- SAP Managed Tags:
A really full month, this month. The continuing importance of supplier relationships permeates throughout the reports this month, as organisations are continuing to find ways to manage the constant uncertainty. Longer term the reports talk to shortening and changing supply chains, moving toward more regionalisation, and therefore the need to drive visibility and better relationships becomes paramount.
AI also is mentioned frequently both in terms of how it will change the way procurement delivers its services, but also the way its organised and the future skill sets needed.
With recent geopolitical changes the impacts on procurement could be far reaching, how will sustainability continue to be prioritised, what do the changes mean for deglobalisation and how will contracts need to evolve to concentrate on what really matters?
AQPC Risk Management
AQPC published a couple of reports linked together this month around risk management. The first report stated that the biggest challenges that procurement professionals are facing right now. For example, respondents to their recent procurement survey said that their three biggest challenges are:
- Shortages/delays in raw materials (47%)
- Cybersecurity risks (40%)
- Complexity in data management (34%).
The report goes into discussing controlling only that you can control and suggests that this includes measures to monitor suppliers that will help with these.
These measures include supplier responsiveness (915), on time delivery (90%) and quality (87%). Interestingly AQPC found a small but meaningful difference between direct and indirect procurement when it comes to these measures. Respondents who carry out direct procurement tend to focus on supplier quality the most (39% of respondents, followed by 37% for on-time delivery). For indirect procurement, the focus is more toward on-time delivery (36%), with quality a close second (34%). Both have price very low at 2/1%.
In additional report this month, AQPC looked specifically at risk in the supply chain, gathering insights from 316 respondents on selected risk management practices with over 80% stating that they have a system that provides a risk profile of suppliers.
A key part of risk management is scenario planning and then the relevant contingency planning that ensues and as part of this research it identified that most organisations do have a process to collect and review their suppliers contingency plans but only 36% are performing mitigations and improving them.
Ivalua – Future of work
Ivalua conducted a study with 200 US based leaders around the future of work in procurement. It identified that 60% saw AI reshaping procurement by creating new roles and redefining existing ones with 48% seeing this as an opportunity and 11% as a threat.
Other key takeaways were:
- 70% investing in upskilling programs and 68% in reskilling.
- 71% reported their organisations are well prepared to face changes in the future of work
However obstacles included:
- Different departmental priorities (57%)
- Siloed information (44%)
- Lack of clear communication channels (22%)
DPW – 10X Procurement
At DPW Amsterdam, DPW released details of a survey of over 200 global procurement leaders in associated with the University of Arkansas.
It identified that
- There was a 30-35% shortfall in critical capabilities (Change management, digital acumen etc)
- 20% of respondents are adopting or scaling AI within their procurement functions, and procurement processes remain only 50% automated on average
Procurement Leaders – The Big Picture
The 2024 Procurement Excellence Benchmarking Survey, , reveals that increased collaboration with business stakeholders, suppliers and legal teams – alongside a renewed emphasis on technology, operational efficiencies and organisational design – is enhancing procurement functions’ strategic value within their businesses
3 main themes emerged
Operational excellence: Procurement’s ability to operate an efficient and cost-effective organisation.
15% of organisations had separated strategic and tactical (execution) tasks by having dedicated focus and 85% had these tasks managed through a combined role
Value enablement: Procurement-generated organisational value by leveraging tools and technology.
30% are using new technologies while 34% believe there are missing pieces to add in – a further 25% are improving their utilisation of existing technology.
Growth strategies: Forward-looking trends and anticipated changes in the procurement landscape
57% have a medium or high engagement with their sales and marketing teams to lessen the silos of decision making.
Gartner
Gartner has been on fire this month! They have released several papers all citing information gathered by their CPO study.
5 Megatrends for procurement
The 5 trends are:
- Gen AI
- 72% report AI as top tech priority. Move to Agentic (self-learning) and multi-modality (many ways to use) will increase usage and change the way procurement delivers its services
- Energy Transition
- Sector undergoing seismic shift. Needs to be treated as critical spend category
- Global Divisions
- Geopolitics changing supply chains, driving them shorter and more regional
- Regulatory Complexity
- Increasing legislation top of mind, and also driving supply chains shorter
- Generational Shifts
- Mass retirements coming up will change the nature of the workforce, and as workforce gets younger, then tolerance of technology (like AI) increases.
59% of procurement leaders believe that having up-to-date technology will have a significant impact on procurement performance
74% of respondents named AI and generative AI (GenAI), 68% named data and analytics, and 22% named other emerging technologies as one of their top three technology priorities for 2025.
Upgrading or optimising current technology is the overall top choice.
