The need to maintain supply chain continuity dominated sourcing and procurement teams’ agendas at the outset of 2023. Slowing global economic growth and increased geopolitical conflict at the outset of 2024, however, are readjusting CPOs’ priorities.
New research from the Hackett Group has found that cost containment has replaced supply chain continuity as the number one goal of CPOs in early 2024.
Hackett researchers note that “it is not surprising” that cost containment has retaken the top spot on the list of CPO priorities for 2024. They predict that enterprises looking to address this need will look to boost “process efficiency, process automation, working capital optimisation, and consolidation to shared services.”
Nevertheless, the challenges posed by the worsening economic landscape threaten to derail many businesses’ plans for growth.
Economic anxieties dominate the conversation, with business leaders increasingly worried about inflation, interest rates, and the risk of a global recession. Almost half of executives (46%) said they expect labour and skill shortages to disrupt business during the year ahead. Over 60% said they expect inflation to curtail their ability to invest in new business. Over a third (38%) of executives surveyed expected to slow their spending or delay projects if the economic outlook deteriorates in the coming months.
Procurement technology investment will remain strong
However, the Hackett researchers note that “one area that won’t be in the crosshairs for spending cuts is technology.”
As predicted by several other reports, procurement teams this year are expecting to have to do more with less. The Hackett survey found that procurement teams expect their workloads to increase by about 8% this year. However, their budgets are only expected to rise by about 1.6%. To make up the difference, spending on technology is expected to increase by about 4.6% across the board.
Emerging technologies like generative artificial intelligence (AI) and machine learning are still finding their applications in the industry. Nonetheless, their potential to automate repetitive tasks in the face of skill shortages is attracting significant interest.
The Hackett Group’s data suggests that business functions are in the early stages of exploring generative AI. However, leaders said they expect mid-level enterprise funding for generative AI to increase in 2024. A “small but notable” proportion of CPOs ( 21%) said that business transformation through generative AI would be a high or critical priority for 2024.
