Unveiling Tomorrow: Top Procurement Trends Shaping 2024

Unveiling Tomorrow: Top Procurement Trends Shaping 2024

Unveiling Tomorrow: Top Procurement Trends Shaping 2024

As we head into 2024, procurement is on the cusp of change. The role of procurement stands as a pivotal force in shaping the success of organisations. A convergence of technological advancements, global dynamics, and changing consumer expectations is ushering in a wave of change that procurement professionals must navigate with precision.

Before we dive into the trends, let’s reflect on some important lessons. Real-time systems are emerging as crucial tools in procurement, enhancing accuracy and speed. Companies are increasingly prioritising eco-friendly practices and fostering fair relationships with suppliers. Moreover, the demand for T-shaped procurement professionals, who possess both deep and broad skills, is taking centre stage.

Three fundamental shifts are propelling this transformative journey, giving rise to some defining procurement trends. Firstly, procurement must embrace innovation, leveraging modern digital opportunities for strategic advantage. Secondly, the very operational framework of procurement is undergoing a reinvention, centring on the creation of value for both customers and suppliers.

Intriguingly, procurement is also assuming the mantle of driving meaningful change in the world. These shifts set the stage for a year marked by opportunities, challenges and the promise of a future where procurement emerges as a force for good is taking centre stage in elevating its role in the broader landscape.

The Evolution of Procurement Through Innovation

Acknowledging the multifaceted significance of procurement that extends beyond mere cost-cutting, companies are increasingly directing their focus toward this essential function. The seamless integration of procurement with cutting-edge innovations, particularly Artificial Intelligence (AI), marks the beginning of our exploration into the initial three procurement trends.

Trend 1: Rapid Integration of AI in Procurement

Recent insights underscore the transformative impact of AI on procurement processes and supply chains, ushering in substantial cost savings. Projections for the global market of artificial intelligence in manufacturing suggest an impressive compound annual growth rate (CAGR) of approximately 55.2% between 2017 and 2025.

Key drivers behind this surge include the widespread adoption of big data technology and the Industrial Internet of Things (IoT) in manufacturing, the pervasive use of computer-based technology and robotics, increased venture capital investments, and cross-industry collaborations.

AI’s role extends beyond mere automation; it enhances various facets of supply chain management, providing invaluable insights into real-time and static data in procurement.

Forecasts predict that global AI adoption in procurement and supply chain management will soar to $1.3 billion by 2024.

The synergy between AI and IoT is creating a highly efficient operational environment, with the potential to make supply chains 45% more effective in terms of timely and error-free product delivery. In essence, AI is set to reshape procurement and supply chain operations, promising a future marked by cost savings, reliable product delivery, and overall supply chain enhancement.

Action: Strategic Investments in AI for Procurement Transformation

To harness the transformative impact of AI in procurement and supply chain management, businesses should consider strategic actions:

  • Allocate resources: Invest in AI technologies tailored for procurement processes to realise cost savings and operational efficiencies.
  • Effective integration and analysis: Ensure seamless integration and analysis of real-time and static data for AI-driven insights and process improvements.
  • Collaboration opportunities: Explore collaboration opportunities with supply chain stakeholders, leveraging AI for efficient communication and cooperation.
  • Synergy between AI and IoT: Implement sensors and devices to collect data for predictive analytics and process optimisation. Establish mechanisms for continuous monitoring and evaluation of AI’s impact.
  • Workforce training: Invest in workforce training to equip employees with the necessary skills to work alongside AI systems effectively.

Trend 2: Conversational AI Spearheading Productivity Surge

A notable upswing is anticipated in the adoption of conversational AI. Despite being in its nascent stages, conversational or generative AI is gaining significant traction, with an estimated 84% of business leaders planning its incorporation by the next year.

Conversational AI promises substantial time savings by allowing professionals to interact with computer programs using natural language. This revolutionary approach eliminates the need for tedious manual database searches.

Imagine procurement professionals posing inquiries like “Find me a supplier for oranges in Australia,” and witnessing AI swiftly retrieve relevant information. This not only expedites the process but liberates valuable time for market research and strategic decision-making.

Beyond time efficiency, conversational AI becomes an invaluable asset in negotiation preparation. Uploading your negotiation strategy into an AI tool enables the identification of improvement areas and the rectification of inaccuracies in the plan.

Action: Strategic Planning for Integration

The impending influence of conversational AI on procurement underscores the need for proactive strategies to ensure seamless integration. It is recommended that businesses formulate a thorough integration plan specifically tailored to the distinctive requirements of procurement. This plan should meticulously pinpoint areas where conversational AI can yield maximum value, optimising workflows, and enhancing overall efficiency.

Trend 3: Strategic Supplier Development to Navigate Supply Chain Uncertainties

There is a critical requirement for proactive planning when seeking alternative suppliers. This foresight is crucial for evaluating potential challenges within the supply chain and identifying risks that might hinder the prompt delivery of products to customers.

Proactivity in addressing procurement challenges and supply chain disruptions provides a distinct advantage over a reactive approach. While data indicates that the primary supply chain issues of 2023 are receding, challenges such as persistent high inflation and geopolitical tensions continue to pose threats to global supply chains and raw material availability. The answer for procurement professionals lies in dedicated efforts to find and onboard alternative suppliers.

Action: Cultivating Proactive Alternative Supplier Strategies

In preparation for potential challenges stemming from geopolitical issues, procurement professionals should allocate a significant portion—approximately 40%—of their time to proactively engaging with, visiting, negotiating and onboarding alternative suppliers.

This strategic focus on developing alternative supplier relationships serves as a key driver for reducing dependency on current suppliers, thereby mitigating risks and achieving successful outcomes. The effectiveness of risk mitigation efforts directly translates into negotiation results. Armed with viable alternatives, businesses hold a position of strength at the negotiation table, influencing positive outcomes.

Revolutionising the Procurement Operational Model

Despite the changes in the past two decades, the operational structure of procurement has witnessed minimal transformation. Traditionally, procurement has been organised to achieve cost savings through distinct roles, often segmented into specialised buying teams and centralised administrative units.

However, navigating the complexities of today’s world demands more than isolated specialisations—it calls for integrated solutions. This necessitates a paradigm shift toward procurement teams that not only fulfill their traditional role but also actively drive business impact.

Effectively achieving this demands a revaluation of skill sets and a redefined value proposition. We believe that procurement, in this context, must enhance forecasting capabilities, embrace real-time supply chain systems, and strategically organise work processes for future resilience. Ultimately, as we move into 2024, procurement will recognise that suppliers hold an unprecedented level of importance in achieving and surpassing its targets. The realisation that collaboration with suppliers is paramount will underscore procurement’s journey toward greater efficacy and success.

To learn more about this topic, get in touch with the team today.