[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.
Prediction #1 – The Global Economy Stays Strong (No Recession)
Multiple surveys published at the end of 2022 showed that 100% of the responding economists predicted there would be a recession in 2023. While economists exist largely to make weather professionals (and now weather apps) look more insightful and accurate, this was a huge miss. A year later, the economy looks much stronger to the so-called “experts” because it is, in fact, stronger. [Author’s note: In the Procurement 2023: BIG Trends and Prediction report that published in February 2023, Ardent Partners predicted that the United States would avoid a recession in 2023.]
Steep inflation has been curbed in most regions, and despite a high level of geopolitical conflict and tension, businesses continue to operate well while unemployment rates remain low. 2024 is also an election year in the United States, with many risks linked to the election process and who, ultimately, is elected. But, election-year recessions are improbable events, and the final weeks of 2023 reflected a strong stock market and unbridled optimism for the year ahead.
The ongoing threat of a U.S. recession will recede (at least until after the election in November), due to resilient employment, lower inflation, and general economic results bolstered by strategic fiscal policies, increased consumer confidence, and robust trade. Other regions will be buoyed by the U.S. economy, although some may falter in H2.
In 2024, a more stable economic landscape will allow procurement leaders to pivot towards more strategic planning and make larger long-term investments in technology and growth initiatives designed to improve operations and results. CPOs are encouraged to get these projects booked in 2024 because 2025 will be another story.
Prediction #2 – A Fully-Automated Procurement Operation Becomes the CFO’s Imperative
Any CFO worth their weight noted the impact the “year of efficiency” had on the stock prices of the Big Tech companies that grew revenues while simultaneously lowering expenses last year. Many of these tech behemoths were able to slice corporate largess without impacting sales/performance and gain billions in market value as a result. Mimicking these accomplishments has become a major goal for many CFOs in 2024.
When well-deployed and well-adopted, supply management solutions have a long track record of driving procurement efficiencies and delivering next-generation value by transforming procurement into a strategic and effective operation — one that leads to more savings and value as well as better decision-making. It is only natural that CFOs will look to the procurement department to drive more value this year. And, with the emerging promise of AI within procurement, many CFOs will champion the need for full automation across the source-to-settle process, making it a business imperative in 2024.
Prediction #3 – The CPO’s Digital Strategy Will Define the Organization for the Next Decade
Nearly a decade ago, Ardent Partners predicted that data would begin to unlock new doors in different ways for procurement teams. This opportunity (and technologies that support it) has progressed dramatically since then. Today, the world is very different, and the importance of big data has reached a tipping point. The expanded usage and broad commercialization of AI tools have unlocked countless new possibilities for utilizing analytical engines to drive tactical operations and impact strategic decisions.
While still emerging, the growth and impact of AI tools for procurement over the next few years will be extraordinary. Chief Procurement Officers (CPOs) must recognize the crucial role that intelligence can and will play in shaping procurement strategy and execution and go all-in on big data intelligence. Doing so starts with a plan — a CPO’s Agenda — based upon a digital foundation that incorporates robust analytics. The resulting streams of data-driven intelligence will be the fundamental drivers that push procurement and supply chain departments to the next level of performance. When it comes to the development and execution of a digital strategy, CPOs cannot afford to sit on the sidelines.
