Article

AI in Procurement: How AI can level up your procurement process

Want to use AI to supercharge your procurement? Here's exactly how to do it.

Written By
The Zip Team

It genuinely feels like AI is everywhere, inserted into products almost to the point of cliché. However, in procurement, AI genuinely is transforming the way people work. New process enhancements are reimagining nearly every procurement workflow.

Many companies haven't yet made the leap however, and are still struggling with error-prone manual intake, inefficient contract management, and time-consuming vend or evaluations. Fortunately, AI-powered procurement orchestration platforms like Zip are already demonstrating remarkable improvements, accelerating processes for everyone involved.

A study by the Hackett Group found that, with proper guidance and optimization, generative AI can deliver up to a 40% reduction in selling, general, and administration (SG&A) processes.

This means AI can empower even small procurement teams to achieve major results. The best part? You can already leverage this technology today.

Let's explore AI’s benefits, applications, and how Zip AI is setting the standard for what’s possible in procurement.

Key Benefits for AI in Procurement:


  • AI streamlines the procurement process, reducing cycle times and manual labor in tasks like contract management and invoice processing.
  • AI tools in procurement excel at identifying high-risk vendors and potential security issues, ensuring a more secure and compliant procurement process.
  • AI optimizes costs and savings by analyzing data across your entire vendor portfolio, surfacing duplicative spend, flagging requests and opportunities, and keeping you in command of it all.

Benefits of AI for procurement teams

Even though AI is no longer “new”, most analysts feel AI is still in its earliest stages. Procurement professionals are still discovering smart new ways of leveraging AI tools to enhance workflows. 

“Embracing technology isn’t enough: it’s how we use it that counts. Focusing on adoption and user experience isn’t just a ‘nice to have’, it's the bedrock upon which our strategic procurement future is built.” - Joe Frederick, Senior Director of Procurement and Strategic sourcing, Snowflake

Fortunately, advancements in AI and machine learning have already brought clear advantages to procurement professionals, empowering cross-functional teams to work faster and more efficiently than ever before. 

Here are three key benefits to using AI for procurement today.

1. Increased operational efficiency

AI technology can help accelerate the entire procurement process starting with intake, slashing cycle times and reducing manual labor in tasks like contract redlining and security reviews. For example, automated invoice coding—an AI feature embedded in Zip—helps procurement teams save valuable time by capturing, extracting, and matching invoice data automatically, allowing teams to focus on strategic initiatives instead of the repetitive tasks of procurement.

2. Hard savings

It’s not just a productivity hack—AI can drive hard savings.Increased real-time visibility and spending alerts empower global procurement leaders to negotiate better pricing and terms, manage proactive renewal processes, and eliminate redundant vendors. This can help category managers save money of course, but also optimize resource allocation across the entire company. Profitability, here we come!

3. Reduced risk

One of the most impressive direct benefits is AI’s ability to mitigate risk and compliance issues. By instantly identifying high-risk vendors and flagging potential security issues with unparalleled precision, AI tools ensure a more secure and reliable procurement process.These are simple, strategic benefits that AI-powered procurement solutions can offer today and lead to real results appearing in this quarter’s close. While the field of AI in procurement is still in its infancy, we’re thrilled to see the impact Zip AI has already had on procurement workflows.

AI-powered risk detection in Zip AI

Top use cases for AI in procurement

AI’s capacity to automate complex tasks, analyze large volume data sets, and provide real-time actionable insights is changing the procurement function. 

Procurement orchestration tools powered by AI optimize efficiency, supplier risk management, and insights into spend. Here are some real-world use cases for AI in procurement.

Data extraction for faster document review

AI can help extract relevant information from documents such as invoices, contracts, purchase orders, and receipts. This can speed up the document review process and reduce manual errors. AI can also help validate the data against predefined rules and flag any discrepancies, leading to faster approvals and payments.

Automated legal and Security risk detection 

With AI, procurement teams can quickly identify potential risks in procurement, such as fraud, non-compliance, cyberattacks, and supplier failures. 

This rapid risk detection is vital, especially considering that 70% of Chief Procurement Officers (CPOs) have reported increases in procurement-related risks and supply chain disruptions.

Vendor consolidation

AI aids in vendor consolidation and spend management by assessing new vendor requests against existing ones to identify overlaps. This capability is crucial for reducing duplicative spending and optimizing the vendor base.

