Welcome to the August 2025 edition of Gordon’s Window, your comprehensive guide to the latest shifts and challenges in global procurement and supply chain management.
This month, Gordon Donovan, VP of Global Procurement Research at SAP, shares how leading organisations are recalibrating priorities amid economic uncertainty, with a sharper focus on cost control, digital transformation and resilience.
He also explores the evolving role of procurement as a strategic advisor, highlighting the surge in AI adoption, the balancing act between cost reduction and ESG goals, and the growing complexity of supplier risk management plus perspectives on navigating geopolitical volatility, leveraging automation for productivity and building stronger procurement-IT partnerships.
There’s also an analysis on the changing landscape of global sourcing, where high-risk regions are becoming growth hubs and sustainability remains a key – if challenging – priority.
Hackett
As usual, we saw several reports from Hackett this month:
Key Issues Pulse Survey
On a recent webinar with Beroe, Chris Sawchuk gave an update on the Key Issues Survey. The survey captures shifts in priorities, savings expectations and transformation agendas among major global procurement organisations, reflecting a sector recalibrating for resilience, efficiency and digital innovation.
Notable insights:
Optimism on Cost Savings Has Tempered
While procurement teams initially projected higher savings for 2025, expectations have cooled since late 2024. More organisations now anticipate flat or even decreasing savings for both purchase cost reduction and cost avoidance, reflecting a more cautious outlook amid ongoing economic uncertainty.
Digital Transformation Surges in Importance
Digital transformation – including the adoption of AI and GenAI technologies – has moved up in priority. Procurement teams are increasingly looking to technology to drive efficiency, improve analytics and enable smarter, faster decision-making.
Shifting Transformation Initiatives: AI and Core Tech Take Centre Stage
Data analytics and reporting remain the leading transformation initiatives, but AI-enabled technology and core procurement platforms have risen in prominence. Service design and delivery projects are less prevalent, while function management is a new focus area for 2025.
Sustainability and Supplier Relationships Slip Down the Agenda
Embedding sustainability and enhancing supplier relationships have dropped out of the top ten priorities. Instead, there’s a stronger emphasis on procurement’s role as a strategic advisor and a driver of competitive differentiation, as well as on agility to adapt to fast-changing stakeholder needs.
Procurement organisations are doubling down on cost control and digital innovation while remaining agile to navigate uncertainty. The evolving agenda highlights the need for procurement teams to rethink digital strategies, invest in talent and ensure that technology investments align with both operational efficiency and broader business goals.
CIPS: Balancing Cost with Sustainability
This paper explores the growing tension procurement professionals face between relentless cost pressures and ambitious sustainability (ESG) commitments. With inflation, supply chain disruptions and new regulations piling on, the report argues that procurement teams must rethink how they approach ESG – not as a compliance burden, but as a strategic lever for both financial and environmental wins.
Key insights include:
ESG: From Cost Centre to Value Driver
Many organisations still see ESG as an added cost, but the paper urges a mindset shift: integrating ESG into procurement can drive efficiencies, reduce risk and create competitive advantage.
Upskilling is Essential
The top skill procurement leaders want to develop is ‘managing sustainability’. There’s a clear call for training in green procurement, circular economy and sustainable supply chain management. This aligns well with the findings from the Economist Impact study that identified sustainability skills as the top skill that procurement is focusing on from a talent development perspective.
Regulations: Not Just a Hurdle
The regulatory landscape is tightening, especially with initiatives like Europe’s Corporate Sustainability Reporting Directive (CSRD).
Supplier Collaboration Fuels Progress
Strong supplier relationships are key to driving ESG improvements. The report recommends clear ESG criteria in supplier selection and working collaboratively on emissions reduction and ethical practices.
In this year’s Economist report, we identified that the top benefit of external collaboration is improved sustainability outcomes.
Tangible Intelligence: From Cost Center to Value Creator
This paper dives into how procurement teams are stepping up as strategic powerhouses – especially as we head into 2025. The paper explores the challenges and opportunities facing procurement, with a special focus on indirect spend, the rise of AI and the need for smarter, more connected processes.
Key insights include:
Siloed departments
Procurement, legal and finance often work in isolation, leading to inefficiencies and missed savings.
Tech and AI Are Game Changers
Nearly all procurement teams are investing in analytics, automation and AI. Automated processes can cut routine transaction times by up to 80 percent, letting teams focus on innovation and supplier relationships.
External Pressures Are Mounting
Geopolitical risks, tariffs and shifting regulations are making procurement riskier and more unpredictable. Organisations need to diversify suppliers and stay agile to weather the storm.
Mindset Shift: From Preventist to Optimist
Procurement isn’t just about preventing problems – it’s about driving business outcomes. Teams that embrace a proactive, optimistic approach are earning a seat at the table and shaping company strategy.
BIZ Click: CPO Survey
This research highlights how procurement leaders are balancing cost discipline, risk management and sustainability while accelerating the adoption of AI and digital technologies.
