Procurement is in a unique moment in time. With unprecedented technological change and resulting skills gaps, a newfound visibility and shifting role within the enterprise, and global unrest not seen in decades, leaders across the US and Europe face a myriad of challenges in 2024. In this article we explore what they are and how to tackle them. How can you better navigate the complexities of the current environment and strategically position your organizations for success?

1 - Supply chain transparency and visibility

Supply chain complexity

The intricacy and interconnectedness of global supply chains have grown, making them more susceptible to vulnerabilities, inventory shortages and significant delays. This evolution, coupled with the growing necessity for businesses to disclose sustainability practices in accordance with stricter regulations, has placed immense pressure on procurement teams to deliver heightened transparency into their supply chain operations. 

Many Chief Procurement Officers (CPOs) grapple with a lack of information regarding their supplier base, leading to inaccurate procurement decisions and potential regulatory violations, particularly with the emergence of climate-focused legislation like the European Green Deal.

Enhancing supply chain transparency

To elevate the procurement function and offer deeper insights, organizations must transcend traditional reporting methods. Investing in software that aligns with their scope, fosters more interactions with sellers, and offers visibility into suppliers' social and environmental impacts is crucial. Software augmented with predictive analytics can deliver valuable metrics, insights and real-time visibility into:

• Supplier emissions and energy usage
• Supplier performance monitoring
• Risk management
• Cost transparency
• Sustainability and compliance
• Category management

By leveraging procurement analytics, companies can gain a deeper understanding of their supply chain operations, identify areas for improvement, and make data-driven decisions to enhance transparency, efficiency and sustainability.

2 - Talent shortage and labor market challenges

Workforce challenges

A talent shortage has dominated the conversation in multiple industries, and the supply chain is no different. In a recent BCG survey of global C-suite and board-level executives, 30% of respondents said that attracting and retaining talent is a top five issue impacting procurement. Additionally, nearly 40% cited difficulty attracting, building and retaining skills as one of the top five barriers to transforming procurement. According to a study by SAP, only 41% of procurement teams possess the skills and abilities required to adopt new technologies.

One recent industry report also indicated that 76% of supply chain operations are experiencing a notable workforce shortage, with 61% describing it as extreme. The institutional knowledge vacuum created by the retirement of the Baby Boomer generation exacerbates this issue, leaving a larger void of shoes to fill within supply chain organizations.

Talent management strategies

To combat this shortage, enterprises are adopting various strategies, including automating non-value-added and repetitive tasks, co-mingling operations with other divisions to create scale and synergy and seeking out new talent pools such as trade schools and universities. They’re also investing in advanced market research and integrated technology.

But the need for internal improvement mustn’t be ignored. One survey conducted by Supply Chain Management Review’s sister research arm Peerless Research Group, found that 77% of employee turnover can be attributed to poor management. 30% of respondents either disagreed or strongly disagreed when asked if they were satisfied with the investment their organization has made in their training. 

Therefore embracing proper management, career planning/development and even turnover by designing effective employee exit strategies can improve long-term outcomes and reduce disruption to the business. Talent development will be critical to equip procurement professionals with the insights and tools needed to address supply market dynamics, risks, economics, new tech and ESG.

3 - Adapting to new procurement technology

Digital transformation in procurement

The challenges of adapting to new technologies in manufacturing procurement are formidable, encompassing infrastructure, legacy systems, interoperability, legal issues and the rapid pace of technological change. Procurement leaders must navigate these complexities by investing in: 

• Scalable infrastructure
• Strategic planning for technology integration
• Establishing industry standards
• Prioritizing cybersecurity
• Addressing legal and ethical concerns
• Fostering a culture of continuous learning and innovation

The growth in digital procurement technology will continue to accelerate throughout 2024, with a special focus on iterations in AI, Source-to-Pay software, blockchain and robotics. AI-powered sourcing technology provides a competitive advantage by automating repetitive tasks and enabling procurement teams to focus on high-value strategic initiatives. GenAI use cases will proliferate the full procurement process, improving both speed and efficiency across the department.

Implementing AI and digital transformation

Organizations must adopt a bold yet prudent AI strategy. AI can equip procurement teams with intelligent business data, leading to more informed purchase decisions and significant cost savings. However, it requires a thoughtful and methodical approach, ensuring that internal and external stakeholders are on board and empowered through comprehensive training and change management programs.

We dive into the challenges and how to implement digital transformation in procurement here. 

