Sourcing and Procurement
Predictive analytics in procurement: How AI helps forecast demand & prevent supply chain disruptions
Procurement in supply chains connects vast data streams. It draws insights from internal factors like spending patterns, product specifications, and demand trends, as well as external factors like supplier performance, market intelligence, and global economic shifts. Using predictive analytics, AI in procurement turns this raw data into useful insights, helping teams predict demand changes, spot supplier risks, and improve sourcing strategies, all while ensuring sustainability and efficiency.
This article explores how supply chains can leverage AI in supply chain management to make proactive, data-backed decisions that enhance resilience.
AI in supply chain: Integrating technology for efficiency and sustainability
By integrating or upgrading existing digital solutions, these AI-driven technologies can be phased in to address immediate supply chain issues first and optimised for financial and sustainability benefits across supply chain functions over time:
Machine learning for smarter forecasting: AI analyses vast historical data sets, uncovering hidden patterns and trends to predict future demand with precision, reducing stockouts and over-purchasing.
Proactive scenario analysis: AI-driven simulations model various market conditions, allowing businesses to evaluate risks, test procurement strategies, and make data-backed decisions before disruptions occur.
Blockchain: Integrating predictive analytics with blockchain ensures end-to-end visibility, reducing fraud risks and strengthening supplier accountability.
IoT and real-time data streams: Sensors and IoT devices provide live tracking of inventory, shipments, and supplier performance, feeding real-time data into predictive models for even greater procurement accuracy.
In addition to efficiency, AI in logistics and supply chain also focuses on sustainability in efforts to track and reduce carbon footprints through green logistics, alternative energy sources, and resource optimisation to cut waste.
Key benefits of predictive analytics in procurement
AI capabilities can move businesses beyond reactive procurement and build a resilient, data-driven global supply chain management that anticipates challenges and seizes opportunities before they arise. Here’s how:
Early risk detection and proactive disruption prevention
Predictive analytics continuously monitors supplier networks, transportation routes, and market conditions, analysing data from multiple sources—including news reports, weather forecasts, and social media. By detecting potential risks in real time, businesses can take proactive measures such as adjusting inventory levels, diversifying suppliers, or securing alternative logistics solutions to mitigate disruptions before they escalate.
Example: During a semiconductor shortage, companies using predictive analytics are able to anticipate supply constraints early and secure alternative sources, avoiding costly production halts.
Smarter supplier management and risk assessment
AI-driven predictive analytics assesses supplier reliability, financial stability, and historical performance trends. By identifying early warning signs of supplier distress—such as delayed deliveries or financial instability—procurement teams can proactively engage alternative suppliers, renegotiate contracts, or develop contingency plans to ensure supply chain resilience.
Example: Global retailers can use predictive analytics to assess the risk of stock shortages during peak shopping seasons. By analysing historical sales data, weather patterns, and supplier performance, the system can identify potential disruptions weeks in advance. This allows a company to adjust inventory levels proactively, secure backup suppliers, and prevent lost sales, ensuring seamless operations and customer satisfaction.
AI-powered demand forecasting for precision procurement
Leveraging AI-powered demand sensing, predictive analytics integrates real-time sales data, market trends, and external factors to generate precise demand forecasts. By anticipating fluctuations in consumer demand, procurement teams can optimise order quantities, reduce stockouts, and prevent inventory overstock, leading to more efficient supply chain management.
Example: Retailers using AI-driven demand sensing during Black Friday accurately can forecast regional demand variations, ensuring optimal stock availability and maximising sales opportunities while reducing excess inventory.
AI-driven procurement optimisation for cost efficiency
AI algorithms analyse historical pricing data, supplier quotes, and market conditions to recommend the most cost-effective procurement strategies. These insights help businesses negotiate better supplier contracts, optimise order quantities, and reduce unnecessary expenses while ensuring supply chain stability.
Example: Automotive companies can leverage AI-powered procurement analytics to optimise supplier contracts, significantly reducing material costs while enhancing supply chain stability.
AI in procurement: Shifting from reactive to predictive
In an era of supply chain volatility, relying on reactive procurement strategies is no longer viable. By integrating AI into procurement workflows, organisations can:
- Enhance supply chain resilience
- Improve demand accuracy and inventory efficiency
- Reduce costs and optimise supplier relationships
- Minimise disruptions and maintain a competitive advantage
AI-driven forecasting reduces errors by 20% to 50% while capturing up to 65% of missed sales opportunities. This leads to 10% to 15% savings in warehousing costs and 25% to 40% in administrative expenses—delivering both efficiency and precision in demand planning.
How can Infosys BPM help you unlock the power of AI-driven procurement?
Businesses that invest in intelligent procurement strategies today will be the ones that thrive in an increasingly uncertain world. For organisations looking to harness the full potential of AI in procurement, partnering with the right technology provider is key. Infosys BPM Sourcing and Procurement services offer AI-powered sourcing and procurement solutions designed to optimise procurement strategies, enhance supplier collaboration, and mitigate supply chain risks.
