Navigating procurement challenges in 2024

Trial by fire is never pleasant, but challenges represent an opportunity for procurement professionals to become more agile and even more adaptive. A recent Ardent Partners report covered insights and challenges faced by procurement professionals. With 68% of CPOs believing 2024 will be even more challenging than the year before, this article will help you prepare your procurement strategy for the ups and downs that may come your way.

Good resilience starts with anticipating what lies ahead. With the influence of inflation and upward price pressures, there is a need to futureproof your organization both externally and internally. Read on to explore four pertinent challenges cited by the survey results from 382 CPOs and other procurement executives.

Wrangling with risk

The question of supply risk remains top of mind for CPOs, with 36% of survey respondents specifying managing and mitigating risk as a top priority in 2024. This comes as no surprise due to the diverse and evolving nature of risks that can significantly disrupt supply chains and impact operational continuity. Procurement professionals must address a range of supply risks, including supplier insolvency, fluctuating commodity prices, geopolitical tensions, and compliance with increasingly stringent regulatory standards.

Additionally, cybersecurity threats pose substantial risks to the integrity of supply chain systems and data. Effective supply risk management involves not only anticipating and mitigating these risks but also developing robust contingency plans to swiftly address disruptions. As one example, check out the StopFraud solution that helps manage supplier risk. As global supply chains become more interconnected and complex, the ability to foresee and manage these supply risks will be critical in maintaining stability and achieving strategic goals. This brings us to the next formidable challenge — adapting to ongoing supply chain changes.

Supply chain volatility

While supply chain changes significantly affect procurement, it’s interesting to see that most CPOs did not integrate these potential changes into their midrange plans. Regardless, 18% are planning to onshore more supply, while 22% plan to nearshore. Preparing for supply chain changes poses its own challenge, as alterations such as onshoring and nearshoring can lead to shifts in supplier relationships, contract terms, logistics operations, and cost structures.

For procurement professionals, these changes mandate a re-evaluation of supplier portfolios to ensure alignment with the new supply chain dynamics. Preparedness in this context is paramount, as it involves developing flexible procurement strategies that can adapt to evolving supply chain models without compromising efficiency or cost-effectiveness. Effective preparation ensures that the procurement function can maintain supply continuity, leverage cost advantages, and mitigate risks associated with longer supply chains, such as geopolitical instability and transportation delays.

Digital transformation budget dilemmas

Though 32% of CPOs reported an increased technology budget in 2024, 54% mentioned unchanged budgets, with 14% dealing with a decrease. Digital transformation on a constrained budget presents numerous challenges for procurement teams, yet remaining focused on automation is imperative for sustaining competitive advantage.

Financial constraints often hinder acquiring cutting-edge technology, data analytics tools, and training programs crucial for transformation. Prioritizing initiatives and strategic trade-offs becomes necessary, like focusing on high-impact areas or opting for cost-effective solutions such as SaaS platforms. Despite challenges, maintaining momentum in automation is crucial. Automated procurement processes enhance efficiency, reduce errors, and improve decision-making with real-time data, vital for navigating complex supply chains and reducing manual risks. While this challenge pertains more to the automation side of procurement, the next subject leads us to the human-centric facet.

Finding the right alignment

Aligning the procurement team with the organization’s broader business goals is essential to ensure cohesive efforts that drive overall success, though not always easy. Procurement strategies support critical priorities such as cost reduction, cash flow management, and market expansion, while contributing to strategic initiatives like digital transformation, supply chain resiliency, and sustainability.

Misalignment can lead to inefficiencies, duplicated efforts, and missed opportunities, potentially exacerbating budgetary constraints and failing to address evolving market conditions. This disconnect can impede innovation, adaptability, and stakeholder trust, ultimately undermining competitive advantage and operational efficiency. Therefore, seamless integration of procurement functions with business objectives is not merely a best practice but a critical determinant of long-term success and resilience.

The road to better resilience

If a company is a car, procurement is the engine, ensuring its operation with the provided resources. The more you know about your engine, the better it works. That’s why we encourage you to take a look at the report that this blog is based on: Ardent Partners’ Procurement Metrics that Matter in 2024.

Diving into relevant procurement topics such as best-in-class metrics, upcoming trends, and more, the report is the perfect one-stop-shop to enrich your current knowledge so you’re better equipped to improve your pre-existing procurement strategies.