[Editor’s Note: Ardent Partners recently published its Procurement-themed report, “Procurement 2024: BIG Trends and Predictions.” Over the next few weeks, this site will feature articles highlighting the key discussion points from the report.
Chief Procurement Officers and their teams head into 2024 with a continued lack of clarity and a need for caution. While a recession was avoided last year and inflation slowed its pace in most regions, economic and overall market uncertainty remains. In addition, geopolitical unrest in the Middle East and climate conditions in Central America are causing big delays and increased costs in global shipping, forcing many procurement teams to seek alternative sources of supply. While the details fluctuate year to year, procurement’s headline remains the same. In 2024, CPOs face a series of new challenges that must be managed while operating with high uncertainty … AND great opportunities exist for the teams who are best prepared for them.
Over the next few weeks, we’ll feature the BIG trends in procurement followed by equally BIG predictions for 2024 that will help CPOs and procurement professionals understand the key issues at hand and better prepare them for the year ahead.
BIG Trend #5 – Polarization and Politicization
In the early days of the internet, various web and business executives, investors, and promoters spoke at length about how the world wide web would connect people and communities and bring them closer together. It would help make the world smaller and imply a much better place as well. They were not wrong. However, in recent times, the internet has allowed smaller and smaller factions to find their like-minded brethren and build new groups and communities. And, having found “their people,” some of these community members can become emboldened to share their ideas and opinions, no matter how large or small their cohort is and no matter how normal or radical their concepts may be. In general this has been a great and positive phenomenon (just ask the 35 million members of this subreddit).
But, while everyone is entitled to their opinion, the problem inside the U.S. and a growing number of countries around the world is that society is becoming highly polarized and very politicized. Polarization grows when people talk only to those who agree with them. Social media companies, and, in fact, most traditional media companies, benefit financially from polarization (and therefore foster it). After all, anger is the most “viral” and profitable emotion.
In 2024, it seems as though everything (not really) is political or has the potential to become a political issue. In polarized societies, when “your team” feels one way about a subject, the “other team” is compelled to take the exact opposite position. The result is often a lose-lose proposition. Entire societies have been taught to “celebrate their differences,” but have largely forgotten how to celebrate their common ground. The U.S. presidential election will accelerate this trend.
The issue for procurement leaders is that polarization leads to instability, creating uncertainty for business. Polarization puts much more pressure on companies and corporate leaders to establish and maintain trust among their customers as well as in the overall marketplace. In 2024, that pressure has a good chance of extending to procurement and the suppliers it has selected. For 15 years, Ardent Partners has pushed CPOs to take bold action. This year, procurement teams should tread a little lightly, and perform more diligence in the sourcing process and be more proactive during the supplier management process to avoid potentially polarizing suppliers (and issues).
BIG Trend #6 – De-Globalization Continues
The long arc of free trade policy is now bent backward by a series of events that accelerated with the election of Donald Trump, with his trade warfare continuing at full speed into 2024. De-globalization results in reduced economic integration and cooperation between nations. In the case of the U.S., this has been driven by a resurgence of nationalist policies, including increased protectionism and a return to traditional, in-country cultural practices.
Putin’s invasion of Ukraine has emboldened China. Since then, there have been a series of frequent and highly public displays of tension between the U.S. and China. These two countries remain deeply entangled economically. But they are also economic adversaries and, to a degree, political and philosophical enemies. And then there is Taiwan which remains a major area of conflict, so much so that Warren Buffet recently divested his multi-billion-dollar stake in a Taiwanese chip foundry because of political risk. New U.S. trade restrictions have led to strained global relations. However, the story of deglobalization is not merely about the East vs. West rivalry or the one between Russia vs. Europe. Since COVID-19, there has been pressure to move supply closer to home and away from China to mitigate risk. This trend will continue in 2024 and is directly tied to the next BIG trend.
BIG Trend #7 – Geopolitical Tensions Strain Supply Chains
“If you’re having supplier problems, I feel bad for you son, CPOs got 99 problems, the supply chain is one.” ~ Ardent’s new spin on an old rap lyric.
For two decades, the risks associated with moving supply offshore, such as increased lead times and holding costs, reduced quality control, and poorer supplier communication and visibility, were mitigated by the dramatic cost savings achievable by simply “lifting and shifting” production to low-cost locations. The expansion of global supply chains traded supply security, control, and assurance for lower prices. And the businesses (most) that ignored the risks were left unprepared for major disruptions.
During COVID-19, many paid the price for having key suppliers located halfway around the world. Today, businesses have come through the toughest times, but a new set of global supply chain challenges are emerging, driven by military conflicts in the Middle East (Israel/Gaza) and Central Europe (Russia/Ukraine) and escalating global tensions between the U.S. and China.
Many countries, like the U.S., are also experiencing contentious political debates and elections. The world appears mired in uncertainty and the nuances of “globalization” are becoming more complex each year. Procurement’s mandate is to be prepared to act if, and when, new sources of supply are needed.
