Global Generative AI in Procurement Market, By Type (Direct Procurement, Indirect Procurement,and Others ), By Application (Supplier Identification, Product/Service Recommendation, and Other), By Region and Companies - Industry Segment Outlook, Market Assessment, Competition Scenario, Trends, and Forecast 2023-2032

Report Overview

Global Generative AI in procurement market size is expected to be worth around USD 2,097 million by 2032 from USD 130 million in 2022, growing at a CAGR of 33%, during the forecast period from 2023 to 2032.

Generative Artificial Intelligence in the procurement market refers to applying and adopting artificial intelligence generative (AI) techniques for procurement and operational processes globally. Generative AI uses machine learning algorithms and neural networks to generate ideas or solutions based on training data.

Generative AI technology can be employed in procurement to automate and optimize various aspects of the purchasing process, such as selecting suppliers, demand forecasting, contract administration, risk evaluation, and supply chain optimization. By harnessing its power, companies can increase efficiency in decision-making while improving accuracy and precision when carrying out their procurement procedures.

Driving Factors

Increasing Demand for Cost Reduction and Efficiency, Increasing Data Availability, Growing Complexity in Procurement, and Advancements in AI Technology are Driving the Generative AI in Procurement Market.

Digital technologies have generated massive amounts of procurement data daily, which generative AI can use to gain valuable insights and optimize procurement processes. Procurement processes are becoming more complicated with globalization, supply chain disruptions, and evolving regulatory environments, causing more complexity to enter procurement processes.

Generative AI can assist in managing this complexity by automating tasks, analyzing data, and suggesting intelligent solutions. Companies are always searching for ways to reduce expenses and boost efficiency. AI-powered procurement strategies may offer companies an efficient means of automating manual tasks, speeding decision-making processes, and cutting costs resulting in cost savings and increased efficiencies.

AI technologies like deep learning, machine learning, and natural language processing have revolutionized procurement using generative AI solutions. These technologies enable greater data analysis, pattern recognition, and predictive modeling, enhancing their efficiency as generative AI solutions. With procurement strategies evolving from transactional models towards strategic approaches, artificial intelligence (AI) can aid companies in creating more effective procurement strategies by providing insight for evaluating suppliers, risk analysis, and contract administration - helping companies reach their long-term objectives more easily.

Generative AI can aid supply chain processes by anticipating demand, identifying bottlenecks, improving inventory management, and mitigating risk - an especially useful capability in industries with complex and dynamic supply chains.

Restraining Factors

Data Quality and Accessibility, Implementation and Integration Complexity, and Trust and Ethical Considerations are Restraining the Growth of the Market.

Generative AI heavily relies on access to accurate and high-quality data sources for training purposes and creating precise insights, but some organizations may encounter difficulty gathering pertinent information when their sources are scattered or poor in quality. Without accessing accurate, relevant data sources, assessing the effectiveness and reliability of artificial intelligence (AI) solutions used for procurement purposes could become challenging.

Integrating AI solutions into existing procurement processes and systems can be a long, complex, and expensive process for businesses. Businesses may need significant resources and expertise to implement and adopt these systems efficiently. Integration challenges could hinder this process due to compatibility issues between older systems or lack of technical know-how, slowing the pace of adoption.

Generative AI algorithms rely on patterns and correlations found within training data. If this data contains biases or is reflective of unfair practices, artificial AI solutions could reinforce those biases or provide false recommendations that undermine trust or create suspicion. Ensuring fairness, transparency, and ethical use of generative AI in procurement is imperative to creating trust and dispelling suspicion. Successful adoption and use of generative AI for procurement will require an experienced workforce with knowledge of AI technologies, data analysis, procurement procedures, and procurement procedures.

Unfortunately, there is a dearth of professionals with sufficient skills and expertise to effectively utilize the power of generative AI for procurement purposes, meaning companies may experience difficulty finding or training skilled employees.

COVID-19 Impact Analysis

This pandemic has caused widespread supply chain disruption, leading to transportation restrictions, closures of borders, and lockdown measures that hinder goods and other services from being transported around the world. These disruptions have highlighted the need for efficient procurement procedures as well as innovative AI solutions to facilitate improved management of supply chains.

The pandemic exposed the supply chain weaknesses, such as overreliance on single sources and no plans in place for contingencies. Companies quickly recognized the necessity of adopting robust risk management strategies when procuring. Generative AI technology can assist companies in identifying, mitigating, and mitigating risks while strengthening resilience within supply chains to ensure operations continue smoothly.

