Summary
This month the reports emphasize the growing importance of supply chain visibility, with a particular focus on sub-tier risks and geopolitical concerns. It also discusses the transformative potential of AI in procurement, noting that over a third of organizations are already investing in this technology. Significant shifts in working capital management, the trend towards nearshoring and friendshoring in supply chains, and the expanding size of the global gig economy.
Procurement Leaders – Sub Tier Risks
This report, explores the evolving landscape of supply chain risk management and the increasing importance of sub-tier visibility for procurement and supply chain professionals. In the Economist Impact studies of the last few years Supply Chain Visibility has ranked at the top of priorities of risk, for procurement to focus on.
According to the report there has been a significant change in the types of risks affecting supply chains. Low-probability, high-impact events (black swans) now account for 51% of past disruptions, compared to 27% in 2016. These risks manifest themselves around geopolitics. 27% of respondents identified geopolitics as their primary concern for the next 12 months, highlighting the need for improved supply chain tracing.
91% of survey respondents indicated limited or no confidence in their visibility of risks beyond the second tier with technology seen as essential for improving sub-tier visibility whilst 34% of respondents use supplier relationship management (SRM) and engagement initiatives to manage sub-tier risks.
According to the 2024 CIPS Global State of Procurement & Supply survey, over a third of organizations are already investing in AI, with 56.9% working towards greater automation. AI's potential to transform procurement is immense, from automating routine tasks to enhancing risk analysis and driving data-driven decision-making. However, the adoption of AI isn't without challenges, with only 30% of procurement professionals feeling prepared for its impact on their roles.
AI is expected to enhance productivity, allowing procurement teams to shift from time-consuming manual tasks to high-impact, strategic activities that drive innovation and align with organizational objectives. Data literacy, strategic thinking, analytical mindset, communication skills, and a commitment to continuous learning are crucial for success in the AI era. While some roles may be replaced by AI, new positions are emerging that combine data and technical expertise with traditional procurement skills
GEP Outlook 2025
This report looks at several transformative trends that will reshape procurement and supply chain management in the coming years. Unsurprisingly Artificial intelligence (AI) is poised to revolutionize operational models, moving from task automation to autonomous decision-making. AI-powered procurement orchestration tools will enable seamless self-service across the source-to-pay process, while AI agents will handle complex tasks like demand forecasting and risk monitoring. These advancements will allow procurement teams to focus on more strategic activities and drive greater value for their organizations.
The report also emphasizes a significant shift in how business value is defined in procurement. Cost savings are no longer the sole measure of success, with resilience, sustainability, regulatory compliance, and risk management becoming equally important. This evolution requires new metrics and KPIs to evaluate procurement performance, such as supply chain flexibility, carbon emissions reduction, and ethical compliance. Procurement leaders will need to communicate a more holistic view of value creation to their organizations, demonstrating how their decisions contribute to long-term business success beyond just cost savings.
Finally, the report underscores the changing global trade landscape and its impact on supply chains. Rising protectionism and geopolitical tensions are challenging traditional globalization models, prompting companies to consider strategies like friendshoring and nearshoring to enhance supply security
Hackett – Working Capital
The 2024 Working Capital Survey by The Hackett Group reveals a concerning trend in the working capital management of the largest U.S. public companies. For the first time in a decade, these companies experienced simultaneous degradation across all major working capital metrics - days sales outstanding (DSO), days inventory outstanding (DIO), and days payables outstanding (DPO). This "triple threat" has led to a staggering $1.76 trillion in untapped working capital opportunity. The cash conversion cycle (CCC) of the top 1,000 companies increased by 4% from 36.4 days to 37.7 days, indicating a significant reversal of fortune in working capital performance.
The implications of these findings are significant for businesses. With persistently higher interest rates and DSO pushed to the limit, working capital improvements are more critical than ever. Finance executives need to take a proactive role in partnering with internal business partners to optimize working capital across the balance sheet. The report also emphasizes the potential of generative AI in transforming working capital management, particularly in areas such as accounts receivable processes, credit management, and supply chain optimization. Companies that can effectively leverage these technologies and implement robust working capital strategies will be better positioned to navigate volatile market conditions and unlock trapped liquidity.
KPMG – Proximity Premium
In the Economist Impact study last year, one of the longer term priorities identified for procurement was supplier diversification. This was due to the increasing geopolitical disruptions that many were expecting.
This report identifies a significant shift in US supply chain strategies, with companies increasingly moving operations closer to home. According to the survey of 250 senior US executives, 69% of US-serving supply chains are expected to be based in the Americas within the next few years, up from 59% currently. This strategic shoring trend is driven by the need for greater agility, faster time to market, and better access to skills and talent. Companies are streamlining their supply chain routes within the Americas, with Mexico gaining prominence as the second-most popular country for US supply chains after the United States itself.
The report highlights that while cost remains a primary consideration, companies are increasingly prioritizing long-term goals such as agility and sustainability in their supply chain strategies. This shift is expected to enhance the durability of business models in the face of disruptions. However, challenges remain, including navigating geopolitical risks, meeting sustainability targets, and managing the complexity of trade agreements and tax regulations. The research suggests that companies often struggle with these complexities, with tax expertise ranking as the second-most important area requiring improvement after data and analytics capabilities.
What this means is that organizations need to reassess their supply chain assumptions, harness the power of data and analytics for better decision-making, at the outset of supply chain decisions. The report emphasizes the importance of forging strong relationships with partners and suppliers, particularly those with local insights.
Everest Group – Business Outcomes 2025
This was a webinar held toward the end of last year. The main points were the whilst organisations are optimistic about 2025 (80% somewhat or highly) cost and margin pressures remain at the top of biggest challenges. 61% of business identify enhancing profitability or cost optimisation, while 66% identified increased revenue growth as top priority. In a snap poll, 36% expected the political environment to have a negative impact to their business in 2025.
As always reach out to discuss more, and always happy to hear your thoughts!
