McKinsey: How Procurement is Transforming in AI-Driven World

After years of disruption, more and more procurement teams are adopting AI to improve performance and deliver value. Those that fail to adapt risk falling behind as shocks continue to hit supply chains.

McKinsey & Company has analysed current procurement trends and how teams are embedding AI in their operations.

Increasing efficiency

According to McKinsey, procurement teams now manage 50% more spend than they did five years ago. This shows demand has risen and procurement teams are facing higher expectations than ever. The growth also suggests that teams are under pressure to reach these heightened expectations with less resources.

Companies are increasingly deploying AI agents to automate repetitive procurement tasks, freeing teams to focus on higher-value work.

The result is a function that is more efficient, more agile and more strategic. These agents continuously ingest new information to make up-to-date decisions, plan work, suggest solutions and act autonomously to speed up processes.

McKinsey states: "They will accelerate the transition to a hybrid workforce where procurement professionals coexist and collaborate with their digital coworkers.

"This shift could result in the procurement function being 25-40% more efficient, according to our analysis, while repurposing team activity from routine tasks to strategic decision making."

Shifting procurement strategy

Procurement strategy has, of course, shifted markedly over the years.

Samir Khushalani, Partner at McKinsey and co-author of the report, says: "Procurement is evolving from a transactional role to a strategic driver of value. Functions that once focused on cost savings are now shaping enterprise resilience, innovation and long-term growth."

To build resilience and growth, procurement leaders are prioritising digital transformation. Priorities have shifted in recent years, driven by market turbulence and rising competitiveness.

According to McKinsey’s latest CPO Executive Forum, top priorities are:

• Organisational stress and talent
• New capabilities and tasks for the purchasing function
• Acceleration of digital enablement

McKinsey also finds leaders are taking a holistic approach to value creation across source to pay, with emphasis on flexibility, partnership and demand.

To understand leadership trends, McKinsey surveyed more than 300 leaders earlier this year across finance, life sciences, global energy, technology, logistics and infrastructure. Two thirds of respondents said their companies separate strategic and transactional procurement, enabling teams to focus on more meaningful, value-driven work.

McKinsey reports that a power generation OEM achieved 11% cost savings in 12 months by setting up a strategic sourcing organisation and collaborating with engineering and product development.

Barriers and adoption

McKinsey states that "a lack of focus on user experience was holding back the use of advanced technologies in their organisations".

This provides an explanation as to why there has been a low adoption of procure-to-pay (P2P), supplier relationship management (SRM) and e-sourcing software, despite these tools being widely available with many specialised platforms.

At McKinsey's latest CPO Executive Forum, only 60% of large and 30% of small organisations said they had a P2P system which can deliver a 2-5% cost reduction.

Despite evidence that e-sourcing tools can create significant savings – one company saw 20% cost reduction in the maintenance, repair, and operations (MRO) category – only 30% of executives said their companies were using e-sourcing.

Procurement teams are, however, increasingly adopting advanced analytics and generative AI. Early adopters report sizeable gains, including up to 20% savings from analytics tools.

McKinsey cautions: "Given the complexities of today’s operating landscape, adjusting the procurement operating model is no longer an option but a business imperative." Its report indicates that technologies such as agentic AI could lift procurement efficiency by 25–40%, creating greater agility.

As agentic AI handles routine transactional work, employees can focus on strategy, guided by real-time insight into market trends and potential solutions. Despite uncertainties, AI enables cost savings and efficiency within a single platform, reshaping the procurement function.