In the Hackett Group’s Enterprise Key Issues Study, 89% of executives across business functions said their organizations are advancing GenAI initiatives, up from 16% in the prior year. A July 2024 Gartner survey also found that 72% of procurement leaders are focusing on incorporating generative AI, anticipating a shift towards strategic decision-making and innovation. Procurement leaders recognize the imperative in front of them, but what does it mean for the future skills profile of the profession?
The implications of this seismic change should not be underestimated. I recently hosted a panel discussion with Elizabeth Zucker, Senior Director, Procurement Advisory North America at The Hackett Group, and Martin Adamek, Senior Manager, Procurement at TE Connectivity. We examined some of the huge challenges that procurement will face in adopting GenAI in the coming years, with a particular focus on talent management.
I kicked off proceedings by pointing to the Hackett Agenda, finding that there is an 8.8% productivity gap in procurement and an 8.9% efficiency gap. “As procurement’s responsibilities have expanded, team sizes have not kept pace,” Elizabeth Zucker said. “Hence the need to invest in new technologies.”
Elizabeth elaborated on the Hackett Group’s findings regarding “Procurement Trends with a Transformational Impact.” The top two issues named by survey respondents were “Digital Procurement and Automation” and “Artificial Intelligence and/or GenAI”; both were named by 64% of respondents. In third place, cited by 56% of respondents, was the “Changing Profile of Procurement Skills” needed to adapt to these developments. The two next-highest ranked trends are also closely related: “Deep Real-time Data and Insights Visibility” (50%) and “Broadening the Scope of Procurement Responsibility.” These trends also call for new and expanded skillsets.
In the light of rapid technological change, respondents to the Hackett survey also named “Transform the Operational Model” as the third priority for procurement in 2025, with “Digital Transformation and Digital Landscape” ranked fifth.
Other priorities raise yet more demands in terms of skills development. Inflationary pressures and price fluctuations caused by shortages and trade barriers call for capabilities such as cost modelling and scenario analysis in areas such as contract management.
Thus, while cost reduction remains procurement’s foundational challenge, the function is now expected to play a greater role in areas such as risk management to ensure continuity of supply in an era of geopolitical disruption and uncertainties around trade policy.
We can add sustainability, ESG and supplier diversity to the growing list of broadened responsibilities. Moreover, there is an increased expectation that procurement leaders should act as a strategic advisor to the business. “High forecasting accuracy on issues such regulatory risk, inflation and supply chain disruptions calls for new skills, as does the capability to build contingency plans and communicate effectively with internal stakeholders, suppliers and customers,” Martin said.
Thus, we must answer the question, “What skills will procurement require to transform the operational model and meet its broadened responsibilities in the near and medium-term?” This holds true at all levels within the procurement function, and across every process step from source to pay.
GenAI concerns to be addressed
GenAI is most commonly viewed as a tool for eliminating routine work, such as automating the production of custom-designed requests for proposals (RFPs) and multiparty contracts or contract creation and contract life cycle management. In fact, GenAI applications have the potential to assist with more complex tasks, such as drawing up category strategies. With the advent of agentic AI, the possibilities will expand exponentially, as artificial intelligence replaces the need for human decision-making in many areas such as price negotiation.
However, the Hackett Agenda report highlighted procurement leaders’ concerns about data quality, data privacy and regulatory issues related to GenAI adoption. There is skepticism about whether intellectual property will remain protected, for example. Respondents also expressed concerns about the complexity of the existing technological and process landscape.
Here too, new skills are needed. It takes tech-savvy users to be able to pose the right questions to GenAI, and crucially, users with finely honed critical thinking capabilities to assess the answers. Procurement professionals will need to work closely with technology vendors to ensure that applications meet the right criteria, and sensible guardrails are put in place. For example, an agentic AI program designed to negotiate prices must be set up to work within clear constraints on parameters such as quantity, quality, location, risk and ESG.
More specifically, procurement leaders are concerned about the lack of implementation skills and experience, the shortage of AI talent in data science and software engineering, and poor training in new skills across the broader workforce.
Filling the AI skills gap
For the past decade, I’ve been concerned with the question of how we attract the right quality of people into the procurement profession in the public sector and how we equip them with the right skills. Without such individuals who see a clear career path it is difficult or impossible to realize a return on investment in any new technology, and especially the GenAI and agentic AI technologies coming onstream now. But it is equally important to look at this from the perspective of the talent coming forward, especially young talent: what are they looking for in an employer and how do they see their career path?
Investment in technology, digitalization and AI is a necessary but insufficient condition to make the transformation needed to raise productivity and efficiency. We have an ageing workforce and today, we need to recruit people with very different skill sets and ambitions – so it’s a challenge, but also an opportunity. Data scientists are coming into procurement; in fact, I brought the very first data scientist into the UK Government Commercial Function six years ago. More generally there is a shift from low-value tactical activities to strategic activities that require high levels of critical thinking.
Over the next decade, we will see an increase in recruitment in the following areas:
- Data analytics and interpretation: Proficiency in analyzing and interpreting complex data sets is essential. AI enables teams to process vast amounts of data, uncover hidden patterns, and make informed decisions.
- AI and machine learning proficiency: Understanding AI tools and machine learning algorithms is crucial for leveraging technology to enhance procurement processes. This includes skills in data science and AI management.
- Strategic thinking: With AI handling transactional tasks, professionals need to focus on strategic decision-making, supplier relationship management, internal stakeholder management, and innovation.
- Process automation engineers: The automation of procurement processes will improve efficiency and reduce errors.
- Cybersecurity: As digital tools become integral to procurement, understanding cybersecurity measures is vital to protect operations from digital threats.
- Soft skills: Negotiation, communication, and relationship management will remain critical skills in procurement. As AI takes on more analytical tasks, the human element in managing supplier relationships and strategic partnerships becomes even more significant.
Recent data on recruitment trends confirms this perspective. According to Business Insider, AI is expected to drive changes in 70% of job skills required by 2030, emphasizing the need for AI fluency across various job types. Employers are increasingly seeking candidates comfortable with AI technologies, even if job listings do not explicitly mention AI literacy.
These developments will allow procurement employees to focus on strategic initiatives, complex problem-solving, and relationship building. Elizabeth highlighted the growing need for specialist procurement centers of excellence in areas such as risk management, analytics and sustainability. Procurement can therefore become an increasingly attractive career path for high performers – but I believe we must do a better job in communicating this.
The issue is becoming increasingly urgent. “If you want to do more with less, you have no choice but to invest in technology, but you must also invest in the skills to leverage the technology and streamline your processes for greater efficiency. You also need to ensure that the technology delivers on expanding stakeholder goals and objectives,” Elizabeth concluded.
Talent, technology and good governance – these will be the three components needed to close the gaps in the coming decade.
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