Procurement Directors: The Top 8 Priorities for the Year

As we approach the year 2024, corporate procurement departments are facing numerous challenges, from the growing importance of Artificial Intelligence to environmental responsibility. To get a clearer picture, two recent studies, one conducted by AgileBuyer and another by PwC, provide an overview of the challenges that companies are expecting in the coming months. Here’s a summary.

#1 Reduce Costs

In 2024, cost reduction becomes a priority for procurement departments (77% of them), which is due to persistent inflation across many sectors and a growing imbalance in relationships with suppliers. Cost reduction is emphasized particularly in the sectors of IT and telecoms, mechanics, textiles, and the automobile industry.

According to the companies surveyed by AgileBuyer, procurement departments are assessed at 59% on savings achieved before their supplier relationship management. To achieve this goal, negotiation remains the favored lever by 59% of procurement departments, followed by the adjustment of specifications, review of needs, and management of demand, Total Cost of Ownership, and rationalization of the supplier panel.

#2 Place Responsible Procurement at the Heart of Strategy

This year again, companies consider the climate transition as a major challenge and an opportunity for transformation. That is why many plan to amplify their decarbonization efforts and be more demanding in their tender criteria to reduce their carbon footprint. Indeed, in 2024, 78% of procurement departments will have sustainable development or Corporate Social Responsibility (CSR) objectives, mainly due to ongoing regulation.

Furthermore, 73% of procurement departments have already committed to reducing their carbon footprint, and 72% have carried out their carbon assessment as part of CSRD/CSR. The most active fields in assessing the carbon footprint of suppliers include chemistry, metallurgy, technology, aerospace, and professional services.

As a reminder, purchases represent 70% of companies’ CO2 emissions through their suppliers. In this context, 85% of procurement departments contribute to the company’s CSR strategy by calculating their carbon footprint. To implement a decarbonization strategy, they aim to co-construct with their suppliers and support them in this transition.

#3 Accelerate the Adoption of AI

Only a quarter of the procurement departments surveyed currently use Artificial Intelligence (AI) in their work, despite its clear potential according to experts. Collaborative tools remain the most popular with procurement departments, followed by data analytics tools and those related to task automation. In practice, AI is mainly used for sourcing, forecasting, contracts, and reporting.

Although digital tools have a considerable impact on task automation and data analytics in the short to medium term, the adoption of AI remains relatively low, despite its potential to help procurement departments face current challenges, such as the scarcity of resources.

#4 Put an End to Monopolistic Practices

The growing problem of illicit agreements among suppliers is driving prices up for buyers and consumers and distorting competition in the market. The most affected sectors include real estate/construction, energy-environment, aerospace-defense, and automobile. To counter this, sanctions have already been pronounced, with significant fines imposed on companies for illicit agreements.

Moreover, the study reveals that 67% of procurement departments faced monopoly situations in 2023, which inevitably changes the dynamics between buyers and suppliers. Forecasts for 2024 indicate a continuation of these monopoly situations, especially in the pharmacy/health/cosmetics, tourism/transport, and aerospace/defense sectors. This trend underscores the need for companies to review their sourcing strategies, performance levers, and the skills of their buyers to meet these challenges.

#5 Decrease Dependence on Chinese Suppliers

This year, one of the major concerns of procurement departments remains the reduction of their dependence on China. This grows due to the risks of supply chain disruptions linked to the current geopolitical context. Although this approach is complex and may lead to a loss of competitiveness in certain sectors, half of the companies surveyed are considering reducing their dependence on China.

This tendency is particularly strong in the computer and telecoms sector, where 88% of companies express this will. The same is true for the health sector since more than 80% of the active ingredients of antibiotics come largely from China. Sectors favoring local purchases, such as construction, environment, and transport, are less concerned by this issue.

#6 Rebalancing Buyer-Supplier Relations

In 2024, 85% of purchasing departments will face imbalanced or even unfavorable relations. This imbalance is exacerbated by the strong position of suppliers in certain industries, or even situations of monopoly. This is mainly manifested by price increases, contractual breaches, and threats of supply disruption.

The economic context is not foreign to this power dynamic. While contract renegotiation is less frequent, with only 77% of purchasing departments engaging in it in 2024 compared to 87% in 2022, inflation has led to a revision of prices for a quarter of the companies. Inflation has also caused tensions in supplier relationships and a decrease in the quantities purchased.

#7 Better Managing International Purchases in a Climate Emergency Context

International purchases raise specific issues related to management as well as the environment. Mid-sized and large companies display notable maturity in managing these challenges. However, studies show that small and medium-sized companies  are still lagging behind on the topics of Corporate Social Responsibility in their international purchases due to resource and legislative constraints.

The case of the automotive industry is indicative of how decarbonization objectives are infiltrating international purchasing strategies. These companies are thus focusing on compliance with strict global emissions regulations, which vary from country to country, and are facing the financial and reputation risks associated with them.

#8 Deepening the Digitalization of Purchasing

Digital purchasing solutions specialized in external resources and service providers, such as Vendor Management Systems (VMS), are experiencing remarkable growth, with increasingly sophisticated functionalities. This digitalization represents a real opportunity for Purchasing functions in their development: not only do these solutions increase the automation of tasks, but they also provide a reliable legal framework and clear monitoring of all their ongoing purchases.

LittleBig Connection’s VMS Rise is geared in this direction as it has been designed to help purchasing departments meet the new challenges that 2024 presents. By integrating carbon emission evaluation tools, adapting to the legal and financial specificities of each country, and reinforcing governance risk management capabilities, Rise can offer companies the means to achieve operational excellence while honoring their commitment to sustainability. Thus, this solution offers companies the opportunity to get ahead on numerous pressing issues and remain competitive in 2024.