The Procurement Monthly - Feb 2025

[GordonDonovan]

Summary

Reviewing this month’s reports, a narrative of transformation and adaptation emerges.

At the heart of this transformation is the rapid adoption of artificial intelligence and digital technologies. Procurement teams are increasingly leveraging AI-powered platforms to automate routine tasks, freeing up valuable time for strategic decision-making. This shift is not without its challenges, as organizations grapple with implementation concerns and the need for upskilling their workforce.

Cost reduction remains a cornerstone of procurement strategy, but it's no longer the sole focus. Teams are now expected to drive value creation across the business, balancing financial goals with sustainability and ethical sourcing. This expanded role has elevated procurement's strategic importance, with many teams now steering corporate strategy and collaborating closely with suppliers to fuel innovation.

The geopolitical landscape continues to shape procurement priorities, with supply chain resilience taking center stage. Teams are bracing for potential "black swan" events, adapting their strategies to navigate inflation, sustainability regulations, and talent gaps.

This focus on risk management has led to a shift in operating models, with many organizations centralizing their procurement functions and creating dedicated teams for supplier relationship management.

Technology investments are reshaping the procurement toolkit, with spend analytics, contract lifecycle management, and e-procurement solutions leading the way. The adoption of generative AI is accelerating, particularly in areas like contract management and risk analysis.

Reviewing these reports its clear that the success of procurement teams will hinge on their ability to embrace these technological advancements, prioritize sustainability, and develop agile strategies to navigate an increasingly complex business environment.

Procurious Next Level Procurement

According to the report a study of 137 procurement leaders globally, Procurement’s future hinges on three pillars: tech adoption (especially AI), supplier collaboration, and strategic agility. As teams juggle cost pressures with ESG demands, the winners will be those using AI-powered platforms to automate grunt work and focus on big-picture value creation.

The report identifies that while 51% still prioritize cost reduction, teams are now steering corporate strategy, balancing sustainability with financial goals. Over half (54%) are doubling down on ethical sourcing, and 77% expect procurement to drive value creation across the business.

60% of respondents say suppliers are their top stakeholders with the aim of building collaborative partnerships that fuel innovation and ESG wins. Half of procurement leaders plan to spend more time working directly with suppliers, especially as tariffs and geopolitical shifts force supply chain reshuffles.

45% of teams are already testing generative AI for tasks like contract management (44%) and risk analysis (57%). While 43% still hesitate about implementation, early adopters report efficiency boosts – 63% say it’s supercharging productivity. As one exec put it: “AI agents will fundamentally change how procurement pros spend their time.”

With 81% bracing for another “black swan” event, resilience is non-negotiable. Top pressures include:

• Inflation (75%)
• Sustainability regulations (63%)
• Talent gaps (58%)

Most teams (74%) have overhauled strategies recently, but only 19% adapt quickly to sudden changes. The report suggests that the fix is more agile systems and tech investments that enable real-time pivots.

Procureability – future proofing procurement

According to the report, Procurement’s role in 2025 hinges on cross-functional collaboration, AI adoption, and agile risk management. Teams that invest in upskilling, interoperable tech, and sustainability frameworks will drive measurable ROI while future-proofing operations.

AI adoption is accelerating, with tools like contract clause analysis reducing cycle times by 30% . By 2027, 50% of organizations will use AI for supplier contract negotiations . Cybersecurity threats rose 30% in 2024 which procurement and organisations must seek to balance.

Cost reduction targets are increasing according to the paper, with hard savings targets of 7–10% which demand advanced strategies including:

• Deploy should-cost modelling and game theory negotiations .
• Collaborate with finance to define clear savings metrics .
• Embed ESG practices across Tier 2/3 suppliers to unlock long-term value .

Amazon State of Procurement Data 2025

According to this study of over 3000 respondents, (2500+ procurement – from all levels) and 650+ remaining c suite (non-procurement), Procurement’s evolution hinges on balancing cost efficiency with sustainability, technology, and collaboration. By embedding data-driven decision-making and advocating for strategic influence, leaders can cement procurement’s role as a growth catalyst.

Procurement is now a growth driver, with 59% of teams expecting budget increases. Yet, only 46% of decision-makers feel fully included in strategic forums.  64% of leaders prioritize AI and analytics to streamline operations, yet adoption lags—42% use AI for purchasing decisions (down 5% YoY).

