Through recent years of unprecedented disruption—vacillating tariffs, wars, catastrophic weather—chief procurement officers (CPOs) have shown how they can help ensure supply continuity to keep revenue flowing. Now, with both that newfound cred and increasingly powerful AI at their fingertips, CPOs have a chance to tackle new challenges and deliver even greater value. To do so, however, procurement needs to up its game—again.

Greater recognition of procurement’s strategic value, along with the recent explosion in AI capability, creates an opportunity for procurement to produce new and significant value for its organization, increasing revenue and innovation rather than just cutting costs.

To do so, however, CPOs need to juggle new and old demands, essentially maintaining procurement’s old remit of cost containment while taking on higher-level, strategic work. They’ll have to create new operating models for procurement. They’ll also need to retrain existing staff and hire new employees who can learn not only to work in new ways—using digital technology to become more productive—but also to think in new ways, such as reimagining old processes. And they’ll need to create new ways to gauge and communicate success and value.

It’s a work in progress. “Everyone is experimenting, trying to figure all of this out at the moment. We’re building the plane while flying it,” says Phil Ideson, co-founder and managing director at Art of Procurement, which provides content and consulting. “Even the best CPOs tell me, ‘I don't know what the answer is.’”

AI will certainly play a key role. Nevertheless, “this is not about the technology, but more about what you put around it,” says Veronika Strausova, a partner in the procurement practice at Baringa, a global management consulting firm. “The focus must be on operating models, people, skills, and especially process optimization.”

Advancing procurement’s operating model

Procurement’s operating model has changed, but there’s more ahead.

Originally, individual business departments procured their own supplies. Then, companies recognized how to benefit from economies of scale by creating a centralized model in which the procurement department handled most of the purchasing.

Now, more organizations are moving to a hybrid model. In this system, a centralized procurement operation handles high-level strategy but leaves tactical decisions to individual departments. The central operation takes a broader view of the entire organization, making decisions about goods and services that align with overall business goals to produce greater long-term value.

For instance, it might review the market to determine whether the company is spending too much for a particular good. Or it could look at the hardware and software being purchased by departments or by geographic locations of the corporation to avoid redundancies, perhaps consolidating purchases. Or it might work with engineering to identify and develop sources of materials or components for a new type of product.

An indication of this change is a shift in organizational reporting lines: Procurement traditionally reported to finance but now more often reports to operations. In a 2025 Economist Impact global survey of C-suite executives sponsored by SAP, 46% of respondents said procurement reported to the chief operating officer, up from 26% in 2023 and 44% in 2024. Only 23% said procurement reported to the CFO, who typically has a narrower focus on revenue and cost.

“The broader the responsibility of the person you report to the better, because they have a bigger purview of procurement’s impact,” says Ideson.

Procurement leaders recognize that these changes are vital if they are to play a more strategic role. In an annual survey of procurement leaders by The Hackett Group, an AI consulting firm, “transforming the operating model” rose to the No. 3 spot in priority for the first time this year, following improving spend cost reduction (No. 1) and ensuring supply continuity (No. 2).

Upgrading the workforce using AI

AI can increasingly automate low-level tasks and free employees for more valuable work. For example, even though a significant amount of task-oriented work is already automated through robotic process automation, humans are often still involved in some aspect of the process. AI is expected to be able to reduce or even eliminate the need for humans in these and other processes.

Humans are still involved in supplier negotiations at most companies, for example. But Walmart has used AI to automate aspects of negotiations since 2021, according to the Harvard Business Review. Presumably, doing so frees humans for jobs such as researching markets, finding innovative new suppliers, or developing more extensive scenario-based plans. In the Economist Impact study, GenAI ranked as the top desired technology to implement or pilot, at 54% in 2025—up from 34% in 2024.

More significantly, experts expect AI to significantly change the very nature of procurement work. To date, most companies have simply digitized work processes that were long established. New technology means entire workflows and processes can be reimagined. Before that can happen, procurement needs to solve significant workforce challenges created by a mix of too few workers and existing workers with the wrong skills.

Procurement has faced a shortage of workers for years due to many factors, including an aging workforce and lack of interest from younger generations; meanwhile, the workload has been increasing. McKinsey’s GPE360 Benchmarking study found that the spend managed per procurement employee is 50% greater today than it was five years ago, according to Samir Khushalani, a partner leading digital procurement work at McKinsey, a global management consulting company. The Hackett Group’s research finds this trend is accelerating. In its 2024 survey, CPOs said they expected workloads to increase by 8% and budgets to rise only 1.6%. In 2025, the gap widens: Procurement workloads are expected to rise 9.8% while budgets grow only 0.9%.

Most of that budget increase is spent on technology, especially AI. “We are seeing a labor-for-technology swap,” says Chris Sawchuk, principal and global procurement executive advisory practice leader at Hackett. “Companies are expecting that technology is going to fill that gap.”

That may be unrealistic with the current staff. Many procurement employees do not have adequate technology skills. One-third of CPOs polled at McKinsey’s 2024 Procurement Executive Forum said that the biggest challenge today is a gap between current skills and the skills needed in the future, according to Khushalani. And most procurement organizations still focus on improving efficiency and cost.

