This month, in his exclusive PASA column ‘Gordon’s Window’, Gordon Donovan, VP of Global Procurement Research at SAP, provides a handy expert summary of December’s global procurement research.
Save your own time reading research when you can get the key takeaways in one place!
A really full month with lots to consider. Overall, what I get from these reports is that the procurement and supply chain landscape for 2025 is characterised by significant shifts driven by geopolitical instability and technological advancements.
Companies are moving away from traditional lowest-cost, fastest-delivery models towards more resilient supply chains.
Themes that I found from these reports were:
- Cost reduction was the top priority for CPOs, followed closely by third-party risk management and speed of execution
- Artificial intelligence adoption is surging, with 94 percent of procurement functions using Generative AI weekly, and 70 percent open to implementing it across the value chain
- Supplier relationship management (SRM) is gaining importance, with 46 percent of organisations reporting over four percent annual financial benefits from their SRM programs
- Challenges persist in spend analysis, with 53 percent of organisations reporting lower-than-expected ROI from analytics solutions
These trends highlight the need for procurement leaders to adapt to a rapidly changing global landscape while leveraging new technologies to drive value and efficiency.
BCG: How Geopolitics Changes the Procurement Equation
Last month, I reviewed Gartner megatrends for procurement, and one of them was about the changing nature of global relationships.
This article from BCG takes this further and looks at how geopolitics changes the procurement equation.
The article begins by recognising that for much of the past couple of decades, procurement has focused on building procurement networks that focus on lowest cost with speediest deliveries, but with the instability at a geopolitical level, this traditional approach – which requires stability – will no longer work.
Today, companies must navigate an immensely complex global landscape; one often unsettled by armed conflict, trade wars, sanctions, export controls and other unexpected developments driven by geopolitics.
As a result, companies are confronting a balancing act: how to reduce procurement costs at a time of high inflation, while at the same time improving access to key markets and ensuring that their supply chains are resilient in the face of geopolitical risk.
The article goes on to describe ways to develop best value sourcing locations (see image) including:
- Costs
- Delivery
- Sustainability
- Risk
- Quality
- Innovation
And then cross referencing these with differing regions.
Producing a geopolitical heat risk map for the regions and products is also identified and, as indicated by the Economist study, scenario planning for these key risks to identify signposts and trigger points.
All in all, a very interesting read if you are thinking of redesigning your supply chain.
Procurement Leaders: Strategic Planning Primer 2025
This report gives us a view of what leading CPOs are thinking about for 2025.
Once again, cost savings is predicted to be the top priority for 2025, followed by third-party risk and a new one – speed of execution.
These will be enabled by evolution in operating models around business partnering, category management and data.
30 percent identified risk management as a value driver for procurement, with business interruptions, single sourced materials and at risk revenue being top areas of concern.
Speed of execution is a new entrant, with supplier onboarding and sourcing cycle times being areas of measurement for improvement.
Procurement Leaders: CPO Compass 2025
This report is based on interviews with eight experts across a range of fields (i.e. not just procurement) looking at macro trends to identify some of the tensions that procurement leaders will need to navigate to deliver value.
- Navigating the business supercycle – The retreat from globalisation continues to redraw the world map, with procurement teams at the forefront of companies’ efforts to adjust. But as leaders continue to pivot at pace, they must develop their understanding of the wider forces driving this trend
- Balancing human and artificial intelligence – CPOs have considered talent to be the number one enabler of success for their functions. But with advances in AI potentially signalling a revolution in what work is done – and how it is accomplished – leaders must view capability development through the prism of technology
- Powering next level productivity – The imperative to do more, to do it faster and more efficiently has never been greater.
It’s a really great read with lots of insights and thought provokers.
Vertice: Procurement Impact Report
This study of 300 global procurement leaders in the US and UK sought to understand the differing levels of maturity in procurement and how that translates to value and opportunity for their organisations.
Not surprisingly, the more mature functions were able to innovate faster, maintain compliance easier and control budgets better. This is aligned to the introduction of procurement automation.
What was interesting is that partially advanced procurement teams were more of a hindrance than a help, suggesting that the journey to maturity is a rocky one for the business to endure.
In other words, change management is hard!
There was a clear split that procurement functions in the UK were more advanced, in terms of maturity, than their counterparts in the US. 67 percent of UK firms vs. 44 percent of US firms have reached advanced procurement maturity, according to the report.
Worryingly, 37 percent of respondents say that procurement is not seen as a strategic priority and 35 percent say their organisation is not willing to invest in the skills to tackle the issue.
It’s an interesting report, with a link for a self-assessment included.
Wharton Business School: AI Growing Up
Over 800 respondents in the US took this study earlier this year. It’s not solely procurement but across business, with the goal to take a pulse on where organisations are on their adoption of GenAI, building from a survey the previous year.
The survey found that 72 percent reported they were using GenAI once per week and that spending on GenAI had increased by 130 percent since 2023.
For procurement, that number rises to 94 percent (from 50 percent 12 months ago), making procurement the highest function of all.
Most leaders agree that it’s having a positive impact – within procurement, 35 percent stated it was high, 41 percent stated it was medium and 18 percent said it was low. This was broadly in line with all other functions except IT (which was a higher, high impact).
Budgets were expected to rise in procurement for AI, with the majority (58 percent) suggesting between a one-to-10 percent increase over the next two-to-five years.
It’s a great read which details the impact that GenAI is having and how it evolves.
APQC: Understanding Accounts Payable Benchmarks and Best Practices
This report, which surveyed 335 respondents, provides insights into accounts payable (AP) practices, focusing on process maturity, data standards and technology implementation, and highlights the growing trend towards automation, AI adoption and cloud-based solutions in accounts payable processes.
Delivery Models:
- 22 percent of respondents use an outsourced model for AP
- 99 percent of respondents consider their delivery model effective, with 39 percent rating it as extremely effective
AI is being implemented across various P2P processes:
- 42 percent in procuring products and services
- 37 percent in processing accounts payable
- 21 percent across the entire P2P process
State of Flux: 2024 Global SRM Research Report
The 16th annual Global SRM Research Report emphasises the critical role of supplier relationships in modern business, highlighting the shift from the Information Age to the Reputation and Relationship Age.
Key findings:
- 46 percent of participants reported financial benefits above four percent per annum from their SRM programs
- 91 percent of leaders monitor financial benefits beyond contracted spend for critical suppliers
Challenges:
- Difficulty in capturing and reporting returns due to lack of accurate data
- 19 percent said their company had no system in place to support contract lifecycle management (however, of leaders, 82 percent do have a dedicated system)
- 21 percent reported the systems they have to support performance management were ‘poor’
- 23 percent said they had not yet developed a business case at all for supplier management
The report underscores the transformative impact of strategic supplier management on organisational success but identified that there was a drop in organisations surveyed who qualified as leaders. With the geopolitical changes happening, this is a concern due to the rising importance of supplier relationships and the changing of global supply chains.
Everest: CPO Agenda 2025
This was taken from a webinar hosted by Everest earlier this month.
CPO challenges and priorities:
- External challenges: Supply chain disruptions due to geopolitical events
- Internal challenges: Budgetary constraints limiting ability to navigate external challenges
Top priorities for 2025:
- Cost reduction
- Minimising supply chain disruptions
- Improving operational efficiencies
Generative AI in procurement:
- 70 percent of respondents are open to implementing generative AI throughout the process value chain
- 52 percent are focusing on quick-win use cases
The data points are sourced from Everest’s CPO report for 2024.
As always, reach out to discuss more, I’m always happy to hear your thoughts!