Supplier challenges surged, with 19% citing inadequate digital support (up 10% YoY). 65% of leaders prioritize talent retention, emphasizing skills in data analytics and strategic supplier management

The report suggests some interesting actions for procurement leaders including:

• Invest in AI-driven demand forecasting and spend analysis tools while upskilling teams to bridge the tech-talent gap
• Audit supplier capabilities and prioritize partners offering transparent communication, ESG compliance, and real-time inventory visibility
• Develop rotational programs to integrate procurement with cross-functional teams, fostering strategic thinking

Hackett – Key Issues Study

This annual study, which is highly anticipated within the procurement community (at least by myself anyway!) which is put together both through a survey and discussions with a wide range of procurement leaders and also wider organisational leaders.

The future of procurement is digital, data-driven, and strategically aligned. Start preparing now to lead the charge in 2025 and beyond specifically:

• Digital transformation is king: AI, automation, and real-time data visibility are set to revolutionize procurement. Embrace these technologies to stay competitive.
• Skills gap alert: The procurement skill set is evolving. Invest in upskilling your team in areas like digital proficiency, data analytics, and sustainability.
• Do more with less: Workloads are increasing, but budgets aren't keeping pace. Leverage technology to boost productivity and efficiency.
• Gen AI is here: Early adopters are already seeing benefits. Explore embedded Gen AI solutions in core procurement tools.
• Operating model shake-up: Centralization is on the rise. Consider dedicated teams for supplier relationship management and risk management.
• Analytics maturity matters: Most teams are stuck in descriptive analytics. Push towards predictive and prescriptive capabilities, especially in spend analytics.
• Sustainability takes center stage: ESG reporting is a top priority. Ensure your team can deliver on this growing demand.

Priorities

In terms of priorities spend cost reduction Remains the #1 priority as teams tackle economic uncertainty and inflationary pressures whilst Supply Continuity remains as the 2nd priority driven by geopolitical disruptions and shifting trade relations make securing supply chains a top focus.

Operating Model Transformation has risen to third place, this reflects the need to adapt to AI, stakeholder expectations, and process simplification and driving a digital transformation is 5th.

Sustainability & ESG Integration driven by stakeholder demands for environmental and social accountability push sustainability to seventh place, up from ninth in 2024.

The report identifies several areas for improvement as well, in areas including:

Gen AI Implementation: Pilots in PO processing, spend analytics, and CLM show early promise, but concerns around data quality (73%) and IP leakage (48%) persist. Intelligent Automation: RPA and Gen AI lead deployments, with predictive AI and agile orchestration emerging as high-investment areas.

Talent Upskilling was identified as a critical area as a growing skills gap in digital proficiency, analytics, and sustainability demands targeted training programs. Only 21% of organizations have dedicated procurement talent teams.

Operating Model Shifts, with 69% of resources are centralized, expected to rise to 71% by 2028, and dedicated teams building SRM, risk management, and COEs for analytics and supplier diversity.

Analytics Maturity. Whilst most teams rely on descriptive analytics. Priority areas for growth should include predictive capabilities in spend analytics (56% plan upgrades) and prescriptive tools for ESG reporting

Technology

When we look at the technology investment areas we can draw some good insights:

60–74% of organizations already use end-to-end tools like spend analytics, CLM, and e-sourcing with planned investments being:

• Spend analytics: 61% plan upgrades (highest priority) .
• CLM: 54% aim to enhance contract lifecycle tools despite 30% of deployments underperforming expectations .
• E-procurement: 58% Favor embedded Gen AI solutions to streamline catalogue management .

Emerging technologies identified include:

• Category management: 49% adoption, with 37% planning upgrades.
• Sustainability/ESG tools: 40% adoption, but 43% report solutions fell short of goals.
• Supplier collaboration: Low ROI (38% underperformance) driving re-evaluation of investment strategies.

Gen AI deployment:

• PO processing: 26% already implemented, 47% using embedded solutions .
• Spend analytics: 20% deployed, with 45% opting for custom-developed tools .

Investment focus:

• Predictive AI: 56% plan new investments despite 33% underperformance .
• RPA: 50% adoption, but limited expansion plans .

The report identifies that Organizations are doubling down on embedded Gen AI for CLM/e-procurement, custom analytics builds, and centralized operating models. Success hinges on addressing data quality gaps while scaling pilots in high-impact areas like spend analytics and supplier risk.

