In short: Three forces have reshaped procurement since the 1990s: accelerating market concentration, the swing from open globalization to regionalization and friend-shoring, and technological discontinuity that has cut innovation cycles from a decade-plus to a few years. The result is a faster, less predictable environment where competition increasingly plays out between supply chains rather than individual companies — though brand, R&D, and leadership still matter at the company level. Layered on top are repeated supply shocks and algorithmic pricing that transmit those shocks faster than before. For procurement, the practical consequence is a shift from cost centre to strategic function, with AI agents that execute processes rather than just assist becoming the next capability gap.
Procurement today is not what it was five years ago. In fact, it's not even what it was ten or twenty years ago. The past three decades have brought such a degree of transformation that it has fundamentally changed how companies compete, price products, and create value. If you feel that the old methods no longer work – you're not alone. The rules of the game have truly changed.
Since the 1990s, three massive forces have reshaped the global business environment, and with it, the role of procurement.
The acceleration of market concentration is one of the most significant changes. The largest companies today are growing faster than ever before. This is not coincidental: platform effects and network advantages create competitive advantages that were previously unimaginable. The principle of "second-mover advantage" has ceased – instead, we see "winner-takes-all" markets where the top companies' combined market capitalization is at unprecedented levels.
The roller coaster of globalization has also redrawn the map. Between 1990 and 2010, open markets, outsourcing, and global supply chains dominated. Between 2015-2020, signs of reorganization were already showing – Brexit, trade tensions. By 2020-2025, we entered a new era: regionalization, "friend-shoring," where supply chain security became a primary concern.
Technological discontinuity has perhaps brought the most radical change. Digital transformation was not a one-time event but became a permanent state. What we previously considered competitive solutions are now merely average factors. The innovation cycle has shortened dramatically — from something measured in a decade or more to just a few years.
The business lifecycle has fundamentally changed. On one hand, it has become faster: the time to maintain competitive advantage has drastically shortened. On the other hand, it's become less predictable: instead of linear growth, we see exponential leaps or sudden collapses.
The answer is simple: in the market, prices tend toward marginal cost. But why?
If prices are significantly above costs, new competitors enter. Increasing competition pushes prices down, and eventually they stabilize at marginal cost. This is a natural market mechanism.
The question therefore is not whether "it can be cheaper," but rather "how can it be cheaper." Four main tools are available:
The experience curve shows that whoever reaches large volume first can remain permanently cheaper. This is plannable and represents a strategic competitive advantage.
There's an interesting assertion we hear increasingly often: real competition is no longer between companies, but between supply chains.
This approach can be supported by three strong arguments.
COVID's impact clearly demonstrated this: the automotive industry shut down due to semiconductors. Not because car manufacturers couldn't make cars, but because a critical component was missing. This highlighted that a company's success depends on the entire supply chain.
The competition between tech giants is actually a battle between complete supply chains. When Apple competes with Samsung, it's really two complex supply chains measuring their strength – from suppliers to logistics, from manufacturing to services.
Digitization enables real-time optimization in multi-actor environments. Modern systems no longer coordinate just one company, but entire supplier networks simultaneously.
However, opposing trends are also visible in the market, showing that company-level competition remains relevant.
Brand power still matters: Nike or Adidas? Consumers identify with brands, not supplier networks.
Innovation centers still create unique value: a leading search algorithm or a breakthrough vaccine wasn't born in the supply chain, but in a company's R&D department.
The impact of leadership and corporate culture cannot be ignored either. Strategic decisions and the direction set at the top remain significant influencing factors.
Financing and shareholder value are still measurable at the corporate level. Investors don't invest in "supply chains" but in companies.
Reality is more of a hybrid model. In the B2C segment, corporate competition is still strong (brand awareness, marketing, customer experience). In the B2B segment, supply chain competition dominates (cost efficiency, reliability, flexibility).
Industry differences also matter: for commodity products, the supply chain is critical, while for differentiated products, company-level competition is stronger.
The temporal evolution shows this: in the past, vertically integrated companies competed, in the present we see a hybrid model (companies + supply chain elements), and in the future, there will likely be even more network competition.
The playing field has changed, and several factors define the new normal.
Persistent trade barriers: elevated tariffs have become a structural feature of global trade rather than a temporary disruption, and they are reorganizing established trade flows.
Realigning capital (FDI): foreign investments are shifting between regions, with Central Europe among the areas positioned to benefit from parts of this realignment.
Structural imbalances: global debt levels relative to productive investment have drawn sustained warnings from institutions monitoring financial stability. Whatever the precise ratios, the direction of the concern is consistent — leverage has grown faster than the productive base underpinning it.
The only path to sustainable growth is a drastic increase in productivity and efficiency.
Traditionally, central banks "looked through" supply shocks, such as energy price increases. The reasoning was logical: these are temporary in nature, interest rate increases take time to work, and moreover, they worsen economic growth.
Since 2019, we've experienced successive supply shocks: COVID, supply chain collapses, the war in Ukraine, energy crisis, food price increases. Inflation expectations have proven less anchored than in the preceding low-inflation era, running above target in both the US and the eurozone through much of this period.
