It’s a time of radical change for the procurement sector. Not only is procurement itself transforming to become a more strategic part of the overall business, but industry trends are changing the shape of the sector from the outside as well.
A new report from KPMG breaks down the “numerous forces” that are conspiring to change the “future trajectory of procurement.” WIth procurement teams facing uncertainty on multiple fronts, the report argues that procurement teams should “brace themselves for a myriad of potential scenarios.”
Primarily, the trends shaping the future of the procurement sector, according to KPMG include: the heightened risk of supply disruption, the impact of technologies like predictive analytics and generative artificial intelligence (AI), and increasing ESG and regulatory demands.
Disruption is the new normal
KPMG’s report, which surveyed 400 senior procurement professionals from a range of industries, found that concern over the increased likelihood of supply chain disruption is becoming an increasingly common fear. Of the executives surveyed, 77 % told KPMG that risk of supply disruption is a critical external challenge.
Geopolitical tensions are mounting in multiple regions. As a result, a retreat from globalisation, and conflict in certain parts of the world are impacting food markets and energy prices and deterring trade routes.
According to KPMG’s report, these disruptive pressures are putting a strain on supply chain resilience. As a result, many organisations are being forced to rethink their sourcing strategies as they try to reduce the risk of shortages and rising prices. Strategies like nearshoring and China-plus-one are expected to significantly reshape supply chains in Asia and beyond over the coming years.
AI, analytics, and digitised supply chains
According to the executives surveyed, predictive analytics and generative AI are the two technologies most likely to have a major impact on procurement functions over next year and a half. Robotic process automation was a distant third.
However, despite widespread consensus that AI and analytics are essential to the next phase of procurement’s evolution, many executives also cited limited data and insights as their top internal challenge. KPMG’s report argues that this indicates an urgent need to invest in this area.
Sustainability, ESG, and tightening regulations
Increasingly, procurement is emerging as one of the key areas for sustainability reform as the conversation shifts towards Scope 3 emissions. Companies in Europe, in particular, are facing stringent regulatory and reporting requirements, with just under two-thirds of KPMG’s respondents arguing that increased regulatory and ESG demands will heavily influence strategic sourcing in the next 3–5 years.
According to KPMG, businesses must demonstrate that their manufacturing and supply chains are not only low-carbon and environmentally friendly, but also provide adequate pay and conditions for workers.