RS/CIPS Indirect Procurement Study

The 2025 Indirect Procurement Report, produced by RS and CIPS, reveals a challenging landscape for procurement professionals. Inflation remains the top concern, with 62% of respondents identifying it as a major issue. Supply chain risk management and global political uncertainty are also significant challenges. Managing risk in the supply chain (47%) and global political uncertainty (37%) are significant challenges.

The report highlights a growing focus on ESG initiatives, with 64% of respondents considering ESG important for company strategy. However, economic pressures have led to a decrease in willingness to pay premiums for sustainable products. Procurement teams are adopting strategies to improve efficiency, including supplier consolidation and driving value through partnerships.

The use of digital procurement systems is increasing, with 62% of professionals now using eProcurement or supplier punchout systems. MRO spend has increased by 20% over the past year, reflecting a trend towards maintaining rather than replacing equipment. The report also identifies areas for improvement, including a lack of knowledge about order processing costs and the need for better relationships with internal stakeholders.

Overall, the findings suggest that procurement professionals must balance cost pressures with sustainability goals while leveraging technology and strategic partnerships to drive efficiency.

Payments – Money Mobility Tracker

Check fraud remains a significant threat to businesses and consumers, causing substantial financial losses despite advancements in digital payment technologies. The report emphasizes the critical need for businesses to transition from paper checks to digital payment methods.

Despite security vulnerabilities, 68% of U.S. companies still use checks for B2B payments, accounting for nearly 40% of all U.S. B2B payment volume. Nine in 10 bankers have experienced higher levels of check fraud in recent years, with 28% of banks noting an increase of more than 50% in the past three years.  Nearly 25% of small to midsized businesses (SMBs) fell victim to check fraud, compared to 15% of the general population

Digital payments offer enhanced security features, including encryption, multi-factor authentication, and real-time transaction monitoring powered by AI. These advanced systems significantly reduce fraud risks, lower processing costs, and provide improved transaction visibility and operational efficiency. 77% of companies utilized instant payment technology in 2024, up from 62% the previous year. Almost all respondents reported that digital treasury processes improved cash flow forecasting (97%), enhanced financial visibility and control (96%), and boosted profits (91%)

Beroe Category Forecast

This comprehensive report provides insights into key procurement categories for 2025, highlighting market trends, price forecasts, and strategic recommendations.

Engineering & Construction:

• Global cement demand expected to increase by 3-4% in 2025
• Structural steel market projected to reach 253 MMT in 2025, with prices rising 10-14% in North America and Europe
• Modular construction market forecasted to hit $149.2 billion in 2025, growing 7.4% from 2024

Integrated Facilities Management:

• IFM services prices expected to increase 4-5% in 2025
• Key trends include focus on single-vendor partnerships, IoT integration, and Maintenance 4.0 adoption

Information Technology:

• IT services spending projected to grow 7-9% in 2025
• Enterprise software spending expected to increase 10-12%
• Managed security services spending forecasted to grow 12-15%
• Cloud computing costs predicted to rise 5-9% across various services
• IT hardware prices expected to increase 3-9% depending on the category

Labor:

• Global staffing industry revenue projected to reach $675 billion in 2025, growing 6% annually
• US temporary staffing market expected to hit $177.8 billion
• Salary increases forecasted at 3.9% in the US, 3.5-4% in EMEA, and 4-5% in APAC

Logistics:

• Road freight operating costs expected to rise 1-2% in North America, Europe, and Asia, but up to 30% in Latin America
• Driver wages and fuel remain primary cost elements in road freight

Key trends across categories include:

• Increasing adoption of AI and automation technologies
• Growing focus on sustainability and green initiatives
• Rising labor costs and skills shortages
• Geopolitical tensions impacting supply chains and pricing
• Regulatory changes affecting various industries
• To navigate these challenges, procurement professionals should focus on:
• Diversifying supplier bases
• Investing in technology and data analytics
• Prioritizing sustainability in sourcing decisions
• Developing flexible and resilient supply chain strategies
• Enhancing workforce skills and adopting innovative hiring practices

As we move into 2025, organizations must stay agile and informed to effectively manage costs, mitigate risks, and capitalize on emerging opportunities across these critical procurement categories.

As always reach out to discuss more, and always happy to hear your thoughts!