Zip AI, for instance, nudges requesters toward existing vendors and flags redundant capabilities, helping to streamline vendor management and cost savings.

Vendor management

In vendor management, AI provides a comprehensive view of the entire vendor record. It tracks contracts, identifies new suppliers and savings opportunities, and alerts procurement teams about upcoming renewals and risky contracts.

This proactive approach to vendor management is supported by AI's ability to analyze vast amounts of structured and unstructured data, including past supplier performance data, product specifications, and customer feedback. Monitor and build supplier relationships, and optimize supply chain management with the power of AI keeping you informed in real time.

Compliance management

AI tools play a pivotal role in compliance management within procurement. It can monitor processes to identify fraudulent activities or anomalies and incorporate historical insights to recognize similar non-compliance patterns in the future. This real-time application of AI ensures adherence to legal standards while promoting ethical practices and sustainability in procurement operations

Strategic procurement decisions

AI's capability to process large sets of new and historical data and generate actionable insights is ideal for strategic decision-making and forecasting in procurement. It combines local, customer data sources with external information to craft better negotiation strategies and evaluate suppliers’ capabilities and associated risks.

Learn how to accelerate operations and prepare your team for the next era with ‘Future Proofed Procurement: Strategies for Scaling in the Age of AI’, the latest free guide from Zip.

AI vs. RPA for Procurement

Artificial Intelligence (AI) and Robotic Process Automation (RPA) are both ground-breaking technologies, but they differ fundamentally in their capabilities and applications, especially in procurement operations. 

Procurement involves strategic decision-making, risk mitigation, vendor relationships, and compliance with regulations—areas where AI's machine learning and natural language processing (NLP) capabilities are particularly beneficial. 

AI's ability to provide spend analysis from large datasets, learn from past trends, and provide predictive insights is invaluable for making better decisions.

RPA providers have their place in streamlining repetitive, time-consuming tasks in procurement, which helps in reducing errors and increasing efficiency. However, for more strategic tasks such as risk analysis, contract negotiation, and supplier selection, the intelligent and adaptive nature of AI algorithms embedded in a procurement orchestration platform becomes indispensable.

Zip AI can instantly extract key information from POs and other documents

Best practices for implementing AI in procurement

Implementing AI in procurement is most effective when integrated into a well-defined system; a piecemeal approach often falls short. Platforms like Zip offer a comprehensive solution, enabling easy and useful AI integration into the intake-to-pay process. Effective deployment will require clear goals, staff training, and an emphasis on data quality and security.

Here are some best practices, leveraging insights from Zip’s approach to AI:

  1. Establish a clear process framework

AI supercharges the work you’re already doing, therefore it thrives in an environment where workstreams are well defined.

It's important to have clear and streamlined procurement processes before integrating AI. This clarity ensures that AI tools can enhance and optimize these processes, rather than being expected to rectify fundamental issues. 

Zip's AI platform is designed to integrate smoothly into existing procurement workflows, reinforcing well-established processes rather than overhauling them.

  1. Understand and define your AI goals

Before deploying AI in procurement, define what you want to achieve. Whether it's faster document processing, improved risk management, or better vendor relations, having specific goals will guide the implementation process. 

Some features, like automated data extraction and intelligent risk detection, each address distinct aspects of procurement. Consider the right features that meet your organization's specific needs.

  1. Ensure data quality and integrity

AI systems rely heavily on data quality. In procurement, this means ensuring that vendor information, contract data, and purchasing histories are accurate and up-to-date. High-quality data enables AI tools to provide more accurate and insightful recommendations. Modern intake-to-pay platforms ensure that data integrity checks are built into their AI, ensuring reliable output from the system.

  1. Provide training and support

The successful adoption of AI in procurement depends entirely on the people using it. As with any kind of delegation, you can outsource the work, not the responsibility.

Encourage your team to become familiar with the powerful new tools at their disposal. They don’t need to be programmers, but they should become comfortable with the AI tool’s capabilities and how they can be used to enhance productivity.

  1. Monitor and iterate

Implementing AI in procurement is not a one-time event but an ongoing process. Regularly monitor the AI system's performance and its impact on procurement operations. This allows for iterations and adjustments to ensure the AI continues to meet the evolving needs of the organization. 

Zip's platform, with its scalable and adaptable AI solutions, are built specifically to facilitate this kind of continuous improvement.

