Five Proven Methods to Effectively Measure Your AI Investments

As AI becomes an essential part of the procurement playbook, companies are assessing whether their investments are delivering real value. As Darshan Deshmukh, President of ProcureAbility, recently shared, “For procurement leaders, the takeaway is clear: once they understand AI’s full potential, a future without it becomes unimaginable. It’s important to identify a handful of use cases to test the hypothesis, create value, and drive adoption within the organization. It’s all about ‘how’ AI integrates within your organization and not ‘if’.” However, ProcureAbility’s co-sponsored benchmarking study found that 90 percent of industry leaders are only somewhat confident—or less—in evaluating the ROI of AI tools.

Spending Without Clarity

Last year, businesses spent $13.8 billion on generative AI. Large companies plan to spend $50 million to $250 million on AI in the next year. That’s a significant investment without clear ROI measurement.

Costs vary by tool, payment model, and other factors. Even free tools have a cost. IT teams must vet and integrate them, while users must spend time learning to use the tool effectively.

Tracking your ROI

To make sure time, effort, and money are used wisely, organizations must measure AI ROI. Procurement professionals already excel at cost-benefit analysis—skills that directly apply here.

Here are five steps to measure AI ROI:

1. Find your foundation: Start with solid baseline data. Ideally, you have a year of clean data showing normal performance before the tool. If long-term data isn’t available, start measuring now. Track hours spent searching for suppliers, current spend, or the impact of past supplier delays or quality issues.

2. Set your KPIs: Our research shows that nearly 60 percent of supply chain and procurement leaders use AI for specific initiatives. We know that targeted implementation yields targeted results. So focus on key performance indicators tied to the tool’s purpose. For instance, if AI monitors contracts for compliance, measure time spent on contracts or compliance rates. Use the SMART framework (specific, measurable, attainable, relevant, time-bound) to define KPIs.

3. Take the time to learn the tool: You won’t achieve the results you’re aiming for if your team doesn’t fully understand how to use the tool. Even the best technology can underdeliver if it isn’t being applied correctly. That’s why it’s essential to invest in proper training, not just once, but as an ongoing practice. If you’ve had the tool for a while, it’s never too late to recalibrate. Schedule targeted training sessions around the features or workflows your team struggles with most, and build a feedback loop to identify new areas for improvement.

4. Determine your timeline: Results don’t happen overnight. Set an analysis timeline based on your usual business cycles, ensuring you encompass peak seasons and lulls. During your chosen timeline, whether a quarter, six months, a year, or more, make sure you make a concerted effort to measure performance related to your KPIs. It’s easy to forget to keep notes and measure as you move on to the next task, but it’s critical that you have a system in place for ensuring measurements are taken.

5. Analyze and decide: Take a look at the final numbers. Is there a noticeable improvement of your KPIs? Is it commensurate with the cost of the tool? Will switching back to old ways or switching to a different tool end up costing more? Use these insights to determine if your AI program is truly valuable.

Benefits beyond the numbers

Remember that not all value is quantifiable. AI excels at handling mundane, time-consuming tasks – the work humans don’t necessarily want to do. And it frees up procurement professionals to focus on strategic work to drive value for the enterprise.

“We spend so much time on tasks that are necessary but that we don’t enjoy – many of which could be automated,” said one technology procurement leader in the ProcureAbility-sponsored study. “People are getting tired of handling these small, repetitive jobs. If we automate those tasks, our teams can focus on what really matters: negotiations, strategy, and category management.” This presents a once-in-a-career chance to leapfrog progress for a procurement professional and a procurement organization. Workers who are less burdened by time-consuming, meticulous clerical tasks can instead devote their energy to strategy, innovation, and problem-solving. They’ll have time to learn and grow and the mind space to be creative, a talent AI can’t replicate yet. And they’ll be less stressed and less likely to burn out.

With 88 percent of industry leaders planning to increase their AI investment within the next 12 months, it’s clear that AI is no longer optional but a strategic imperative. However, as with other technologies, some of this could be hype spend. Organizations may be investing just because competitors are investing. The true strategic advantage lies in getting the most value out of your investment and knowing where, when, and how to implement AI to maximize value. “Evaluating ROI remains a major hurdle in AI implementation with no quick and easy solution in sight. However, having a clear objective for AI projects and establishing an agreed-upon ROI evaluation mechanism upfront can accelerate adoption,” said Satyen Pathak, Managing Director-India at ProcureAbility.

Discover how procurement leaders are strategically approaching AI in ProcureAbility’s latest benchmarking report with ProcureCon, “AI Adoption and Its Transformational Impact on Procurement.”