AI meets spend classification: A new frontier in information processing

This paper investigates the impact of artificial intelligence (AI) on spend classification in buyer firms, using the organizational information processing theory (OIPT) as a reference framework. Existing research on the use of AI in procurement lacks a holistic approach that effectively integrates human oversight. This gap is particularly evident in procurement activities beyond automating repetitive tasks, especially in advanced analyses supporting strategic purchasing decisions, such as spend classification. Through a case study approach focusing on providers of AI-based spend classification solutions, this research highlights how AI addresses the substantial information processing needs that exceed the internal capabilities of buyer firms. By aligning these needs with the capabilities enabled by the adoption of AI, the study demonstrates a significant advancement in spend classification practices. This research applies the theoretical constructs of the OIPT at the intersection of two relatively unexplored domains—spend classification and AI and aims to translate these constructs into actionable insights for professionals, thereby making a significant contribution to the field.