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Use these three 2024 procurement trends to guide your planning for the coming year.
While supply chains have largely recovered from the pandemic, several other uncertainties are now top of mind for procurement professionals. Some experts anticipate a delayed recession fueled by persistent high interest rates. Other forces, such as geopolitical unrest and climate change risks, could also quickly disrupt economic forecasts.
Proactive organizations are recognizing the importance of procurement strategies in navigating these risks, with over half of businesses increasing their procurement budgets in 2024. How are procurement and supply chain professionals investing these funds to stay resilient next year and beyond?
Amazon Business recently released its 2024 State of Procurement Report, which surveyed over 3,000 procurement decision-makers and executives globally. Respondents cited efficiency, complexity, rising purchase costs and supply chain volatility as top procurement challenges and risks. Businesses also recognized the value of digital transformation in addressing these concerns, with 98% indicating plans to invest in data analytics, automation and artificial intelligence (AI) over the next few years.
As a procurement professional, you’re most likely aware that these technologies enable more efficient processes and smarter supply chain decisions — for example, through spend forecasting and logistics automation. However, these benefits are only possible if digital transformation is founded on effective data governance.
Data governance ensures that procurement solutions, such as analytics and AI, are powered by data that is relevant, accurate and easily accessible to those who need it. This is crucial for procurement, where data can become easily siloed between internal processes and external suppliers. It also ensures that your business isn’t basing strategic decisions on analytics generated from data that is incorrect, out of date or missing vital metadata.
Your hiring and upskilling strategy is equally important when digitizing procurement. A focus on innovation means that procurement leaders are increasing the number of specialized personnel, such as data scientists and analysts, on their teams. A 2023 report found that when 15% of procurement’s headcount consists of specialized roles, these organizations typically outperform competitors in both cost savings and return on investment (ROI). Organizations must also adopt user-friendly procurement solutions, often aided by low-code and no-code software, to promote usage and optimization.
In 2024 and beyond, environmental, social and governance (ESG) mandates will require procurement teams to rethink how to approach social justice and sustainability. For example, the European Union’s Corporate Sustainability Reporting Directive (CSRD) will now ask companies to report on their social and environmental risks and impacts. Nearly a third of non-EU companies subject to this directive are US-based. Similarly, the US Security and Exchange Commission is expected to roll out ESG reporting mandates in 2024.
However, members of the Association for Supply Chain Management (ASCM) cite a lack of executive buy-in and value chain participation as major barriers to ESG initiatives. For many organizations, inadequate data is the biggest obstacle to making ESG progress. The 2024 Amazon Business survey also found that 85% of procurement leaders say that difficulties in sourcing the appropriate suppliers make it hard to set and reach sustainability targets.
The good news is that if you’re already investing in digital procurement solutions, many of these technologies can be applied to ESG. For example, some procurement platforms can efficiently vet suppliers based on their ESG activities. Others may leverage blockchain to improve supply chain traceability. These solutions not only can integrate ESG into your procurement practices but also can make these activities easier to measure and report on.
Since the pandemic, procurement organizations have come to realize the value of healthy supply chain relationships in building resilience. In 2022, the American Productivity and Quality Center (APQC) found that nearly 3 out of 4 supply chain professionals engaged in supplier relationship management (SRM), a significant jump from 2018. A more recent study from State of Flux indicates continued growth of SRM, stressing the importance of treating your supply chain as an extension of your core business. The research found that:
However, only 8% of the organizations surveyed had the resources needed to establish leading supplier relationship management practices. This points to a need for tools and strategies that facilitate stronger relationships, such as supplier management software.
Some businesses are also combining their SRM and financial strategies through the use of innovative fintech such as early payment programs. For example, with C2FO’s solutions for buyers, suppliers can request early payments on demand in exchange for a discount. Your suppliers benefit by getting a cash flow boost on more flexible terms than traditional financing, while the discount reduces your costs and strengthens the supply chain — a win-win. Simple solutions like these can be an effective way for procurement to establish supply chain resilience while getting buy-in from other departments such as treasury.
Based on industry statistics, your procurement organization has most likely allocated funds for digital transformation in the coming years. However, investing in technology is not enough on its own to future-proof your business against economic risks. Instead, forward-thinking procurement strategies must also prioritize investments that are actionable and align with other business goals, such as ESG and supply chain resilience.
Discover how C2FO can help you build stronger supplier relationships.
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