Why Procurement and Supply Chain Teams Are Flocking to Agentic AI

Just getting to grips with traditional AI? Think you're starting to get the hang of prompting generative AI?

Well, get ready for a whole new ballgame in procurement and supply chain with the emergence of agentic AI. 

The TL;DR 👇

What is Agentic AI?
An advanced AI that operates autonomously to manage complex workflows and make real-time decisions.

How does it differ from other AI types?
Traditional AI automates tasks but lacks flexibility; generative AI creates content but does not manage workflows.

What are the use cases in procurement?
Real-time risk prediction, active decision-making for daily tasks, and supplier relationship management.

What are the use cases in supply chain?
Dynamic decision-making for sourcing, operational efficiency with real-time visibility, and predictive analytics for disruptions.

What is the overall impact?
Enhances efficiency and transforms procurement and supply chain processes into autonomous workflows.

AI Adoption Accelerates

Artificial intelligence (AI) is rapidly transforming procurement and supply chain management, with a staggering 96% of organizations currently using AI in some capacity. This widespread adoption signals a significant shift in how teams operate, leveraging sophisticated technologies to handle tasks that were once the domain of human workers. From market intelligence gathering (77%) to predictive analytics (57%), AI is proving to be an indispensable asset in navigating the complexities of procurement.

However, despite the high adoption rates, only 30% of organizations report being very satisfied with their current AI solutions. This dissatisfaction presents an opportunity for procurement leaders to explore new developments in AI that can enhance their processes. In fact, a full 100% of surveyed organizations plan to implement AI tools within the next year, emphasizing the urgent need for an effective AI strategy.

As the landscape evolves, one type of AI stands out as particularly promising: agentic AI. But what exactly is it?

What is Agentic AI in Procurement and Supply Chain?

Agentic AI is an advanced form of artificial intelligence that operates independently to manage and optimize complex workflows. It adapts to dynamic environments and makes real-time decisions, enhancing efficiency and responsiveness in various applications.

In procurement and supply chain management, agentic AI empowers teams to proactively navigate challenges, streamline operations, and make data-driven decisions, ultimately improving efficiency and reducing risks.

Understanding the Differences

To appreciate the transformative potential of agentic AI, it’s essential to compare it with traditional AI and generative AI:

Traditional AI

This type of AI is designed to automate specific tasks, often following strict instructions. It excels at repetitive processes but can lack the flexibility to adapt or make complex decisions independently. Traditional AI is like a well-trained assistant that can perform tasks efficiently but needs constant guidance.

Generative AI

This AI focuses on creating new content, such as text or images. While it can produce impressive outputs by learning patterns from data, it doesn’t inherently manage workflows or make decisions. It's more about creativity than coordination. Examples include ChatGPT and DeepSeek.

Agentic AI

This is where the game changes. Agentic AI operates autonomously, handling complex objectives and adapting to dynamic environments. It can analyze vast amounts of data, learn from interactions, and make real-time decisions—essentially acting like an independent problem-solver rather than just an automated tool.

Managing a Narrow Procurement Process vs. Creating an Entire Workflow

Think of managing a narrow procurement process as operating a single elevator in a building. This elevator efficiently takes people to their designated floors based on pre-set buttons, responding to immediate requests but limited to its programmed routes. It’s effective for straightforward tasks but lacks the flexibility to adapt to unexpected situations.

Now, imagine a fire alarm going off in the building. In response, a skilled facilities manager must not only ensure everyone gets to safety but also coordinate multiple elevators, direct personnel to the nearest exits, and communicate with emergency services—all in real-time. This manager represents agentic AI, which can create and manage an entire workflow in response to a specific event.

While the elevator can handle routine transport, the facilities manager orchestrates a complex set of operations, adapting dynamically to the evolving situation and ensuring that the entire building functions cohesively in a crisis. Similarly, agentic AI can navigate complex procurement challenges, responding to unexpected market changes or supply chain disruptions by managing the entire workflow rather than just a narrow process.

What are the Capabilities of Agentic AI in Procurement?

Here are some of agentic AI’s standout capabilities in procurement:

1. Real-Time Risk Prediction: Imagine procurement teams not just reacting to market shocks but predicting and mitigating risks in real time. With agentic AI, this is becoming a reality. By continuously analyzing data streams, these systems can identify potential disruptions before they occur and suggest proactive measures.
2. Active Decision-Making: According to GEP, these autonomous agents are expected to manage at least 15% of daily procurement decisions independently by the end of 2025. This capability allows them to weigh multiple factors, such as cost, quality, and supplier reliability, making informed decisions on the fly.
3. Data Analysis and Memory: Agentic AI systems analyze large datasets, learn from past interactions, and retain knowledge to adapt to new challenges. This ability to remember and learn allows them to function more like experienced team members rather than just tools.
4. Supplier Relationship Management: AI agents can continuously monitor supplier performance and negotiate terms, enhancing relationships and ensuring everyone is on the same page. By maintaining an ongoing dialogue with suppliers, they can proactively address issues and foster a collaborative environment.
5. Task Automation: By automating routine functions, agentic AI frees up human teams to focus on high-value tasks, driving efficiency and productivity. Instead of spending time on mundane paperwork, teams can concentrate on strategic initiatives and relationship building, ultimately adding more value to the organization.
   

What are the Capabilities of Agentic AI in Supply Chain?

Agentic AI is making waves in supply chain management too:

1. Dynamic Decision-Making: These agents can adjust sourcing strategies and reroute shipments autonomously in response to real-time data, like weather forecasts or economic trends. Imagine an AI agent rerouting shipments due to an impending storm, ensuring timely deliveries without human intervention.
2. Operational Efficiency: With real-time visibility into extended supply networks, agentic AI helps companies know their suppliers better than ever before, ensuring smoother operations. They can track the entire supply chain process, from raw materials to finished products, identifying bottlenecks and optimizing flows.
3. Multi-Agent Framework: Companies are deploying multi-agent AI frameworks tailored to specific tasks, from RFx creation to contract management. Each agent specializes in a different aspect of procurement, allowing for a more coordinated and efficient operation.
4. Predictive Analytics: By leveraging predictive analytics, agentic AI can forecast disruptions and identify alternative sourcing strategies, making supply chains more resilient. This capability enables organizations to adapt quickly to changes in the market landscape, whether due to geopolitical factors, natural disasters, or economic shifts.
5. Enhanced Collaboration: Agentic AI facilitates collaboration not only within procurement teams but also with suppliers. By sharing insights and data, these agents help build stronger partnerships, driving collective efforts toward common goals, such as sustainability initiatives.
   

Why Keep Humans in the Loop?

As agentic AI increasingly takes the reins in autonomously designing entire workflows in procurement and supply chain management, the need to keep the human in the loop has never been more critical.

While these advanced systems can enhance efficiency and optimize decision-making, they lack the nuanced understanding of market dynamics, supplier relationships, and ethical considerations that only humans can provide. 

Without ongoing human oversight, there is a risk of unintended consequences, such as misaligned procurement strategies, overlooked ethical implications in supplier selection, or failure to adapt to sudden market changes. Maintaining human involvement ensures accountability, fosters collaboration with suppliers, and allows for the integration of human judgment in complex negotiations, ultimately safeguarding against the potential pitfalls of fully automated procurement processes.