The impact of artificial intelligence on pricing is not negligible. Automatic pricing algorithms make shock transmission faster and more unpredictable. AI-driven pricing systems react in real-time, B2B dynamic pricing emerges, e-commerce platforms use automatic price trackers, and high-frequency trading in commodity markets has become the norm.
Supply chains used as geopolitical instruments have created a new reality. Export restrictions on critical materials — rare earths among the most prominent examples — have been deployed as leverage in trade disputes. This is what's often called "weaponized interdependence": when economic relationships become political tools.
Labor market disruptions also contribute to the problem.
The consequence: central banks must react more actively to supply shocks because the era of consistently low inflation and interest rates has ended. The new approach to monetary policy will affect every wallet.
The price effects of supply shocks form a complex system.
Direct price effect: reduced supply immediately causes price increases in affected products. Example: the disruption of Russian gas exports drove European energy prices to multiples of their previous levels.
Spillover effects occur at multiple levels: on the cost side, higher input prices make all related products more expensive; with substitute products, demand shifts and causes additional price increases; and transportation costs rise as energy prices affect all goods.
Algorithmic pricing, supply chains used as geopolitical instruments, and successive shocks together have created a new monetary reality.
Research from the McKinsey Global Institute points to a striking finding: national productivity growth is far more concentrated in a small number of firms than conventional wisdom suggests. In a study tracking 8,300 companies across Germany, the UK, and the US between 2011 and 2019, fewer than 100 "standout" firms accounted for around two-thirds of the sample's productivity growth. In the US portion of the sample, roughly 5% of companies drove some 80% of productivity growth.
The practical implication for everyone else is the same either way: companies cannot wait for market improvement – they must actively work for competitiveness. Key areas: strategic focus, implementation of artificial intelligence and automation, and continuous innovation.
Investments and results from recent years have accelerated. AI capabilities have developed significantly, and the emphasis has shifted from theoretical possibilities to concrete results. IDC research sponsored by Microsoft reported an average return of $3.70 for every dollar invested in generative AI, rising to around $10 among top-tier adopters. That figure deserves context, though: it comes from a vendor-sponsored study of adopters, and independent research has found that a large share of enterprise AI pilots deliver no measurable bottom-line impact. The spread between the two isn't a contradiction — it reflects how concentrated the returns are among organizations that redesign a workflow rather than bolt a tool onto an existing one.
The procurement function is transforming: from a cost center perspective to a strategic pillar. Today it's the driving force of organizational flexibility, sustainability, and innovation. Deloitte's Global Chief Procurement Officer Survey, drawing on more than 250 CPOs across some 40 countries, found the large majority of procurement leaders assessing or planning generative and agentic AI capabilities – especially for complex decisions, difficult-to-maintain regulatory systems, and unstructured data management.
Traditional AI systems are optimized for specific tasks and require human guidance. AI agents, however, independently execute tasks and complex processes. They use large language models (LLMs) to control workflows, access external systems, and function as specialized team members. The key point: they don't just help with the task, they complete it.
The key to success is personalization and true integration. Not a boxed solution, but tailored to business processes, agents have direct access to corporate data and seamlessly integrate with existing systems.
The past 30 years have transformed procurement. The waves of globalization, market concentration, technological discontinuity, and supply shocks have brought new rules of the game. The old methods no longer work because competition has become faster, more volatile, and more unpredictable.
The question is no longer "do we need to change," but "when do we start." Because whoever falls behind now won't be able to catch up tomorrow.
1. What are the three forces that reshaped procurement since the 1990s?
Market concentration (winner-takes-all dynamics driven by platform and network effects), the globalization cycle (open markets and outsourcing giving way to regionalization and friend-shoring after 2020), and technological discontinuity (innovation cycles compressing from a decade-plus to a few years, making digital transformation a permanent state rather than a project).
2. Is competition really between supply chains rather than companies?
Partly. In B2B and commodity markets, supply chain competition dominates — cost efficiency, reliability, and flexibility decide outcomes, as the semiconductor shortage that halted automotive production demonstrated. But in B2C, company-level factors like brand, R&D, and leadership still carry real weight. The realistic picture is hybrid, trending toward more network competition over time.
3. Why do prices tend to fall over time, and what can procurement do about it?
Because competition drives prices toward marginal cost: when margins are wide, new entrants appear and compete them down. The lever isn't whether costs can fall but how — through economies of scale, process automation, supply chain optimization, and product simplification. Reaching volume first creates a durable cost advantage, which is why sourcing strategy is a competitive question, not an administrative one.
4. Why do supply shocks now transmit faster than they used to?
Because pricing has become algorithmic. Automated and AI-driven pricing systems react in real time, dynamic pricing has spread into B2B, and commodity markets run on high-frequency trading. Combined with export restrictions used as geopolitical leverage, this means a shock in one place propagates through cost structures, substitutes, and transport costs faster than central banks or buyers can absorb it.
5. What distinguishes an AI agent from a conventional AI tool in procurement?
A conventional AI tool is optimized for a specific task and waits for human direction. An AI agent executes complete processes autonomously — using language models to drive workflows, accessing external systems, and acting as a specialized team member. The practical difference is that it doesn't just assist with a task; it finishes it.
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