The pandemic has increased the digital transformation efforts of various organizations. Remote work has become more frequent and demand greater, placing greater reliance on technology and digital tools - such as generative AI for procurement - to automatize manual processes, increase efficiency, and decrease reliance on manual interventions. Companies are turning towards innovative AI solutions as ways of automating manual processes while increasing efficiency and decreasing dependence on manual interventions.

By Type Analysis

The Direct Procurement Segment Accounted for the Largest Revenue Share in Generative AI in Procurement Market in 2022.

Based on type, the market is segmented into direct, indirect, goods, and services. Among these types, direct procurement is expected to be the most lucrative in the global generative AI in procurement market, with the largest revenue share of 37.6%.

Direct procurement pertaining to the use of Generative AI is defined as purchasing or procuring these solutions or technologies directly from vendors or suppliers. Generative AI (also referred to as creative AI or deep learning) utilizes algorithms to generate unique text, images, and complete designs - something organizations could utilize the power of Generative AI technology for in order to streamline purchasing processes such as demand forecasting/management/supplier selection or even optimizing inventory levels. Organizations can use direct procurement to identify requirements, supplier identification, supplier evaluation, request for proposal, contract negotiation, and testing and evaluation.

The Indirect Procurement Segment is Fastest Growing Type Segment in Generative AI in Procurement Market.

The indirect procurement segment is projected as the fastest growing type segment in generative AI in the procurement market from 2023 to 2032 at a high CAGR. Indirect procurement within the context of the generative AI market refers to purchasing or sourcing services or goods that support the implementation of generative AI solutions for procurement processes.

Indirect procurement primarily covers the acquisition of non-production related goods and services essential to running an organization's operations. When purchasing generative AI solutions on the market, indirect procurement may involve purchasing various supporting elements, including hardware infrastructure, software, or consulting services that facilitate efficient implementation and use.

By Application Analysis

The Supplier Identification Holds the Significant Share of the Application Segment in Generative AI in the Procurement Market.

Based on application, the market is divided into supplier identification, product/service recommendation, negotiation support, risk assessment, contract analysis, fraud detection, predictive modeling, and other applications. Among this, the supplier identification segment is dominant in the application segment in generative AI in the procurement market, with a market share of 25%.

Supplier identification is of critical importance in the successful implementation of generative AI solutions in procurement markets. Companies seeking suppliers to implement an AI procurement system must consider various factors to identify suppliers that best match their specific requirements. Considerations should also be given to the provider's experience and expertise in creating AI solutions tailored specifically for procurement processes. Establishing the expertise of potential partners in areas like demand forecasting, procurement selection, contract administration, and inventory optimization is crucial. Examination of a supplier's technological capabilities in generative AI, such as algorithms and deep learning models, is also vital.

Product/Service Recommendation is Identified as Fastest Growing Application Segment in Projected Period.

Product/service recommendation is also an important application segment in generative AI in the procurement market, and it is expected to grow faster in the application segment in generative AI in the procurement market. Generative AI offers invaluable suggestions for procurement, helping make decisions easier and facilitating faster. Generative AI algorithms can quickly analyze large volumes of data, such as buying patterns from past suppliers' performances, market trends, and user preferences, to provide intelligent suggestions to procurement professionals.

Intelligent AI offers companies more precise, data-driven suggestions to select suppliers, reduce costs, improve inventory levels, and suggest alternatives that meet particular needs. As a result, companies can make more informed sourcing choices, boost efficiency and achieve optimal procurement results through intelligent AI solutions.

Key Market Segments

Based on Type

• Direct Procurement
• Indirect Procurement
• Goods Procurement
• Services Procurement

Based on Application

• Supplier Identification
• Product/Service Recommendation
• Negotiation Support
• Risk Assessment
• Contract Analysis
• Fraud Detection
• Predictive Modeling
• Other Applications

Growth Opportunity

Demand Forecasting, Supplier Selection and Evaluation, and Risk Management Create the Opportunity in the Market.

Generative AI can analyze historical data, market trends, and other relevant variables to generate accurate demand forecasts, which allows procurement teams to optimize inventory levels, reduce shortages and eliminate unnecessary items, leading to improved supply chain management and cost savings. Generative AI can assist procurement professionals in selecting suppliers by analyzing vast amounts of data on price, performance quality, and risk factors. The program then makes recommendations in response to specific requirements, helping procurement professionals make more informed decisions while developing stronger relationships with them.

Generative AI can assist procurement professionals when negotiating with suppliers by analyzing past contract data, market conditions, contract data, and other factors. By creating optimal negotiation strategies and suggesting terms to simulate different negotiation scenarios, Generative AI allows procurement professionals to achieve positive outcomes and cost savings while increasing their opportunities to provide positive outcomes and cost savings for themselves and their organization. Generative AI can automate contract creation, review, and analysis processes. It can identify important clauses and conditions within contracts as well as potential risks or opportunities - helping streamline contract management, decreasing manual work, and decreasing mistakes or oversights.