P2P Automation impacts on procurement as a function
Automation reduces the need for manual, transactional tasks, enabling procurement to focus on strategic activities such as category management, strategic sourcing and supplier relationship management. Increasing P2P automation can create opportunities for specialized roles focused on high-impact activities like supplier collaboration, optimized sourcing and data-driven decision making. Automation may transform procurement operating models by enabling centralization, standardization and enhanced collaboration across departments, while allowing for strategic decisions between maintaining an in-house model versus outsourcing — ultimately leading to a more strategic and efficient procurement operating model.
How Procurement leads
The 2024 Gartner Chief Procurement Officer Survey asked chief procurement officers about their top value propositions in 2025 and 2030
Cost reduction is currently cited as the most important value proposition by 52%, signalling that procurement is clawing back price increases after years of inflationary pressure. The future value proposition of cost reduction is ranked lower.
Risk management and resilience are cited by 43% of CPOs as an important value proposition for procurement in 2025, as its operating environment has been inundated with risks that have varied in size, complexity and speed. This holds true for CPOs in the long term, which reiterates that procurement must be resilient in navigating emerging and unknown risks by proactively prioritizing the risk factors that need immediate attention
Sustainability is cited by 37% of CPOs as a top-three procurement value proposition for 2025. This indicates that an increasingly challenging regulatory landscape, and heightened customer expectations are prompting CPOs to embed ESG requirements into how procurement operates. This proposition remains a priority in 2030, indicating that procurement must reposition itself — from meeting imminent regulatory demands to advancing sustainable procurement goals that move the needle on organizational targets
All very similar to the Economist Impact study on procurement released earlier this year.
Economist Impact - Supply Chains
This report sponsored by GEP covers supply chains and how they may evolve over the future. Its is based on a survey of 400 supply chain execs in US and Europe. The continuing core essentiality of supply chains to their business is continuing to be a primary concern for many with the following as stand out takeaways:
- 55% of executives anticipate significant supply-chain disruptions, as they are caught between macroeconomic uncertainty, government protectionism and the impacts of climate change
- 63% of executives flagged macroeconomic uncertainty and geopolitics as major supply chain disruptors
- 38% of executives view procurement and supply-chain decisions as having a major influence on business strategy
- 73% identified that improving supplier relationships is essential for supply chain strategy.
- 57% of businesses plan to invest in AI and 44% in advanced automation to enhance their supply-chain and procurement operations
McKinsey Supply Chains – Still Vulnerable
Continuing the supply chain theme comes this article from McKinsey. As the title suggests it covers the vulnerability of supply chains (something identified by the SAP Economist impact study as well) with 90% from their pulse survey stating they had encountered supply chain challenges this year.
Some of the longer term procurement priorities that Economist Impact identified are being worked on by companies now. 73% reported progress on dual sources of supply (Multi- sourcing) and 60% are moving to regionalise supply chains (Re/near shoring).
Inventory strategy remains split between 47% who want to keep their inventories art current levels, and 46% planning to reduce levels closer to pre pandemic levels.
Getting deeper transparency into the n tier struggles to make an impact according to the report which is interesting when reviewing the Gartner work earlier.
KPMG CEO Outlook
The 10th edition of the KPMG CEO Outlook, conducted with 1,325 CEOs , provides an interesting insight into the mindset, strategies and planning tactics of CEOs.
Well over half (61 percent) identified ethical challenges as some of the most difficult issues to address when implementing AI within their businesses — an increase from 57 percent in 2023. Additionally, concerns over a lack of regulation (50 percent) and insufficient technical skills and capabilities (48 percent) further complicate the path forward.
Confidence in the global economy has remained stable over the last 3 years around the early 70% mark, but a lot lower than 10 years ago when it was over 90%.
This additional pressure felt by CEOs could be attributed to an evolving list of threats to business growth with this year’s survey showing that CEOs are the most concerned about the impact of supply chain disruption, and operational issues on their business’ growth in the next three years, coming in above cyber security and even last year’s number one threat – geopolitics and political uncertainty.
World CC Most Negotiated Terms
This annual study sponsored by Icertis, obtained responses from over 900 organisations and provides a good insight into what’s being negotiated, where issues may still be and as the report shows the disconnect between what’s important, and what’s being negotiated!
A key observation is that, in spite of the many shifts in the business environment over the last 20 years, in particular a growing focus on outcomes, the negotiation agenda has not kept pace.
There is a disconnect between what negotiators focus on, i.e. the Most Negotiated Terms versus where problems tend to emerge, i.e. the Most Disputed Terms. There is a similar disconnect between Most Negotiated Terms and Most Important Terms
Most negotiated top 3 are
- Limitation of liability
- Price changes and prices
- Scope/Spec
Most disputed are
- Prices and price changes
- Delivery
- Scope and spec
Most Important are
- Scope/spec
- Prices and price changes
- Delivery
A significant portion of negotiation time is spent on terms that may never be invoked unless something goes wrong and delivery, which is both disputed and most important top 3 doesn’t make the top 3 of most negotiated.
As always reach out to discuss more, and always happy to hear your thoughts!
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