufacturing and industrials: Strengthening the supply chain backbone

In the manufacturing world, procurement is about much more than just tracking spend—it’s the heartbeat of supply chain management. With raw materials, equipment, and maintenance making up the bulk of their expenditures, procurement professionals in manufacturing are turning to AI to gain deeper insights and stronger control over their supplier networks.

Leading firms are using AI to model extended value chains, linking them with AI-assisted supplier intelligence to anticipate risks before they become problems. Supply chain disruptions—whether from geopolitical shifts, weather events, or logistical breakdowns—are nearly impossible for humans to predict alone. That’s where AI steps in, offering a proactive approach to predicting supplier lead times and optimizing demand forecasts for buyers.

Maintenance, Repair, and Operations (MRO) is also benefiting from AI. It is not only reducing spending on spare parts and improving inventory management—it’s helping manufacturers create digital twins of their machinery to anticipate breakdowns before they happen. This predictive maintenance approach minimizes downtime and keeps operations running smoothly. In short, AI is making manufacturing procurement faster, smarter, and more resilient than ever before.

While some procurement leaders in the manufacturing and industrial sector have found data quality to be a major barrier to AI implementation along with poor integration across applications, they are combating these challenges, by prioritizing agile development and tool deployment. The resulting standardization of procurement practices ensures a clear digital strategy and helps secure executive buy-in.

Life sciences and healthcare: Enhancing supply chain visibility and compliance

For life sciences and healthcare, procurement is a complex dance involving medicines, medical supplies, and strategic services spread across a global landscape. AI’s role isn’t just confined to drug discovery—it’s also revolutionizing real-time market insights for sourcing critical compounds and navigating the intricate web of suppliers.

One of the biggest challenges in this sector is maintaining end-to-end visibility in the supply chain, and AI is proving to be a game-changer. Supply network modeling, now integrating large language models (LLMs), allows for precise tracking and material tracing. This means better compliance, fewer disruptions, and greater efficiency in managing supplier relationships.

Beyond direct procurement, AI is also transforming how life sciences and healthcare organizations manage their contingent workforce. By analyzing skills, competencies, and rate benchmarks, AI can accurately predict “should cost” rates, helping organizations rein in external labor expenses. Meanwhile, AI-driven product forecasting is improving supply planning and ensuring inventory levels are optimized—critical in an industry where spoilage of sensitive products can mean massive financial losses.

The rise of AI in life sciences and healthcare provides procurement professionals with greater visibility, ensuring regulatory compliance, and optimizing both direct and indirect procurement processes.

Despite the positive impacts of new technological opportunities, procurement leaders have cited difficulty maintaining data cleanliness, strict budgets, change management with stakeholders, and aging technology as the main barriers to implementation. To combat these challenges, procurement teams are prioritizing standardization of processes and data to ensure executives are aligned on strategic initiatives and the organization is prepared to adopt new technology.

Public sector: Navigating regulations and mitigating risk

Procurement in the public sector often faces more red tape and strict regulatory requirements than other industries. Cross-functional teams are subject to disconnected systems to manage the complexities of compliance, which can be a significant challenge—but AI is stepping in to streamline these processes in a way that was never before possible.

It is worth noting that there is a lower percentage of new implementations across the industry compared to others for AI holistically. Many departments still rely on legacy systems for contracting and procurement, but AI tools can also integrate with these existing systems, minimizing workflow discrepancies and improving overall efficiency.

One of AI’s most powerful applications in the public sector is its ability to translate complex, document-heavy regulations into actionable workflows. Instead of navigating mountains of paperwork, procurement teams can use AI to ensure compliance in real-time, helping prevent non-compliance and fraud before they become issues. This capability is particularly beneficial in contract management, as it can enhance analytics for complex IT and SaaS agreements, ensuring public funds are spent wisely and efficiently.

Risk management is another primary concern, and AI plays a pivotal role by incorporating external intelligence on suppliers into third-party risk management (TPRM) processes. With government contracts often involving multiple third-party vendors, having AI continuously monitor potential risks and provide mitigation strategies ensures better decision-making and security.

Procurement leaders are developing clear strategies to proactively implement AI into public sector practices. This approach ensures executive buy-in and builds the support and resources necessary for internal IT initiatives.

The future of AI in procurement: Smarter, faster, more strategic

While the way AI is applied in procurement varies by industry, one thing is clear: it is no longer just a tool for automation—it is a strategic force driving efficiency, smarter decision-making, and value creation.

Whether it’s predicting supply chain risks in manufacturing, ensuring compliance and visibility in healthcare, or managing regulatory complexity in the public sector, AI is revolutionizing procurement in ways that were unimaginable just a decade ago.

As industries continue to evolve, organizations that embrace these AI-driven procurement strategies will be the ones that stay ahead of the curve—turning procurement from a back-office function into a powerful driver of innovation and competitive advantage.

Originally published in Spend Matters