McKinsey: How Agentic AI is Shifting Procurement Capability

Procurement is no longer defined by cost savings, but is now more understood for its role in sustainability, innovation and resilience.

Despite the deeper understanding of procurement's role, teams around the world are struggling to adapt to demand.

Ongoing volatility in the global landscape is creating immense pressure on these teams, making them vulnerable to cracks.

McKinsey & Company explores how procurement is being redefined by agentic AI.

AI adoption

Recent years in the global landscape have created immense instability across businesses, disrupting supply chains everywhere. Ongoing inflationary pressure, supply shocks and an increased volume of data are testing the limits of legacy procurement models.

Procurement leaders are now having to predict external and internal volatility, tracking disruptions from its minor starting point in order to preempt action and respond to major events.

Meanwhile, they are also working to develop collaborative supplier partnerships to build strong working relationships. In doing this, they are protecting their supply chain to mitigate outside pressures.

Despite this, there is an increasing gap between goals and execution of them, with teams facing delays from administration workloads, fragmented data points and slow sourcing. Negotiation and sourcing is changing, as supplier organisations are adopting AI across their own processes. McKinsey estimates that today's procurement functions use less than 20% of available data to support decision-making.

As a result, the emerging use of agentic AI calls for an evolvement of procurement teams and functions. If teams can appropriately implement AI across their operations, they can see new savings, resilience and innovation across their company. 

"Across hundreds of conversations with procurement leaders, and based on what we are seeing in live transformations, the pattern is consistent," says Roman Belotserkovskiy, Partner at McKinsey & Company.

"Leaders are moving beyond dashboards and insights toward agentic systems that deliver not just efficiency, but materially higher effectiveness.

"As sourcing, negotiations, contract compliance and value preservation are increasingly augmented by AI, the real question becomes: how do we deliberately transition humans to focus on judgment, orchestration and relationships?"

All supply chain, sustainability, Scope 3 and net zero leaders should attend:

• Procurement and Supply Chain LIVE: The Net Zero Summit - QEII Centre, London, March 4-5
• Procurement and Supply Chain LIVE: The US Summit - Navy Pier, Chicago, April 21-22

Co-located with Sustainability LIVE, these events brings together CSCOs, CSOs and senior decision-makers at a moment when sustainability, supply chains and commercial performance are increasingly interconnected.
Tickets can be booked online today for The Net Zero Summit and The US Summit. Group discounts available.

Boosting efficiency

The way in which procurement teams are now using technology has changed, moving away from analytical AI to agentic AI, where the agents are being asked to undertake the performances as opposed to presenting the data for the user.

The agents take in data, exploring a range of solutions and autonomously generate recommendations. 

Procurement teams are harnessing AI agents to operate across end-to-end solutions, across identifying opportunities, sourcing suppliers and tracking performance post-agreement. The outcome sees the agents working scale, speed and synthesis while humans put their efforts in relationship building and complex judgement. 

Businesses who have acted fast have seen significant results, generating savings opportunities or increases in efficiency. One company using AI agents to work on autonomous sourcing has seen an increase in procurement staff efficiency from 20%-30%, while boosting value capture to 1-3%. 

By investing in the right foundations, businesses can pilot new technology in weeks and grow to scale in less than a year, witnessing high savings and operational efficiency with speed. 

Procurement roadmap

Executives are witnessing new opportunities with AI, making procurement strategic for driving growth, resilience and ESG. The tool can enable smarter decisions with more agile supplier networks, as long as it is used correctly. 

McKinsey points to a road map for success:

• Activate no-regret agents - Agentic AI solutions are already available to use, with RFx generation and analytics, contract optimisation and tail repricing systems.
• Define long-term vision - Look at business outcomes when applying AI solutions, not just viewing it as a tool or a use case
• Scale fast - Pick high-impact categories to reimagine and use success to build momentum
• Build the right team - Combine data, AI, procurement and change expertise for a cross-functional task force
• Invest in capability building - Start upskilling teams immediately so the product takeoff faces no delays
• Establish feedback and learning loops - Treat every cycle as a learning opportunity as AI systems improve with use

Procurement leaders who fail to act with speed may being left behind by their competitors and their own suppliers, so the need to invest is clear.