Key insights include:
The top priority for 68 percent of procurement leaders is cost reduction and efficiency. This is closely followed by sustainability and ESG compliance (55 percent) and supplier collaboration and innovation (51 percent). Risk management and resilience remain critical, with 44 percent citing them as ongoing challenges.
While 39 percent of leaders are prioritising digital transformation and automation, the survey reveals that progress is steady but not rapid. Over half (52 percent) of organisations are moving towards a more centralised procurement model, supported by digital tools, but there is a clear need to accelerate digital investment to keep pace with complexity.
Nearly half (49 percent) of respondents see AI as truly transformational for procurement. The most impactful AI applications are in spend classification (62 percent), supplier risk management (51 percent) and negotiations and sourcing (48 percent). However, concerns about data security and integration are significant barriers to broader AI deployment.
ProcureCon: CPO-CIO Report
The 2025 ProcureCon CPO-CIO Report explores how procurement and technology leaders are collaborating to drive procurement transformation amid accelerating digital change. The report finds that while collaboration between Chief Procurement Officers (CPOs) and Chief Information Officers (CIOs) is generally effective, significant challenges remain – particularly in preparing for advanced technologies like AI.
Key insights include:
Nearly half of respondents (45 percent) say their CPO and CIO are equal partners in technology procurement, while 29 percent report the CIO leads with procurement in a supporting role. This suggests that although balanced leadership is becoming more common, many organisations still see IT dominating technology decisions, which can limit procurement’s influence on outcomes.
A majority (58 percent) believe their procurement and IT teams coordinate effectively, and 54 percent report regular collaboration on shared objectives. However, 39 percent say collaboration is only occasional, indicating that many organisations still operate in silos and may miss opportunities for innovation and better technology adoption.
Implementing AI and machine learning is the most significant technology initiative for 34 percent of respondents in the coming year, yet 58 percent admit their organisations are only “somewhat prepared” for AI, and a further 33 percent feel not very or not at all prepared.
Where procurement and IT work closely, organisations see tangible benefits: 61 percent report significant improvements in negotiating technology contracts, 54 percent in leveraging procurement data for decision-making and 51 percent in implementing new systems.
The top two priorities for improving collaboration are integrated technology and data-sharing platforms (65 percent) and enhanced communication and project goal alignment (52 percent).
Procurement Leaders: Supercharging Procurement Productivity
According to Procurement Leaders’ research, more than three-quarters of procurement teams face mandates to reduce operating costs, even as they are expected to deliver on broader business objectives such as risk management, regulatory compliance and sustainability.
Key insights include:
78 percent of procurement teams are under pressure to cut operating costs in the coming year, with an average target reduction of 14.2 percent. This is occurring even as the function’s remit broadens, creating a tension between cost-cutting and the need to support wider business goals.
Automation is the top lever for cost reduction, with 61 percent of respondents planning to automate more processes. Digitalisation – including AI – is the leading investment priority, with 87 percent of teams planning to invest in productivity improvements, and 84 percent already having deployed at least one automation tool.
Only around half of procurement teams have a formal system for measuring productivity, and just 38 percent track cost savings per FTE. Many organisations focus on output metrics (like savings and value creation) but neglect input measures (such as efficiency and resource use), making it difficult to benchmark performance or secure investment for improvement.
Proxima: Global Sourcing Risk Index
This report delivers a comprehensive overview of supply chain risks across 30 of the world’s largest and fastest-emerging economies. Evaluating 10 major industry sectors against eight risk dimensions – including geopolitical conflict, climate disruption, governance, human rights and supplier concentration.
High-Risk Sourcing Destinations Are Also Growth Hubs
Countries like Mexico, Turkey, India and Russia are among the riskiest sourcing locations, mainly due to climate vulnerability, governance challenges and supplier concentration. Despite these risks, they are attracting significant investment as global supply chains realign, making them both high-risk and high-reward destinations.
Lower-risk economies, such as those in Europe, offer greater stability but come with higher sourcing costs. Procurement leaders must balance their organisation’s risk appetite against economic advantages, understanding that managing risk often increases costs and may not always be financially feasible to absorb or pass on to customers.
Globalisation is slowing but not reversing. International trade as a share of GDP has plateaued, yet every major region still relies on imports for at least 25 percent of critical goods or services.
The report highlights that global trade flows are shifting.
Five Forces Are Reshaping Sourcing Strategies:
- Geopolitical reorientation (e.g. nearshoring, friend-shoring)
- Reindustrialisation (onshoring, especially in high-value sectors)
- Digitisation (AI, automation, digital twins for real-time risk mapping)
- Sustainability (with 70 percent of companies prioritising it, though progress varies by region)
- Risk and resilience (greater emphasis on predictability and control over pure cost savings)
As always, reach out to discuss more. I’m always happy to hear your thoughts!
