AI tools are already helping procurement professionals at 64% of firms, according to research by Economist Impact
Artificial intelligence (AI) is rapidly transforming the procurement landscape, redefining roles and reshaping how organizations approach their procurement teams. According to an Economist Impact research program, sponsored by Amazon Business, organizations are amid a pivotal shift, as companies increasingly leverage AI to enhance efficiency and drive strategic decision-making.
Most enterprises are already seeing value creation from AI for procurement, but this is particularly the case at larger firms, where AI is being used not just to automate tasks but also to enhance decision-making processes. Sixty-nine percent of organizations with US$500m or more in annual revenue say that AI tools help procurement professionals do their jobs better, compared with 58% at organizations below this threshold.
Strategic transformation: beyond traditional roles
This rapid adoption of AI in procurement accompanies a strategic shift in the function’s role within organizations. Historically seen as a back-office operation focused on cost reduction, procurement is now recognized as a critical component of business strategy. AI's ongoing integration into procurement teams is changing the function at its core, enabling new kinds of work to take place. Klaus Staubitizer, chief procurement officer at Siemens, sees this evolution as part of a broader transformation within procurement: "We’ve moved beyond just cutting costs. Our focus now is on creating value through sustainability, innovation and resilience."
AI excels at streamlining operational tasks, particularly routine, data-rich ones such as risk analysis. Whereas procurement specialists may have had to focus on these areas previously, they can now turn to work that drives strategic value. This process is already under way, with over 50% of respondents reporting that AI tools have already replaced some procurement tasks or roles at their organizations.
Balancing AI with core competencies
As procurement and AI tools continue to evolve, their points of intersection will undoubtedly increase. However, the successful integration of AI and other technologies into procurement processes will depend on the ability of leaders to adapt and evolve alongside these innovations. Sheri Hinish, global consulting sustainability technology and ecosystems leader at EY, highlights the importance of balancing technological innovation with human expertise. "Even if you have the best technology in the world, it's still going to come back to people," Ms Hinish asserts.
Thomas Johnsen, professor of purchasing and supply chain management at Audencia Business School, suggests that while advanced technologies are crucial for modernizing procurement, organizations must not lose sight of the foundational tools and skills that underpin effective procurement: "For a junior procurement professional, there are requirements for negotiation skills, as well as, these days, for everything to do with data analytics."
To this end, despite AI’s significant impact, traditional data analytics remain essential, with 77% of procurement leaders rating them as important for the function at their organization. Cybersecurity is another key concern, recognised by 74% of leaders as vital for protecting procurement operations from digital threats.
Looking ahead: the growing importance of soft skills
As technology advances, the skill mix needed in the procurement function will continue to shift. Mr Johnsen adds that "AI and big data are transforming procurement. But to truly benefit, we need leaders who understand these technologies and can use them strategically to drive value."
To make this happen, procurement teams require soft skills, such as strategic leadership and cross-functional collaboration to align technology implementation with organizational and procurement objectives. It’s no surprise that respondents rate the former as among the most essential skills for procurement professionals in their organizations, now and for the future. Cross-functional collaboration, rated by survey respondents as the least essential, merits particular attention, especially given that 72% of procurement leaders rely at least to some extent on technology expertise from other parts of their organization. Continuous professional development and a deep understanding of business operations throughout the organization remain critical for procurement professionals navigating this new landscape.