“Probably 90% of organizations today still look at technology as a way to do more with less,” says Ideson. In addition, current employees may be afraid of being displaced by technology—and for good reason. The Hackett Group has estimated that 46% of procurement activity could be done by technology within five to seven years. Sawchuk thinks that the estimate could be even higher because the estimate was made in 2023, before agentic AI came onto the market.

In addition to inadequate skills, employees may not have the right mindset for the new procurement. While procurement has been viewed as tactical, strategic thinking is the most important skill that procurement needs now, according to 43% of CPOs in the McKinsey CPO survey. Procurement will also require more creativity and even imagination. Employees will need to think of ways to apply technology in new ways to improve performance and value, says Sawchuk. “Today we are witnessing the very early days of individual procurement professionals building their own agents to support them,” he says.

Such a transition to a new working environment may not be possible for employees accustomed to technologies and processes of the past. Rather than applying the latest technology to existing procurement processes, they will need to reimagine processes in light of today’s technological capabilities. For instance, it can still take months for a supplier to be certified. But the current process may date from decades ago, or even a prehistoric analog era. It may still require a string of approvals: Person A signs off, then it goes to Person B to sign off, then Person C, and so on.

The approvals may no longer be necessary, at least as originally designed. The process can probably be rethought and at least partially automated to happen more efficiently. Perhaps an AI agent could handle it, dramatically reducing time to approval, increasing productivity, and freeing every human along the chain to do more important things.

The most important of those things: fresh ideas. Unfettered by past limitations of technology or time, “I think the real jewel is, what are we not doing today?” notes Sawchuk. “It’s the realm of ‘We don’t know what we don’t know.”

Inventing new metrics for procurement

To succeed in its new role, procurement needs better ways to measure the value it delivers.

In practice, few existing metrics show how procurement contributes directly to C-suite goals. Traditional metrics focus on efficiency and cost savings, which are certainly valuable, but they do not show how procurement adds value in higher-level strategic areas like innovation, revenue growth, and customer satisfaction.

And even standard supplier management metrics on cost may not translate well. “The core metric everybody talks about is savings,” says Roman Belotserkovskiy, a partner at McKinsey. “It’s shocking how often we hear the CPO say, ‘We saved X amount of money,’ but the business says, ‘We've never seen any of that money.’”

Why? Procurement might be counting cost avoidance as savings, but that doesn't necessarily show up in the manufacturing operation. For example, procurement achieved significant savings on one particular component, but because of other factors not necessarily under its control, the final bill of materials was higher.

No common metric shows a direct line between procurement and revenue or customer satisfaction. One way companies try to link procurement to innovation is by tracking the percentage of new products that originated from a supplier, says Khushalani. But that measure is more akin to a game of six degrees of separation than a key performance indicator. It’s a long journey from a supplier’s innovation to a business’s final product. “The problem is that a lot of things happen between the supply chain and the final product or service. It’s hard to measure how innovation from procurement adds to final product value,” says Strausova.

To better align procurement metrics with C-suite goals, start with clear definitions and goals. What constitutes value for one company won’t necessarily constitute value for another company.

“In order to measure how procurement adds strategic value, you have to define what strategic value is,” says Sawchuk. If a company's strategy is to offer the lowest-cost products, it makes sense for procurement to measure cost savings. If a company aims to be a leader in quality with its high-end service or product, procurement will put more weight on reliability and quality of parts rather than cost. If a business and its procurement department were properly aligned, then it might be able to trace customer satisfaction with the quality of its cars back to the quality of its parts.

Then again, part selection is only one of many factors contributing to overall quality. The most important thing is for the C-suite and procurement to agree on procurement’s role in the overall business strategy, then decide how that will be assessed.

In many organizations, if procurement has a way to show it has advanced the business, the C-suite will invest more attention and even money in the function, says McKinsey’s Belotserkovskiy.

“The procurement function has to earn the right to play in this different game,” he says. “CPOs need to step up and think: What does the business need, and how can procurement contribute to that?” When CPOs are willing to sign up for a target that is aligned with business priorities, they can start at the business-level target and then move down, identifying the specific things they need to do internally to reach those targets, he explains. When they hit the targets, they can show top leaders exactly how they did so. “They can state their ROI: Procurement hit this target at this cost. That’s demonstrable value,” Belotserkovskiy says. “And they have presented a strong rationale in asking for an increased budget.”

The challenge to prove procurement’s worth once more

Companies have some heavy lifting to do to continue procurement’s shift from a cost-cutting machine to a strategic value-creating partner.

The rest of the C-suite is watching—with some skepticism. Nearly 70% of the executives in the Economist Impact survey said they believed that a lack of vision and business alignment would be a major barrier. The survey report sums it up with a quote from Sami Naffakh, chief supply officer at Reckitt, which makes health, hygiene, and nutrition products. “We’re talking about massive change, which will require different structures, completely different operating models, and completely different sets of skills and capabilities. Not many companies are creating a road map yet to guide such change.”

It’s time to start. As AI supercharges capabilities, CPOs continue to demonstrate the value of excellent procurement by revising its operating model, training staff with new digital skills and the aptitude to work hand in glove with technology, and devising metrics that more clearly show how procurement aligns with business goals.