Everyone with an AI tool is proclaiming how their tool negates the need for manual spend analysis and, beyond that, how it negates the need for sourcing (because their Agentic solution can create the event and execute it automatically), and how it can even handle the contract generation, negotiations, and signing. How it will save you so much time and money that you will never need to do manual spend analysis again.

And it’s all lies, damn lies, and statistics — of the worst kind — since it usually involves probabilistic Gen-AI that often hallucinates market conditions, best practice, and true innovation.

It’s true that an agentic solution can run pre-packaged spend analysis against all of your spend once it has been classified, identify the products and categories with the greatest variance, compare the average price paid to current market prices, suggest opportunities, and push the products into the sourcing tool (and invoke the sourcing agent).

But here are the problems:

• even assuming it’s ranking opportunities by the savings today, that doesn’t mean it’s the greatest savings tomorrow; there could be contracts in place, declining demand, or rising inflation in the category
• similarly, products or categories passed over could be the greatest opportunities due to increasing demand, lack of long term contracts, or stagnation in pricing
• without verification, the “market prices” could be quite off actuals as it could be “public” pricing only and private is quite cheaper, especially with volume discounts
• the opportunities are not real unless they are with suppliers you can actually source from (and auto-identification is not actual product verification)
• and just getting auto-responses to auto-requests doesn’t guarantee you get the responses from the suppliers with the best products and prices

And that’s just the beginning.

Here are the missing pieces.

• it’s working on a predefined categorization (yours, the vendor’s, or, even worse, a random AI one); sometimes the best opportunities come from a categorical reorganization that allows you to bundle the right mix of products for the suppliers you’re inviting
• suppliers don’t auto-bid in response to auto-RFI requests, vendors do — and for strategic categories, you need strategic suppliers
• you can use agentic CLM to assemble clauses or send and retrieve documents and even do an initial analysis, but since the review is based on Gen-AI LLMs that can hallucinate as often as not, a review can be helpful, but it’s not a real review
• the data ingested for product matchings may or may not be accurate, especially since suppliers or distributors can put want they want on their site, or, more importantly, leave out key details

It’s great to use AI to find potential opportunities, but you can’t use AI to verify, and you definitely can’t use AI to capture them. Manual spend analysis has just become more important than ever, as has a tool that allows you to do it as efficiently as AI appears to. Fortunately, a such tools do exist — although you may have to work hard to find one.