Procurement teams are under mounting pressure to deliver more value with fewer people — and artificial intelligence (AI) is quickly becoming the defining factor in who keeps up.
A new McKinsey report, “Transforming Procurement Functions for an AI-Driven World,” finds that companies now manage 50% more spend per employee than five years ago. The consulting firm says the next wave of automation could make procurement operations 25% to 40% more efficient. That next wave, driven by “agentic AI” systems, can interpret data, make decisions and act independently.
Companies are already using AI to reconcile invoices, audit contracts and support supplier negotiations. The result, McKinsey says, is a shift from transactional purchasing to strategic value creation.
“Procurement will guide business behavior and drive better outcomes,” the report notes.
The impact AI could have on procurement
Procurement now sits at the center of business volatility — juggling inflation, supply chain instability and sustainability demands. McKinsey’s long-running Global Procurement Excellence benchmark shows that companies with advanced operating models enjoy five percentage points higher EBITDA margins than peers.
Two-thirds of the 300-plus procurement leaders McKinsey surveyed say they report directly to the CEO or CFO, reflecting procurement’s growing strategic influence.
Two-thirds of companies have divided their procurement work into strategic and transactional tracks. That change alone, McKinsey says, is improving speed, supplier performance and cost control.
A power-equipment manufacturer cut costs by 11% after creating a sourcing group aligned with product development. A cruise line restructured its team and saw major gains in on-time supplier delivery.
More than half of surveyed firms have also established centers of excellence (COEs) to centralize analytics and cost modeling. One specialty-chemicals company saved 13% on raw materials through a COE-led pricing model; another manufacturer achieved $370 million in first-year savings after elevating its COE to the executive level.
Despite proven returns, many companies still lag in core systems. Only 60% of large firms and 30% of small ones have fully implemented procure-to-pay platforms. Just a third use e-sourcing tools, even though they can cut maintenance and repair costs by up to 20%.
Meanwhile, 40% of procurement functions have begun using generative AI. In one pharmaceutical example, an AI audit recovered $10 million in missed value in under a month.
McKinsey’s warning: Procurement can no longer rely solely on manual processes or outsourcing. As automation advances, routine work is being insourced and managed by AI, allowing humans to focus on strategy, risk, and supplier partnerships.
“The next generation of procurement,” the report concludes, “will be recognized for its expertise in supply markets and its ability to shape business outcomes.”
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