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 10 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 wars. 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 dramatically shortened: from ten-fifteen years to two-three 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: Google's search algorithm or Pfizer's vaccine wasn't born in the supply chain, but in a company's R&D department.
The impact of leadership personality (Musk vs. Barra) cannot be ignored. Corporate culture, strategic decisions, and the cult of leadership personality are 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 three factors determine the new normal.
Persistent trade wars: High American tariffs are here to stay, fundamentally reorganizing global trade. This is not a temporary phenomenon.
Realigning capital (FDI): Foreign investments are flowing from China toward the US and Europe. Hungary and Central Europe are profiting from this process.
Global "balance" problem: For every dollar of investment, there's nearly two dollars of debt and four dollars of wealth. This is an unsustainable bubble.
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 Russian-Ukrainian war, energy crisis, food price increases. Inflation expectations are no longer stable. In the US it's 3.3%, in the eurozone 2.8% – compared to the 2% target.
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 weapons have created a new reality. China, for example, just restricted rare earth exports against Trump. The so-called "weaponized interdependence" – when economic relationships become political tools.
Labor market disruptions – Brexit and immigration restrictions – also contribute to the problem.
The consequence: Central banks must react more actively to supply shocks because the era of 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 shutdown of Russian gas exports caused a tenfold energy price increase in Europe.
Spillover effects occur at multiple levels:
Algorithmic pricing, supply chains used as geopolitical weapons, and successive shocks together have created a new monetary reality.
McKinsey's research brought a surprising discovery: the fate of national economic competitiveness is extremely concentrated in the hands of just a few companies.
This means 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 every dollar invested brings a $3.70 return. The emphasis has shifted from theoretical possibilities to concrete results.
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. 90 percent of procurement leaders plan to introduce AI agents, 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.
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