The Future of Procurement: A Look Ahead to 2024 and Beyond
Procurement trends in 2024
In the dynamic landscape of business, procurement plays a pivotal role in shaping organisational success. As we step into 2024, the procurement landscape is undergoing a profound transformation, driven by technological advancements, migration of core business systems to the cloud, a heightened focus on sustainability, and a change in focus from cost savings to generating value. We investigate the key trends that are shaping the future of procurement, what Grosvenor’s research found to be the key priorities for 2024 and give you strategies that you can adopt to stay ahead of the curve.
Key procurement trends for 2024
Digital Transformation and Procurement
The digital revolution continues to reshape the way businesses operate, and procurement is a key enabler of any technology-enabled transformation. Advanced technologies such as artificial intelligence and machine learning are becoming integral to the procurement process and are increasingly the subject of procurement activities. AI-driven algorithms are helping organisations analyse vast amounts of data, for example SPAT, to develop new insights and make informed decisions. The automation of routine tasks and the ability to analyse large volumes of unstructured data is freeing up procurement professionals to focus on strategic activities that add value to the organisation.
Businesses are continuing to adjust from purchasing technology and other necessities as goods, to purchasing them as services – as the range of Everything-as-a-Service continues to advance and expand.
In discussing the challenges of this with our customers, and through our annual Chief Procurement Officer survey, the following eventualities seem clear for 2024:
- AI will continue to expand into new domains. AI is still in an R&D and expansion phase. It has found a few areas in which it really excels, but there will be lots of experimentation by vendors to find new value propositions that differentiate suppliers from each other and generate unique value for customers. AI is somewhat unique in the XaaS market, as it cannot practically be hosted with generally available on-premise equipment and is therefore highly prized by cloud service providers as it accelerates uptake of their solution platforms. AI will be a key differentiator of high value XaaS solutions – but will create a new level of vendor lock-in over the medium term.
- Technology generational change. Customers still using on-premise solutions to deliver their core business applications will be pushed by end-of-life or end-of-support arrangements to migrate to Software-as-a-Service offerings. Additionally, customers using early generation SaaS products are going to start looking to move to best-of-breed solutions – where their current provider is lacking innovation, becoming too expensive, or not meeting required performance or support KPIs. Here are four tips to maximising the value you get from your SaaS contracts.
- Business and technology architecture in the cloud. Over the last few years, businesses have progressively implemented more cloud-based products into their environments. This has been driven by business customer need, identification of best-of-breed solutions, or through implementation of point solutions. As this transition from on-premises to cloud business applications has occurred, not all businesses have considered the way these cloud products fit their ICT architecture or cyber security needs or standards. This will change over the next cycle as a greater proportion of a business’s ICT footprint is comprised of ‘as-a-Service’ products and businesses look to consolidate, reduce duplication of functions, manage costs, and improve their cyber security posture.
- Vendor and product consolidation. The proliferation of XaaS and AI solutions will result in vendors buying other solution providers as a way to quickly incorporate key SaaS innovations and to integrate AI capabilities into their solutions. XaaS companies will also use the purchase of lagging competitors as a way to quickly expand their userbase and licensing income streams. This type of market rationalisation is likely to be accelerated if the global economy tips over into a downturn in 2024.
Data-Driven Decision Making
Procurement is leveraging data to drive strategic decision-making. Advanced analytics tools are enabling organisations to gain deeper insights into supplier performance, market trends, and risk factors. Predictive analytics is helping procurement teams anticipate changes in demand, optimise inventory levels, and mitigate supply chain disruptions. The ability to harness and analyse data is becoming a critical competency for procurement professionals.
For businesses to take advantage of these analytics and decision-making capabilities requires that the right tools, platforms, and integrations are in-place. Where existing technologies do not support this, or where an organisation’s current solution provider roadmap isn’t delivering in this area – businesses will need to consider migration to a new best-of-breed solution in 2024, like SPAT which has been utilising AI for over 5 years now.
Sustainability and Ethical Sourcing
In the wake of growing environmental concerns and social awareness, sustainability has become a key focus in procurement. Businesses are increasingly adopting sustainable and ethical sourcing practices to meet consumer expectations and align with corporate social responsibility goals but how do you get started with sustainable procurement?
Procurement professionals are not only assessing suppliers based on cost and quality but also considering their environmental and social impact. This shift towards responsible procurement is not just a trend; it’s a strategic imperative for organisations looking to build resilient and socially conscious supply chains. In addition, modern slavery is a critical consideration within the realm of ethical sourcing, prompting organisations to vigilantly evaluate and eradicate any exploitative practices from their supply chains as part of their commitment to sustainability and responsible procurement.
Supplier Relationship Management (SRM)
In the future of mature procurement practice, the emphasis on building strong and collaborative relationships with suppliers is gaining prominence. Organisations are recognising the value of strategic partnerships with suppliers to drive innovation, develop joint value-creation opportunities, reduce costs, and enhance overall supply chain efficiency. Supplier Relationship Management (SRM) goes beyond transactional interactions and focuses on long-term collaboration, risk management, and joint value creation.
It is about aligning supplier activities with the strategic goals of the organisation. It involves understanding the role suppliers play in achieving business objectives and ensuring that the supplier relationship supports the overall strategic direction. Building a network of trusted partners is becoming a cornerstone of successful procurement strategies. In 2024, you will need to manage your suppliers like you manage your staff.
Procurement professionals will need to adopt robust risk management strategies in 2024 to navigate their risk management challenges. This includes diversifying their supplier base, utilising technology for real-time risk monitoring, and implementing contingency plans to mitigate the impact of unforeseen events. Other tactics for mitigating supply risk and becoming the customer of choice include coordinating with other customers.
Key priorities for 2024 based on procurement research
From a practitioner’s perspective, in 2024 we will continue to operate in an inflationary environment with reasonable uncertainty around the developing economic situation. Both factors are likely to influence our business partners priorities and buying decisions.
Grosvenor‘s research Geared to High Performance – How to get the best out of your suppliers, suggests that improving outcomes for internal and external stakeholders is something we can focus on in 2024 to improve and maintain strong procurement outcomes.
The thinking is, that if prices go up in a world constrained by inflation and a tight labour market, then, “let’s at least get the most performance for our stakeholders”. This year, the ability to deliver results for external stakeholders, such as taxpayers, the wider community, and shareholders, followed by the ability to improve the way the business operates are the top priorities for procurement teams.
As we peer into the future of procurement in 2024 and beyond, it’s clear that the role of procurement is evolving from a transactional function to a strategic enabler of business success. Embracing digital transformation, leveraging data for decision-making, prioritising sustainability, nurturing supplier relationships, and managing risks are key imperatives for organisations aiming to thrive in the rapidly changing business landscape. By staying attuned to these trends, focusing on the 2024 priorities and proactively adapting these strategies, businesses can position themselves for success in 2024.
Book a meeting with our procurement team to discuss the challenges and opportunities that you forsee in 2024.