AI in Procurement: How Can AI Reduce Supply Chain Friction?

For years, organisations have focused on reducing procurement costs. They negotiate contracts, consolidate suppliers and scrutinise spending in pursuit of greater efficiency. But in 2027, are these the right problems to focus on?

Often, the biggest drain on productivity, visibility and financial control is often not what you’re buying – it’s closer to home than that.

What we see in our new customers is that most friction in Procurement comes from approval delays, disconnected systems, manual tasks, and fragmented data. This slows decisions and makes control harder to maintain.

These points are exactly where we recommend Telefónica Tech customers turn first to benefit from AI, but they’re often overlooked. Focusing on cost reduction can be obvious, but a smarter move for Procurement Directors would be to shift your focus to friction reduction. Here’s why and how.

Traditionally, procurement strategies focused on spend. The objectives were clear: secure better supplier value, while maintaining compliance and control.

But today’s challenges are different. Most finance and procurement teams have enough data, but are struggling because multiple systems, processes, and stakeholders scatter the information they need.

Now procurement has become increasingly complex. Every purchasing decision can involve budget approvals, supplier agreements, governance requirements, contract reviews and financial reporting obligations.

As a result, what we see is teams often spend more time moving information than acting on it, which can create a friction gap. This is the growing distance between the information organisations have and their ability to use it effectively.

Consequently, the friction gap causes slower decisions, reduced productivity and limited visibility into financial performance.

Traditionally, the first step towards improving procurement efficiency has been automation.

It has undoubtedly delivered value by removing repetitive, rule-based activities. However, it often struggles when processes become dependent on context, judgement and information from multiple sources.

For example, an approval workflow can route a request automatically, but it cannot explain why a supplier is risky.

This is where AI for procurement represents a significant shift. Rather than only automating tasks, AI can help people understand information, find insights, and make better decisions faster.

In my experience, this is why the barriers that prevent organisations from acting with confidence should be the focus.

Much of the AI conversation has focused on productivity tools like Microsoft Copilot. Copilot helps employees summarise information, create content, and analyse data more efficiently.

Unlike traditional automation, AI agents can support specific business processes. They work across different data sources to help users complete tasks and make decisions.

For example, imagine a procurement manager reviewing a request for approval. Rather than switching between systems to check budgets, suppliers, contract details, and approvals, an AI agent gathers it fast.

Or consider a supplier query. Instead of manually searching for updates and replying by email, an AI agent can access the needed information. It provides accurate responses and escalates exceptions when it requires human input.

In practice, at Telefónica Tech customers we see AI supporting activities such as:

The real opportunity emerges when AI agents can work across multiple systems. This is where AI for procurement moves beyond productivity gains and begins transforming how organisations make decisions. By linking data across ERP platforms, supplier records, and contracts, AI in supply chain operations helps organisations decide faster.

Without a doubt, governance is becoming increasingly important as AI adoption accelerates.

This is particularly true for local authorities, housing associations and other public sector organisations operating within highly regulated environments.

Strong governance, clear accountability and robust controls remain essential. AI should be there to support human decision-making, not replace it.

Therefore, the organisations seeing the most success with AI balance innovation with proper oversight. This ensures technology builds trust and does not add extra risk.

One of the most common mistakes we see is that organisations treat AI as the starting point. However, successful AI adoption actually begins elsewhere.

Organisations must first identify where processes slow down. They must also find where manual work is highest and check where employees cannot access the information they need. Then, organisations should consider how AI can help.

This approach not only delivers faster results but also creates a clearer path to long-term value. Because then the organisations that gain an advantage from AI won’t be those with the best technology.

They’ll be the ones that remove the most friction.

People often focus conversations about AI on what’s possible.

The more valuable question is, what’s practical?

So, the lesson is clear. The greatest value doesn’t come from replacing work, it comes from removing the friction that prevents organisations from doing their best work.

AI in procurement has the potential to transform but success starts with understanding where friction exists and identifying where technology can deliver.

At Telefónica Tech, we help organisations identify high-value AI opportunities and build practical adoption roadmaps that balance innovation with governance, security and measurable business outcomes.

Whether you’re exploring Microsoft Copilot, AI agents or broader finance and procurement transformation initiatives, our specialists can help you take the next step with confidence.

Ready to reduce procurement friction? Speak with our experts today →