For nearly a decade, our team gathers to discuss and review the prior year and lay out plans for the new one. We review, in depth, the key findings and trends from the prior years’ market research studies. We also discuss the highlights and takeaways from the previous year’s briefings delivered by solution providers, consultants, and investor groups.
Our goal is to develop a list of the big trends impacting procurement today as well as a list of predictions for the industry this year and share them in a published report.
While our promotions for the formal report – Procurement 2022: BIG Trends and Predictions – have ended, I wanted to share some of the highlights with you here.
BIG Trend #2: Inflation is Here for the Duration of 2022
The annual rate of inflation in the United States hit 6.2% in October 2021, the highest in more than three decades, as measured by the Consumer Price Index (CPI). Other inflation metrics also have shown significant increases in recent months, though not to the same extent as the CPI. Inflation in 2021 and 2022 is a global phenomenon. Explanations for ongoing inflation include the continuing disruptions in global supply chains amidst the coronavirus pandemic; turmoil in many labor markets; the fact that today’s prices are
being measured against prices during periods of COVID-19-induced shutdowns; and strong consumer demand after local economies were reopened. Inflation is the mortal enemy of savings, and therefore the bane of any CPO’s existence. Inflation cannot be beaten, but it can be managed. Doing so will require greater effort and focus from sourcing and category managers. And eSourcing automation will be more important in 2022 than any recent year. Succeeding in an inflationary environment will also require greater collaboration with finance and budget holders.
Seven Inflation-based Predictions
- The CPO-CFO partnership will thrive in 2022 because two big issues – inflation and supply risk – are at the top of each executive’s agenda.
- As soon as the economy begins to slow and the stock market corrects, the pressure to find more savings will increase for most procurement departments, creating a spike in sourcing pipelines.
- Supply assurance will be a make or break concern for many CPOs in 2022. It will be more important than price in many instances. This means that despite the increased pressure to find savings, “low price” suppliers will lose more bids this year than in recent times.
- Inflation will also place more pressure on CPOs to manage their department strictly within budget, making staff retention and talent nurturing more difficult.
- In an attempt to mimic the curation, specialization, and customization of orders available in their B2C lives, procurement and sourcing teams will award more bids to the smart suppliers who justify higher prices by differentiating with greater customization and value-added services.
- Price increases for some goods and services will see sharp increases without a clear market explanation or rationale. To combat this, sourcing teams will have to act with greater vigilance as their sourcing capabilities, supply market intelligence, category expertise, and core instincts will be challenged this year as they try to manage or avoid major price increases in certain categories.
- Some supply markets were probably manipulated in 2021 and some will be in 2022. The prediction here is that in a few years, manipulation of some supply markets will be uncovered. Be vigilant and keep good records.
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