Latest Trends

Automated Supplier Identification and Matching, Natural Language Processing (NLP) for Contract Analysis are the Latest Trends in the Market

NLP techniques are increasingly used to analyze and extract data from procurement contracts. Generative AI models can understand contract language and extract key phrases and terms while providing insight to enhance the management of contracts and risk assessments. Generative AI can automate the process of finding suppliers who meet specific procurement requirements. AI systems can efficiently search databases of suppliers to generate shortlists and recommendations that save both time and effort for procurement specialists.

Generative AI helps businesses anticipate patterns in demand, identify disruptions in supply chains and increase inventory available. AI models use historical data, market trends, and external influences to produce accurate forecasts that allow procurement strategies to be optimized more successfully. AI-powered negotiation tools are being designed to automate and improve negotiations with suppliers. Utilizing generative AI strategies to model scenarios of negotiation, recommend optimal strategies, and assist procurement experts in reaching greater results.

Regional Analysis

North America Accounted for the Largest Revenue Share in Generative AI in Procurement Market in 2022.

North America is estimated to be the most lucrative market in the global generative AI in Procurement market, with the largest market share of 45.8%. North America has long been at the forefront of adopting and harnessing artificial intelligence technologies for diverse fields - from procurement to tech hubs like Silicon Valley - by harnessing their power for improvement across sectors such as procurement. Tech hubs such as Silicon Valley have seen companies and startups emerge that specialize in AI-powered procurement solutions, with many organizations actively exploring its use to increase efficiency, reduce costs and assist strategic decision-making.

Asia-Pacific is Expected as Fastest Growing Region in Projected Period in Generative AI in Procurement Market.

Asia-Pacific is expected to be as fastest growing region in the forecast period in the generative AI in Procurement market with a high CAGR. Asia Pacific region has experienced rapid development of Intelligent AI across various industries, and procurement is no different. China, Japan, and Singapore have all been at the forefront of developing and using generative AI to advance both technological advancement and digital transformation efforts in these countries. Supply chains and manufacturing hubs across this region present ample opportunity for using this technology to optimize procurement process management, supplier relationship management, and logistics strategies.

Key Regions

• North America
  • The US
  • Canada
  • Mexico
• Western Europe
  • Germany
  • France
  • The UK
  • Spain
  • Italy
  • Portugal
  • Ireland
  • Austria
  • Switzerland
  • Benelux
  • Nordic
  • Rest of Western Europe
• Eastern Europe
  • Russia
  • Poland
  • The Czech Republic
  • Greece
  • Rest of Eastern Europe
• APAC
  • China
  • Japan
  • South Korea
  • India
  • Australia & New Zealand
  • Indonesia
  • Malaysia
  • Philippines
  • Singapore
  • Thailand
  • Vietnam
  • Rest of APAC
• Latin America
  • Brazil
  • Colombia
  • Chile
  • Argentina
  • Costa Rica
  • Rest of Latin America
• Middle East & Africa
  • Algeria
  • Egypt
  • Israel
  • Kuwait
  • Nigeria
  • Saudi Arabia
  • South Africa
  • Turkey
  • United Arab Emirates
  • Rest of MEA

Market Share & Key Players Analysis

Generative AI in procurement is fragmented. There are many market players. IBM, Oracle, SAP Ariba, Zycus, Ivalua, GEP, Keelvar, and Suplari are major players in this space, employing AI technologies to improve various procurement processes, including demand forecasting/management/supplier selection/spend analysis. Among these companies, many players are the leaders in the generative AI market for procurement, and they all invest heavily in research and development to stay ahead of their competition. We expect to continue seeing innovation and competition as the market grows.

Market Key Players

• IBM Corporation
• SAP SE
• Oracle Corporation
• GEP Worldwide
• Coupa Software Inc.
• Microsoft Corporation
• Other Key Players

Recent Developments

• In 2021, SAP Ariba, SAP's procurement and supply chain management software, has recently integrated dynamic AI capabilities for use in tasks such as spend analysis, supplier risk evaluation, and contract management.
• In 20221, Keelvar has been developing AI-powered sourcing optimization strategies using the power of generative AI to automate sourcing activities, optimize supplier selection processes and negotiate contracts more easily.
• In 2021, Coupa Software leveraged artificial intelligence (AI) to automate and optimize various procurement processes, such as spending analysis, supplier management, contract compliance monitoring, and compliance auditing.

Report Scope