4 - Bureaucracy and regulatory changes

Sadly, the Brexit hangover continues, with increased bureaucracy, journey times and supply chain inefficiencies (particularly in the European automotive sector). In the US, recent legislative initiatives aimed at revitalizing domestic manufacturing, such as the Infrastructure Investment and Jobs Act and the Inflation Reduction Act, introduce new requirements and incentives for home-grown production and sustainable procurement practices, necessitating strategies to comply and benefit from these changes.

New procurement regulations

The Procurement Act 2023, set to come into force in October 2024, represents a substantial re-writing and consolidation of the current, EU-inspired rules on public procurement. This Act will replace the existing regulations governing the award of contracts and concessions by public authorities and utilities in England, Wales and Northern Ireland. The new regulations aim to make procurement simpler, faster, more transparent and less bureaucratic, creating more opportunities for innovation and supporting new businesses, including small and local companies.

Sustainability reporting requirements are also becoming increasingly stringent. The EU has introduced directives such as the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive. The former will require large companies to disclose information on how they operate and manage social and environmental challenges. This directive aims to make corporate sustainability reporting more consistent and comparable, which will impact procurement teams by increasing the need for transparency and accountability in their supply chains.

Additionally, the EU's Regulation on deforestation-free products, which came into force in June 2023, aims to ensure that key high-risk goods are sourced sustainably. In the USA, the Securities and Exchange Commission (SEC) has established a climate and ESG task force to target ESG-related misconduct. These regulations will require procurement teams to enhance their due diligence and reporting practices to comply with new sustainability standards. 

This environment, combined with an increase in climate change and energy transition regulations, as well as a continued crackdown on greenwashing, will impact procurement by:

• Requiring procurement teams to adopt more proactive and resilient supply chain strategies. This will require enhanced:
  • Supply chain mapping and risk assessment
  • Diversification of supplier base
  • Nearshoring and localization
  • Strategic partnerships and collaborations with key suppliers, industry associations and relevant stakeholders
  • Scenario planning and stress testing

• Changing how they communicate and verify the sustainability credentials of their suppliers. Plus, increasing the need for transparency and accountability in their supply chains. This will mean procurement leaders will need to invest resources into:
  • Supplier evaluation and audits
  • Sustainability reporting and certifications
  • Blockchain and digital traceability
  • Stakeholder engagement and collaboration, including customers, NGOs and regulatory bodies

• Needing new skills and expertise to navigate the complexities of sourcing components for renewable energy projects, managing supply chain risks and ensuring compliance with new energy regulations. Procurement teams will need to focus on:
  • Training and upskilling
  • Hiring new talent with new knowledge and skills
  • Collaboration with experts to gain this specialized knowledge
  • Knowledge sharing of best practices within the organization and across the industry

5 - Customer expectations

Procurement leaders in 2024 are dealing with several customer expectations that are driving changes in their strategies and operations. These expectations include:

• Timely deliveries and product availability: Customers expect fast and reliable shipping times and deliveries, as well as consistent product availability. This requires procurement teams to optimize their logistics and supply chain management to ensure timely delivery and minimize stockouts.
• Sustainability practices: Customers are increasingly demanding that companies adopt sustainable practices throughout their supply chains. This includes reducing carbon emissions, sourcing materials responsibly and ensuring fair labor practices. Procurement leaders must work with suppliers to implement these practices and provide transparency into their sustainability efforts.
• Cost competitiveness: Customers expect competitive pricing for products and services. Procurement teams must negotiate favorable terms with suppliers and implement cost-saving initiatives without compromising quality or sustainability.
• Quality assurance: Customers expect high-quality products and services. Procurement teams must ensure that suppliers adhere to quality standards and implement robust quality control processes.

Collaboration across business functions is essential to meet these expectations and ensure business continuity.

Today’s procurement reality

We didn’t include them separately, but want to emphasize that these challenges exist in an environment of economic volatility at a time where ESG considerations, as mentioned above, are increasingly becoming integral to supply chain strategies. Leading companies such as Ford, Danone and IKEA are partnering with suppliers to promote socially responsible supply chains while improving cost competitiveness. 

Efforts to meet 2030 decarbonization targets and comply with more stringent EU regulations are ramping up, making ESG a critical focus for procurement leaders.  DSSI itself recently joined the Ecovadis network to ensure a culture of continuous improvement in ESG-related topics. We were proud to achieve a Bronze status in 2023 and are working toward a Gold status.

Of course economic volatility continues to be a significant challenge for procurement leaders. To maintain stability and margins amid turbulence, successful CPOs are managing costs without compromising supply chain reliability. This involves reassessing risk and resilience practices, including supplier relationships, to navigate supply chain disruptions caused by geopolitical and climate issues.

If you’re looking for technology systems that can help you tackle some of these challenges, get in touch with the DSSI team.