Future-ready procurement: From cost control to value creation

Procurement is facing a moment of reinvention. As supply chains become more digital, complex, and customer-driven, the traditional focus on cost reduction is giving way to a broader mandate: deliver total business value. That was the theme of the Future Ready Procurement session at CSCMP EDGE, led by Dan Pellathy, faculty of practice at the University of Tennessee, and Scott DeGroot, managing director of the university’s Global Supply Chain Institute.

Together, they unveiled insights from new University of Tennessee research and white paper interviews with procurement and supply chain executives across 20 major companies. The message was clear: procurement can no longer be confined to cost execution. It must move upstream in the decision-making process, where 70% of product costs are determined.

The procurement predicament

Pellathy opened by describing what he called “the procurement predicament,” teams spending most of their time “on incremental costs rather than thinking about customers.” Many, he said, are “executing decisions that were made earlier in the supply chain” instead of being engaged at the table where tradeoffs are defined.

As DeGroot noted, procurement maturity is reflected best when the function gets involved. “The earlier on, the better in new product [development],” he said. “In this world, new items will always be part of the equation, and procurement teams have to create the ability for themselves to add value in that conversation.”

Pellathy added that engaging early isn’t just about influence, it’s about economics. “Something like 70% of the product cost or the cost of the offering is baked in at the design phase,” he explained. “So, if procurement is not upfront in that decision-making, the best the procurement team could do is optimize on the costs related to that last 30%.”

Balancing cost and innovation

Attendees joining the conversation talked about the persistent tension between short-term savings and long-term innovation. One participant framed it as “time-driven,” explaining that while design-phase collaboration adds value, quarterly targets still dominate executive focus. DeGroot agreed, saying that “the closer you get in time, especially if you’re a public company, the more important the quarter you’re in.”

He warned that when decisions are made “unintentionally because someone doesn’t communicate with the rest of the organization, then we have added-on cost or impacts on service or lead time.”

The solution, both speakers said, lies in transparency.

“Leading procurement teams communicate those tradeoffs very clearly,” Pellathy said. “They make sure the data and analytics are there, and then communicate those tradeoffs to business leaders.”

AI and the evolving role of procurement talent

As Generative and Agentic AI reshape supply chain work, Pellathy and DeGroot see procurement roles shifting dramatically.

“AI is going to take some of the more mundane or repetitive tasks away,” Pellathy said, “and those folks need to be transitioned toward thinking about value add and how to start these discussions at a more strategic level.”

DeGroot believes this evolution will finally free category managers to act as true market leaders.

“The transactional elements of contract management, PO management, all the body-pushing, we should be able to eliminate the majority of that in procurement,” he said. “Then upskill the rest of the talent so they can really be of the future that we need to really drive innovation.”

Examples shared by audience participants reinforced this trend: AI agents already reach out to suppliers to verify shipment timing, collect bills of lading, and fill data gaps automatically. These tools, several noted, cut off the administrative burden and let the category manager manage the category.

From cost to customer value

At the center of the University of Tennessee’s new research is a simple but transformative shift: moving from cost to total value.

“Thinking about value rather than cost was a big theme that came out of those discussions with our partners,” Pellathy said. Procurement, he added, must be able to “understand customer value and have that as the north star that drives their decision making.”

DeGroot agreed that cultural change is key.

“It has to be built into the nature of the agreement and pricing models we put in place with our suppliers,” he said. “Are the contracts reflecting the innovation-seeking, risk-taking nature of the relationship? In many cases, they don’t.”

He urged companies to rethink their supplier segmentation. Strategic partners deserve more flexible, innovation-based relationship models, while transactional vendors can remain on fixed-price terms, DeGroot said.

Procurement as the conduit for intelligence

Perhaps the most overlooked value, Pellathy concluded, is information flow.

“Procurement has a lot of value in bringing information into the organization—innovation, new ideas, market trends,” he said. “Many people within the organization are not connected to the external supply base or the customer base. Procurement is.”

DeGroot summarized the mindset shift by noting it needs to be thought of as a collaboration.

“If you really want to have the customer at the center of the supply chain, then you have to structure your relationships to build capability jointly with shared risk and reward.”

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