1. Overview:
The role of Procurement Function has become both universal and critical for growth, as business executives have recognized the strategic importance of this function. The events over the last few years have altered the landscape of the supply chain creating many challenges for Procurement Professionals.
2. State of Procurement:
As 2023 begins to wind down and 2024 comes into focus, most procurement teams expect their budgets to rise next year. Many senior leaders are evaluating new tools and technologies that support a more strategic approach to business buying and an optimized procurement process. As procurement expands within organizations, leaders are seeking new ways to optimize their processes and allocate more time and resources to addressing strategic challenges. Based on survey undertaken by Amazon, the key findings include:
- 📊 95% of decision-makers acknowledge that there’s room for procurement optimization.
- 🌱 85% of respondents say the difficulty of sourcing suppliers that follow sustainable practices prevents their company from setting or achieving strategic sustainability goals for procurement.
- 🌐 81% of respondents have mandates to buy from certified sellers, which might include sustainable, local or disadvantaged group-owned businesses.
- ⚙️ 80% of respondents would consider integrating AI into their procurement processes within the next two years.
- 🔄 44% of respondents listed efficiency and complexity as a procurement challenge.
3. Key Challenges/ Risks:
The challenges & risks facing the CPOs are numerous and significant. Broadly in terms of ranking these are as follows:
- 💹 Inflation & Supplier Price Increase:
- 💼Budget Constraints (ROI of Procurement)
- 🌍 Supply Chain Disruption due to Geopolitical Issues
- 🔄 Supply Assurance & Performance
- 🤝 Collaboration with Stakeholders
- 📈 Competency Development of Staff
- 🚫 Missing & Incomplete Technology
4. Trends in 2024:
The procurement landscape for 2024 presents a multitude of opportunities for organizations to enhance their processes, improve sustainability, and establish themselves as responsible and forward-thinking partners in their respective industries. By embracing these trends and proactively adapting to them, organizations can position themselves for success in a dynamic and evolving procurement environment. To navigate the procurement towards success in 2024, following trends are expected to become need of the hour.
🔄 Digital Transformation: The rise of digital transformation has elevated procurement from a tactical function to a strategic one, empowering procurement teams to generate value for their organisations. This calls for pursuing new approaches to achieve better outcomes. These are as follows:
- Agile methodologies to ensure that transformation process is more iterative, flexible and adaptable to changing business needs.
- Design thinking to ensure that the process meets the needs of end users
- Digital Ecosystem that leverages Data, Analytics and AI to create new value propositions for their organization.
- Connect all stakeholders in the supply chain to improve visibility.
- Automate the repetitive tasks by making use of RPA and Cognitive automation
🌱 Sustainable Procurement as a Norm: Sustainability remains a key challenge across industries, and procurement is no exception. In 2024, there will be a surge in demand for sustainable products that meet increasingly stringent specifications. This is essential to manage the Climate Risks.
🔄 Case for Re-shoring & Near Shoring: This will help in improving resilience of Supply Chain and cut down the carbon footprints.
🤝 Supply Chain Collaboration: It is no longer an option; it’s a necessity. In 2024, organisations should explore opportunities to share resources and pool data and insights with their supply chain partners. This collaborative approach can lead to improved efficiency, reduced costs, and better risk management. The key is to foster strong, transparent relationships with suppliers and leverage technology to facilitate information sharing and coordination.
🤖 Harnessing AI for Procurement: Artificial Intelligence (AI) is revolutionising procurement by automating routine tasks, providing data-driven insights, and enhancing decision-making processes. In 2024, organisations should explore AI solutions to drive efficiency, solve complex problems, and improve the overall procurement workflow. Leveraging AI can free up procurement teams to focus on strategic activities, while AI-powered analytics can identify cost-saving opportunities and trends.
🔄 T-Shaped Procurement Teams: “T” shaped professional possesses a depth of skill and knowledge in a specific discipline and the horizontal stroke in “T” represents the ability to collaborate across multiple functions. In short it provides holistic view of the function.
🔄 Integration with Supply Chain
5. Concluding Thoughts:
The procurement landscape for 2024 presents a multitude of opportunities for organisations to enhance their processes, improve sustainability, and establish themselves as responsible and forward-thinking partners in their respective industries. By embracing these trends and proactively adapting to them, organisations can position themselves for success in a dynamic and evolving procurement environment.
Written By: Krishan K. Batra
President & CEO
ISM-INDIA