The 2024 Economist Impact report “Across the procurement-verse: Changing trends in the procurement function” highlights the trends transforming the role of procurement, from the evolving influence of procurement to driving sustainability and managing risk.
The SAP-sponsored report offers insights from more than 2,300 C-suite executives spanning multiple countries, regions and industries and examines the pressures facing today’s procurement teams. As these teams manage risks like geopolitical shifts, supplier threats, and liquidity risks, the surveyed executives emphasize an urgent motivation to improve their procurement operations through agile, innovative, and fast-paced solutions.
Today’s complex and uncertain business environment has pushed procurement teams to take matters into their own hands. Not only are they accelerating digitalization by adopting emerging technologies like AI, they are driving it by searching for ways to change the procurement operating model.
As Always, It’s All About Innovation
Procurement officers view driving innovation as one of their function’s chief objectives. Doing so will help them navigate risks and respond to an evolving consumer environment.
When procurement is truly influential, it is proactive. Teams that understand digitalization and the technologies being acquired have more impact in this area than those that are reactive. Over two-thirds (70%) of the survey respondents agree that procurement is actively involved in developing their wider organization’s digital transformation strategy — though whether this is true in the day-to-day may vary from business to business.
If procurement is to play a more integral role in businesses, changes to the function’s operating model are likely for some organizations, which is why the research also shows that procurement is accelerating its digitalization, including through the adoption of emerging technologies. Approximately 84% of executives are confident in their procurement team’s ability to apply technology successfully to automate some processes and shift attention to more strategic and complex tasks.
This ability to seamlessly integrate and adopt new solutions will be critical as procurement teams work to balance capabilities, know-how, and expertise from suppliers to achieve the best possible results.
Digitalization Remains a Top Priority
While innovation is at the core of many companies’ priorities, C-suite leaders are laser-focused on the solutions that enable their teams to be more efficient, cost-effective, and risk-averse.
More than half (57%) of the C-suite cite digitalization as the top strategic priority for their procurement teams. This emphasis may be fueled by recent advances in generative AI, which is the top technology trend (34%) executives plan to implement in the next 12 to 18 months.
Digitalization efforts can offer real-time capabilities that better address dynamic market challenges and make existing procurement processes more efficient. Data-driven insights allow for more actionable outputs in strategic decision-making and can even impact procurement’s role in engaging contingent labor. Augmented with AI, they can easily manage contingent labor by streamlining and standardizing recruiting processes like job advertising, resume scanning, expediting background checks, and more.
More efficient intake management also goes hand-in-hand with digitalization. While generative AI occupies the highest priority, intake management is only one percentage point behind it, making it the second-most likely tech trend to be piloted or implemented.
Value of Multi-Sourcing and Supplier Diversity
The top organizational risk for procurement was monetary uncertainty (49%), as macroeconomic risks can have a large impact on operational external risk. This is a potential factor as to why procurement teams are focused on risk as a longer-term priority.
Updates here can create opportunities like multi-sourcing, which can improve risk reduction and resilience amid growing external threats, and supplier diversity — driving market expansion through a more diverse supplier base. This can also reduce single-sourcing dependencies to mitigate risks against potential disruptions.
These possibilities prove how companies must make it a mission to improve the quality of data and the models needed to effectively analyze it. Subpar data directly hinders procurement’s ability to make good decisions, undermining its overall effectiveness and derailing successful digitalization before it takes hold.
Executives Agree: Time to Go All-In on AI
No other strategic priority attracts nearly as many responses as a priority across all industries as digitalization. However, respondents also agreed on one other key topic: the role that AI will take in the digitalization journey.
Adoption of an AI strategy stands at the joint top of executives’ list of digitalization priorities for procurement, alongside spend analytics, both cited by 44%. Almost half (48%) of executives aim to use AI to improve procurement processes through source-to-pay and AI-enabled spend management and decision support.
As the main drivers for digital transformation in procurement, these two objectives are complementary. AI tools can read a contract to evaluate clauses and suggest how they can be improved. It can also enhance data management, streamlining the processes needed to make key procurement decisions.
Fully digitalizing procurement operations has been on the function’s agenda for several years, but it is a continuous challenge. It is a process that does not have an endpoint, particularly as technologies advance quickly. The leading technologies from just three years ago pale in comparison to what can be accomplished today, which require knowledge across software development, APIs, and AI.
Therefore, success in building a thorough and adaptable AI strategy requires top-level expertise. Acquiring the necessary skills could entail considerable organizational and cultural change in procurement and across the business — extending beyond the structural shifts and developing new ways of working to build these skills.
The Start of a Procurement Renaissance
Across industries, procurement is already finding new ways to add value to the organization. But now that chief procurement officers and their teams are more consistently gaining a seat at the decision table, the challenge is to keep it.
The ongoing state of disruption offers ample opportunity for procurement teams to continue evolving and demonstrate their worth. Above all, improving collaboration with other business stakeholders will be the key to strengthening procurement’s role within the organization. Today’s technology-driven initiatives are as much a human challenge as they are a technology one, and when organizations are planning these initiatives it is clear that they need to consider people, process, and technology in equal measure to ensure success.
For more about the findings from this year’s Economist Impact report, tune in to this podcast hosted by Art of Procurement: What the Research Foretells About Procurement’s Vision, Priorities, and Opportunities.
Gordon Donovan is global vice president of Research, Procurement, and External Workforce at SAP.