Improvements to existing procurement processes, procedures, and operations are as time-sensitive as ever. In the 2024 State of Procurement Data Report by Amazon Business, 95% of decision-makers surveyed acknowledge that there’s room for procurement optimization.
In 2023, our procurement predictions focused on five key areas:
- The growing emphasis on burnout prevention.
- A pivot towards simplifying complex data and process management.
- The urgency around IT and developer shortages.
- The effects of rising inflation.
- Growing investments in procurement technology.
We also predicted that the thriving companies will be the ones replacing short-term solutions and spending on more long-term strategic investments in technology, people, and processes.
Going into 2024, the focus will remain on growing tech spend; the spotlight will also shine on areas like talent development and the transformation of procurement into a more strategic player as an orchestrator of business value.
Here are our five trends and predictions driving procurement in 2024.
1. Greater investments in AI, automation, and analytics
It’s estimated that by 2031, the global procurement analytics market will reach $32.3 billion — and leaders are preparing for an increase in spending with many preparing to make larger Investments in technology like AI, automation, and data analytics.
In the Amazon Business report on procurement data, 98% of respondents report having plans for investments in analytics and insights tools, automation, and AI for their procurement operations in the next few years.
The primary drivers of this strategic move heavily lean on increasing efficiency, improving productivity, reducing errors, and generating greater cost savings. In analyzing each of these drivers for adopting process automation software and getting to the root of these results, it’s clear that procurement teams are in need of a solution that not only improves day-to-day operations but also future process demands as they arise — independent of IT and without compromising agility.
Pipefy’s survey of business and IT leaders found that for more than 50% of all respondents, the leading benefit of applying AI to existing process automation initiatives was better use of employee time. Drilling into the data for anticipated benefits, it’s clear that these larger investments in technology are necessary for more reliable access to data and faster, more advantageous decision-making.
In addition to efficiency, productivity, and competitive gains, the cost and speed of deploying no-code process automation software creates even more gains in terms of operational maintenance and development costs and time. The result is an acutely streamlined tech stack free of process or capability gaps, reduced risk, better use of employee time, and accelerated (and accurate) change management.
2. More time for value-adding work
Ninety-five percent of decision-makers say their organization has to outsource procurement activities to third parties due to the fact that pressing operational needs outpace readily available resources like talent, skills, or systems needed to adequately support and complete projects. Between this limited capacity and a need for agility, outsourced work primarily falls to strategic activities, transactional activities, and tech or support systems. This outsourced work not only leads to incurred costs, but it also leads to incurred risks.
When surveyed, business and IT leaders reported increased productivity and innovation, greater scalability, and labor/skills shortages among the factors influencing their decision to adopt no-code tools. A lack of agility or flexibility with existing tools was also listed.
Procurement teams also want less time spent on “low-value” work caused by inefficient and manual purchasing processes so they can focus on innovative high-level activities. According to the Amazon Business procurement report, 91% of respondents reported that their purchasing processes were currently set up in a way that restricts non-procurement staff and creates additional manual and repetitive work for procurement teams.
3. Developing future strategic advisors within procurement
A recent Gartner survey found that only 14% of procurement leaders feel confident in their team’s ability to meet their department’s future needs as certain competencies have grown in importance over more traditional procurement skills. Among the areas that gained importance over the last year are business acumen (69%) and technology and data skills (68%).
“Procurement leaders are generally confident in the current state of their talent and the ability to meet their near-term objectives,” says Fareen Mehrzai, senior director analyst in Gartner’s Supply Chain Practice. “However, our data shows that chief procurement officers (CPOs) are worried about the future and having sufficient talent to meet transformative goals based around technology, as well as the ability to serve as a strategic advisor to the business.”
In addition to refining their needs for future talent, leaders will also need to consider avenues for upskilling existing procurement talent and consider tools necessary for keeping up with market changes and forecasting potential disruptions.
4. Prioritizing collaboration
Going into 2024, connections between teams and processes will need some improvements. Only 39% of business leaders say they believe procurement is “highly coordinated” with groups like finance, compliance, legal, and technology.
Luckily for leaders, improving collaboration between teams is a major benefit of adopting no-code tools. According to Pipefy’s Workflow Survey, 33.1% of respondents said better collaboration between business and IT teams was among the anticipated benefits.
And with only 46% of procurement decision-makers in complete agreement that employees outside of procurement follow their policies and procedures, improving collaboration holds as a leading concern that needs to be addressed.
However, while teams want better collaboration and work coordination, what they prefer is a “happy medium” that democratizes purchasing, rather than adding additional layers of control teams must spend more time managing. This means a solution that:
- Maintains oversight of purchasing patterns overalls.
- Reduces the need to outsource.
- Frees up the time they want to focus on strategy.
5. Balancing rising costs, limitations, and complexity
Leaders understand and want to reap the benefits of automation technology, but some factors limit an organization’s ability to implement automation initiatives. Among the factors reported in Pipefy’s Workflow Survey, limitations include:
- Limited IT bandwidth (a greater concern for 45% of C-suite respondents).
- Too expensive (a greater concern for 25% of directors).
- Lengthy or difficult implementation (an equally concerning issue for both the C-suite and directors).
For 32% of directors with a more active role in day-to-day work and process management, tech stack complexity stood out as the leading limitation. According to Pipefy data, almost 50% of business leaders report existing tech stacks of 101-500 components.
While adding one more component to the tech stack may not seem like an issue, the reality is that a balancing act is necessary to increase operational efficiency by implementing a tool or technology that maximizes dollar expenditure without adding more complications to already complex processes.
Price increases are also a challenge that many teams will have to navigate in 2024. For the first time in 10 years, procurement operating costs have gone up. A vice president of purchasing at a global bank/credit union in the United States had this to say about the increases: “I’ve personally seen cases where suppliers may be asking for even a 40% or 50% increase in price, and that’s not budgeted. In some cases, we may have only budgeted a 10% increase. So the challenge for procurement increases. And that’s not going away.”
As procurement leaders plan for greater investments in 2024, they’re also paying attention to the impact of those investments to ensure they make the most of their spending (both financial and in use of resources like employee time and IT bandwidth).
Procurement as a key player and decision-maker in 2024
Insights and data from the procurement team can play a decisive role in strategy, from determining which suppliers to use to calibrating spend and assessing risks. Procurement can help the business identify and exploit new opportunities and avoid unnecessary risks and wasteful spending.
Equipped with the right tools, 2024 will mark a turning point for procurement teams stepping up as a source of strategic influence rather than a spend management center. For teams that have already begun their procurement optimization journey, the next year is chock-full of opportunities to refine their strategies and maximize digital and technological investments so that talent is not only supported but also prepared to meet changing function needs. For those taking their first steps, it’s a chance to fully assess the landscape and forge a path forward that’s focused on both short-term stability and long-term resilience.
As procurement teams step into their role as value orchestrators, the partnership between procurement and key business players will lead to faster, more reliable decisions made with more precision.
