“One of the markers of a leading procurement function is when you see suppliers as more than just a source of supply but also as a source of value and innovation.” - Samir Khushalani, Partner at McKinsey & Company
Procurement is facing a pivotal inflection point. Evolving geopolitical and economic uncertainty along with the rapid advancement of new technologies like generative AI present unprecedented challenges – and, yes, opportunities – that procurement has to figure out the best ways to adapt to… all while working to increase their strategic impact and secure their role as business-critical partners.
To discuss the best ways for procurement to position themselves for long-term success during such a time of change and uncertainty, I recently spoke with Samir Khushalani, Partner at McKinsey & Company. Samir shared his predictions for procurement will change in 2025 and also what they can and should be doing to leverage this time of change to solidify their role and influence in the business.
Procurement needs to do a lot more than make than a few tweaks to what they are already doing. Samir sees a fundamental reimagining of procurement’s entire operating model where, largely because of the impact of generative AI, they relinquish a large portion of their tactical or process-driven tasks to AI and function instead as a kind of “invisible hand” that guides the strategic direction of the business.
Samir shared how procurement can transform their teams, their operating models, and their mindset to weather all the disruption and turn it into rocket fuel for value creation. Here, in his own words, are some key insights from our conversation:
A New Operating Model for Procurement
"We're reimagining the operating model. It’s a necessity. We’re seeing companies adopt the notion of agile procurement where you now basically have this notion of fixed category teams that are not sized for peak load. But it's more of an agile flow to work model. It's smaller category teams that are then supplemented by experts as and when needed. So, it’s just a fundamentally different way of organizing yourselves."
AI's Real Impact Today
"If procurement can identify the specific pain points a particular company is facing and also the generative AI use cases that could help alleviate, mitigate, and improve upon those pain points, then you have a much higher chance of success.
“One of the ones that is very exciting for category managers is this notion of a co-pilot... imagine a co-pilot generating your Porter's Five Forces and analysis, your SWOT analysis, etc. Up until now the category manager was having to do that... even if it is 60 or 70 percent, it's not only an efficiency boost, but the quality of that strategy is going to be that much better."
Don't Wait for Perfect Data
"It’s always good to have really good data, but let's not let perfect be the enemy of good... with the data you've got you can still drive a lot of impact. And let's not forget the idea of GenAI being able to help you improve your data."
A CPOs Top 3 Priorities
"The first one of course is around saving money... The second one is talent... The third one, of course, it would be disingenuous not to include digital. In fact, the need to accelerate digital enablement saw the sharpest increase in CPO priorities from the spring of 2023 to the spring of 2024."
Procurement's Rising Strategic Value
"We are in a period of transition. You do have companies where a stint in procurement is their requisite to getting into the CXO ranks. You have other companies where a person who is in charge of procurement and a couple of other topics like sustainability etc. are actually in a board position. And then we have clients where procurement is embedded deep within the business, and there’s room to grow in terms of how it’s been perceived and how it’s being treated in terms of level of involvement and degree of participation.”
The Journey with AI in 2025
"Last year was a year of talking. This year has been a year of doing. I would hope 2025... would be a year of scaling. This year there's been a lot more of ‘okay, let's move from pilots to action,’ but the action has been much more proof of concepts, proof of values, more limited testing the waters."
The New Risk Landscape
"We seem to be entering into an era of mercantilism and economic nationalism... That means procurement's role has to be to develop flexible strategies that can respond to geopolitical disruptions, tariffs and counter tariffs... You can't be sitting and waiting for a year before you can change your strategies. That just will not work."
