Top procurement trends

A business’ procurement team must use evolving strategies, technologies, and practices to optimize their sourcing and acquisition of goods and services. These procurement trends are brought forth by a broader business shift, technological advancements, and the need for greater efficiency and sustainability.

Outside influences such as the Covid-19 pandemic and geopolitical discord have brought about new challenges for procurement operations, further disrupting an organization’s supply chain. However, with these challenges have come an opportunity for new innovative technology that is reshaping procurement processes, like artificial intelligence (AI) and automation across the entire procurement lifecycle.

Furthermore, it’s important for organizations to stay on top of emerging trends and can ensure that their procurement operation is functioning as efficiently as possible. Procurement leaders and stakeholders need to be forward-thinking and manage their operations with customers top of mind. Along with factors such as business profitability, lowering operating costs, and boosting relations with suppliers.

Procurement professionals are being pushed and challenged as emerging trends continue to reshape the landscape. Procurement management is complex and requires leaders to make informed decisions that benefit all involved parties. The recent trends range from generative AI to sustainability practices to bolstering the human connection.

These new technologies are rapidly transforming procurement practices, making them one of the most significant trends in the field. Advancements in automation and AI offer the potential to enhance decision-making and improve efficiency, ultimately reshaping procurement strategies. By using AI technologies in their processes, procurement teams can expect to make data-driven decisions, such as predicting demand fluctuations or identifying the most reliable suppliers. Machine learning (ML) algorithms can optimize supplier selection, negotiate contracts, and even detect fraud.

Building on these capabilities is generative AI (gen AI), which takes things a step further by enabling the creation of tailored procurement solutions. For example, a gen AI tool is constantly taking in a business’ specific needs and goals. It can then draft contracts, design supply chain models, and generate purchase strategies that are highly customized to their needs. In addition, gen AI can use predictive analytics for demand forecasting, which helps mitigate supply chain disruptions. This level of customization can streamline workflows and shift procurement professionals from transactional tasks to more strategic roles.

Organizations traditionally managed procurement processes through several different mechanisms, such as spreadsheets, phone calls, emails, among others. New digital procurement technology is helping businesses manage all the moving parts that are involved in procurement management and make teams more agile and efficient resulting in cost-cutting opportunities and greater value creation. Many organizations are choosing a digital transformation of their procurement function as part of a wider implementation of an enterprise resource planning (ERP) system. This integrative approach can help businesses track procurement data, and gives them visibility into other business functions, like accounting, human resources, and supplier relationship management.

By replacing manual processes, digital procurement tools can reduce human error and eliminate procurement bottlenecks that can become costly and disruptive. Real-time data analytics allows organizations to track spending patterns, monitor supplier performance, and help maintain good relationships with their suppliers. Separately, digitizing procurement processes can help with compliance by creating clear, automated audit trails, minimizing the risk of noncompliance. Some procurement operations are also enlisting blockchain technology to further streamline contract management and visibility.

Organizations are increasingly recognizing the value of collaboration over traditional transactional interactions. Rather than just focusing on cost savings, organizations are fostering long-term partnerships with suppliers to drive mutual growth, innovation, and a resilient supply chain. By building a stronger relationship that it allows for more effective communication, which in turn improves transparency, trust, and alignment on goals. With mutual collaboration, both parties can make informed decisions, mitigate risks, and even develop new goods or services.

In addition, enhanced supplier relationships can contribute to great supply chain resilience. In times of disruption out of an organizations control, like a natural disaster or geopolitical instability, a strong partnership can lead to more flexible and agile responses. These relationships can also provide access to better terms, faster delivery, and prioritized service during shortages. The future of procurement relies on organizations maintaining strong relations with suppliers and viewing them as critical contributors.

Procurement technology will work if the human workers know how to use the tools. As procurement becomes more strategic, organizations are investing in their teams to can ensure that they have the skills that are required to manage modern procurement challenges effectively. A Gartner survey found just 14% of procurement leaders were confident in their talent’s ability to meet the future needs of the function.

Upskilling is essential to help ensure that teams can use these technologies, from using AI for data analytics to managing digital procurement platforms. By having the knowledge to run these tools, procurement professionals are empowered to become more strategic contributors to organizational goals and focus less on transactional tasks.

Separately, there is a growing emphasis on sustainability, ethical sourcing, and risk management, which requires procurement teams to stay updated on evolving regulations and best practices. Investing in upskilling also supports talent retention and development, fostering a workforce that is both adaptable and capable of driving innovation.

Most organizations across every industry are recognizing the need for the integration of environmental, social, and governance (ESG) procurement practices. Businesses are facing increasing pressure from consumers, governments, and stakeholders to prioritize environmental and social responsibility. Sustainable procurement involves sourcing goods and services in a way that minimizes environmental impact and promotes ethical practices and initiatives. Today’s consumers want transparency and ethically sourced products.

Governments and regulatory bodies are also playing a significant role, with stricter environmental regulations that are pushing companies to adopt more sustainable practices like cutting down on emissions. Suppliers who align with sustainability standards are becoming more attractive while those that fail to comply may face penalties or lose business opportunities, ultimately impacting their bottom line.

