How Generative AI is Becoming Integral to Spend Analysis, Category Management and Budget-to-Pay

Generative AI continues its march, with Apple recently launching new AI capabilities and Amazon announcing massive funding for startups in the field.

Meanwhile, in the world of procurement too, generative AI is making deep inroads, connecting disparate functions and their data and opening up new possibilities for efficiency and, yes, cost savings, especially for category managers and finance executives.

Here’s how.

The chief finance officer and the chief procurement officer usually rely on internal historical data to report on spend and budgeting. But this data only tells them about what has happened, not what’s currently occurring within the company, and certainly not what can be expected, according to a new paper by CFO Dive.

Anup Shetty, director of market intelligence at GEP, explains: “We’ve seen lots of recent instances where companies have paid, for example, 5% more than the previous year. While this is an increase, they’ve done a lot better than their competitors. Comparatively, those other companies may have been paying 25% or 35% more. In these conditions, paying 5% more is considered a ‘good’ price. But you would only know that with the support of external data. Keeping things in perspective and striking the right balance are what is needed in uncertain times.”

It’s essential to bridge this information gap to create future-forward strategies. That’s where generative AI comes in.

“Generative AI can help you consider what the market will look like in the short term for cost-cutting, as well as in the mid term and long term for strategic planning, supplier relationships and value,” says Srikanth Venkateswaran, a senior manager of consulting at GEP.

How does it do this? If you want to know, for instance, which suppliers (tier 1, 2 and 3) provide the best products and services, generative AI that’s built into intelligent spend analysis, category management and budget-to-pay solutions can help you quickly evaluate supplier performance.

It can screen supplier data and identify ESG risks.

Generative AI can also assess payment terms and your best opportunities for cost reduction.

What if your budget forecast needs a revision based on new market developments?

AI-driven data and analytics can ensure budget revisions are justified. For instance, when the chips shortage sent prices through the roof, procurement quickly prioritized supply assurance and quality over cost considerations. Working in tandem with finance in such scenarios ensures greater business agility.

Get the full CFO Dive guidebook.

The Intelligence in Category Management

Category managers have to regularly deal with complexity and poor visibility into critical data.?How can generative AI-powered tools make life easier for them?

We answered these questions in a two-part GEP podcast titled AI in Action: Practical Use Cases of Intelligent Category Management, with our product marketing experts Alex Zhong and Raj Aggarwal.

Many category managers struggle to understand what’s happening in a volatile market, says Raj. “Is your supplier going to be there tomorrow? Because most companies are focused only on tier-one suppliers and don’t have deeper visibility within the supply chain, they don’t fully understand all the factors influencing suppliers. So, without a powerful tool that can bring all of the data together, you are shooting in the dark, and the inaccuracies make it difficult for a category sourcing manager to perform. There’s an efficiency gap.”

The question is: What tools can help category managers get real outcomes?

Generative AI can elevate category management capabilities to a whole new level in terms of visibility, collaboration and intelligence, says Alex. “For example, AI can help understand the market situation better and make better forecasts. From the cost perspective, it can improve should-cost modeling. All these capabilities coming together in real time improve procurement’s capability to execute.”

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