Risks and limitations of AI in procurement

Like any transformative technology, AI comes with its own set of risks and limitations that procurement organizations need to navigate carefully. Here’s what you need to focus on to ensure a successful and secure AI implementation.

Train employees to adopt AI workflows

One of the primary hurdles in adopting AI in procurement is the training and adaptation required for new workflows. AI systems, with their advanced algorithms and data processing capabilities, can do a lot. For some it may feel overwhelming, which may lead to underutilization of incorrect usage if the tool is too complex.

This is why Zip was built to be incredibly straight-forward easy to use. We provide consumer-grade interfaces that anyone can pick up immediately.

“There’s virtually no training needed. There’s no friction for new employees or old. It’s so simple, I don’t even need a sysadmin. We maintain it ourselves.” - Crystal Ryu, Senior Director of Finance Operations, Patreon

Read Patreon’s incredible story to learn how Zip slashed cycle times in half, and increased spend under management by 300%.

Remember: AI won't magically solve everything

AI is not a one-stop solution for all procurement inefficiencies. If procurement strategies are inherently unclear or poorly designed, AI alone won’t solve these foundational issues. Effective use of AI requires a solid base of well-structured and efficient processes.

The way we approach this challenge at Zip is to ensure seamless integration with existing tools, and offer thoughtful AI-enhancements that enhance existing workflows, leaving teams to focus on the work that really drives value.

Privacy and security concerns with AI tools

While AI can accelerate procurement processes, it’s important to be thorough in your privacy assessment of AI tools. 

In procurement, sensitive data such as vendor information, contract terms, and pricing strategies must be handled with utmost care—this kind of purchase data can be detrimental to operations and competitive advantages if lost and distributed.

Zip takes a rigorous and transparent approach to AI data security

We’re committed to ensuring our AI features are ethical, transparent, and safe—customer data is never used to train our models. Instead, we rely on open-source data, synthetic test data, and our own internal documents. 

Zip also offers customers the option to completely opt-out of AI functionality, if preferred. Everything we offer in our feature set is built upon a commitment to data security and customer autonomy. 

Read more about our commitment to privacy and safety on the Zip platform.

Make AI adoption easier with Zip

Adopting AI in procurement can be a challenge, especially when attempting to integrate it into existing, potentially disjointed systems. 

However, Zip offers a streamlined solution that not only simplifies the adoption of AI in procurement but also amplifies its impact. 

We do this through a combination of comprehensive systems integrations with the tools your teams already use, a consumer-grade welcoming design employees love to use, and powerful AI capabilities specifically designed to turbocharge procurement workflows.

Zip is designed to integrate with existing procurement systems with our integration ecosystem, enhancing processes rather than replacing or complicating them. 

These integrations ensure that AI acts as a natural extension of the procurement process, accessible and beneficial to everyone involved in the purchasing process.

Zip AI features

We’ve recently expanded our full suite of AI products embedded in the Zip procurement orchestration platform. Zip AI is designed to securely leverage procurement data to enable accelerated workflows that solve real problems, and give your team time back.

  • Automatic data extraction: Zip AI can swiftly pull key data from contracts, including DPAs, NDAs, SOWs, and amendments, significantly reducing time required for document processing and review.
  • Automated legal and security risk detection: Zip AI platform quickly identifies and flags potential legal and security issues in vendor contracts, enhancing compliance and reducing risks.
  • Accelerated approval workflows: Zip notifies stakeholders, directing attention to the most relevant information in the procurement process, helping to minimize cycle time at every step.
  • AI-powered intake assistant: Zip’s AI assistant is a 24/7 procurement concierge, available in Zip or in Slack. Any question an employee might have about a purchase or a purchase policy is answered instantly, relieving your team to focus on more strategic operations.

By intelligently orchestrating the entire procurement process, Zip tackles the inefficiencies that often arise from manual work. AI-driven automation and insights help alleviate common frustrations experienced by end users, legal teams, and CFOs. 

Watch this video to see how Miro has been able to slash cycle times and scale procurement even faster using the incredible power of Zip AI. You'll findout why Zip is the global leader in spend orchestration, accelerating workflows with cutting-edge procurement intelligence that works for you.

To see how your team can benefit from an AI-powered procurement orchestration platform like Zip, book a demo today.

Written By
The Zip Team

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