Agentic AI: Powering a Procurement Revolution

Agentic AI is revolutionising procurement functions, enabling teams to move beyond traditional analytical tools towards autonomous systems that deliver recommendations and execute tasks, according to McKinsey & Company.

The role of procurement has shifted in recent years, becoming a driver of resilience and business growth as opposed to a source of savings. And yet, despite a deeper appreciation, teams are still struggling to adapt to demand.

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

There is an increasing gap between goals and execution, with teams facing delays from administration workloads, fragmented data points and slow sourcing. Negotiation and sourcing are 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 evolution of procurement teams and functions.

From analytics to autonomous action

The way in which procurement teams are now using technology has changed, moving away from analytical AI to agentic AI, where agents are asked to undertake the performance as opposed to presenting the data for the user. Agents ingest data and explore a range of solutions before autonomously generating recommendations.

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

"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."

Businesses that 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% to 30%, while boosting value capture to between 1% and 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.

Strategic implementation for competitive advantage

Executives are witnessing new opportunities with AI, making procurement truly strategic when it comes to driving growth, resilience and ESG initiatives.

The tech can enable smarter decisions with more agile supplier networks, as long as it is used correctly.

If teams appropriately implement AI across their operations, they can enjoy new savings, resilience and innovation across their companies. 

Roman adds that, as sourcing, negotiations, contract compliance and value preservation are increasingly augmented by AI, the real question becomes how to deliberately transition humans to focus on judgment, orchestration and relationships.

Building AI-enabled procurement

McKinsey points to a road map for success in implementing agentic AI across procurement operations. Agentic AI solutions are already available to use, with requests for X (RFx) generation and analytics, contract optimisation and tail repricing systems ready for deployment.

Organisations should look at business outcomes when applying AI solutions, not just viewing it as a tool or a use case.

The consulting giant recommends picking high-impact categories to reimagine and use success to build momentum, while combining data, AI, procurement and change expertise for a cross-functional task force. Starting upskilling teams immediately could mean the product take-off faces no delays, with every cycle treated as a learning opportunity as AI systems improve with use.

Ongoing volatility in the global landscape is creating immense pressure on procurement teams, making them vulnerable to disruption, Procurement leaders who fail to act at pace could be left behind by their competitors and their own suppliers.

Meanwhile, they are also working to develop collaborative supplier partnerships to build strong working relationships, protecting their supply chain to mitigate outside pressures in an AI-enabled environment.