The global supply chain remains complex and unpredictable. Geopolitical tensions, natural disasters, and economic instability, which is coupled with the ongoing effects of the Covid-19 pandemic have highlighted the need for stronger risk mitigation strategies within procurement. In response, organizations are adopting a more proactive approach to identifying, assessing, and managing risks. This approach includes diversifying their supplier base to reduce dependency on single sources, especially in areas prone to instability. This practice can help with cost management and over-supplying.

In addition, the rise of digital technologies, like AI and data analytics, is enhancing procurement teams’ ability to predict and mitigate risks. Advanced tools can provide real-time insights into supplier performance, finance stability, and market conditions, enabling procurement professionals to act fast and make informed decisions.

As the drive toward procurement software where AI and automation are becoming commonplace, the need for personal engagement and trust in supplier relationships is more important than ever. Procurement is no longer just about negotiating prices or securing goods, it’s about creating value through long-term, mutually beneficial relationships. By focusing on human connections, organizations can improve communication and be more transparent with suppliers and other stakeholders.

These deeper partnerships can often lead to better problem-solving, quicker responses to market changes, and more tailored solutions that benefit both parties. With a stronger connection the procurement team can better understand suppliers’ capabilities, values, and challenges. While technology is certainly transforming the procurement landscape, it’s clear the human worker sees the benefit, which is more time to focus on bolstering relationships and internal team building.

Global supply chains are highly complex and face-increased frequency of disruptions that are outside of anyone’s control. This highlights the need for companies to reduce reliance on single suppliers or regions. By diversifying their procurement strategies, businesses can spread risk across a wide array of suppliers, industries, and geographic locations. This disbursement can reduce the potential impact of disruptions in any one area and allow businesses to maintain operations even if an unforeseen event occurs.

By diversifying, a business can tap into new markets and access a broader range of goods and services. A diversified supplier base also means that stronger supply chain management is required and mean exploring innovative technology. Technology like predictive analytics that can manage business functions, such as spend analysis, contract management, and strategic sourcing. Lastly, a diversified supplier base can help organizations with regulatory compliance and reaching sustainability goals, as they can choose suppliers who align with their values.

Procurement leaders must look at procurement trends proactively. This means not just letting the new technologies happen to them. Rather, they need to look to modernize their operations as a whole. For many procurement teams, the starting point is to evaluate where the organization is and assess what needs to change in order to achieve its goals. One area that is important is good data. A recent McKinsey survey found most of CPOs interviewed lack the platforms to access “good quality data" both internal and external. The CPOs also shared capacity constraints and a lack of analytical skills in procurement teams. To mitigate these issues, CPOs can start by:

• Assessing organizational readiness
• Having executive buy-in
• Ensuring strong data management
• Level-setting on digital maturity

Once these criteria for organizational readiness are met the next step is to invest in training and upskilling of employees. There is no procurement optimization without the human worker at the helm. Organizations with prepared and skilled employees have a competitive advantage compared to an organization that needs to bring in new hires who may not align with their values and goals. Get there by:

• Providing training on digital tools
• Helping ensure that employees understand their values and goals
• Investing in digitalization and technology

Lastly, an organization can set itself up for success by implementing trend procurement strategies. Some examples of where procurement leaders can invest are market research and analysis, digital procurement solutions, and AI-powered tools. Organizations and CPOs must also recognize the challenges that can come with these emerging trends and be ready to act.

• Bringing in new technology with an open mind
• Preparing for the unexpected
• Considering the challenges that come with procurement trends

These are exciting times for the procurement field and require open-minded leaders and employees.

The latest procurement trends revolve primarily around technology over enterprise applications. These intelligent workflows can help transform procurement functions in five main areas, according to findings from the IBM Institute for Business Value (IBV).¹

The once largely physical procurement product and service landscape must evolve to become fully digitized and supported by ecosystems. It requires organizations to think about procurement cost in terms of speed, rather than speed in terms of cost. One example is the Asia Pacific region standardized and automated its source-to-pay process and ended up saving USD 20 million in operating costs.

Procurement teams are at the front line of brand and reputational risk. They can play a pivotal role in an organization’s sustainability and inclusion practices since procurement is embedded across the value chain. An example is RCS Global, technology-driven platform for responsible sourcing data, used a blockchain platform to help assure buyers raw materials going into electric vehicle (EV) batteries were produces responsibly.

Procurement teams need to start leaning on their network of vendors and partners to unlock innovation pipelines and start sharing goals and strategies together. A collaborative effort from procurement teams and the power of technologies like analytics, AI, and automation can unlock untapped value. Already, 33% of Chief Supply Chain Officers reported that they initiated working with suppliers in new countries over the last three years.

Innovative procurement teams are adopting agile operating models that will drive enabled multidisciplinary teams to focus on user outcomes across the entire portfolio. For example, a global chemical company, with suppliers in 21 countries realized manual intervention in its invoices was impacting S2P performance. The company used analytics to expose new insights across six process areas. The company ended up improving its working capital and resulted in USD 50 million in cash flow.

Procurement teams will continue to balance machine intelligence and human capabilities. The new technology can free procurement professionals from repetitive manual tasks and instead focus on optimizing opportunities for the future. However, getting to the intelligent automation with intelligent workflows requires upskilling and appropriate training plans. For example, procurement leaders could create training tutorials for their employees and give them detailed instructions on how to start using intelligent workflows.