Procurement Priorities for 2025 and Beyond
The manufacturing industry is evolving rapidly, leaving Chief Procurement Officers (CPOs) grappling with challenges that could make or break their organizations. Amid economic uncertainties and geopolitical shifts, procurement leaders face mounting pressure to drive sustained growth.
The most recent Hackett Group Report highlights key priorities reshaping procurement in 2025, including technology adoption, the rise of Generative AI, and managing emerging risks. However, the top three procurement challenges featured in the Hackett Group report demand immediate attention: slashing spending costs, securing supply chain resilience, and modernizing outdated operating models.
Let’s dive into these critical issues and explore actionable strategies that help CPOs navigate the path forward.
Generating More Value: The Relentless Pursuit of Spend Cost Reduction
For the second year running, reducing supplier spend remains a top priority for procurement organizations in this year’s Hackett Group Report. This heightened focus reflects the ongoing uncertain economic outlook, making every penny count.
However, simply cutting costs isn’t a sustainable strategy – CPOs must move beyond tactical price reductions and embrace strategic cost management.
Solutions:
- Strategic Sourcing: Move beyond transactional purchasing and embrace strategic sourcing. This involves analyzing spend data, identifying for consolidation, and negotiating better contracts with key suppliers.
- Demand Management: Work with internal stakeholders to understand their needs and identify opportunities to reduce consumption or find alternative solutions. This could include optimizing specifications, reducing waste, or exploring product substitution.
- Leveraging Technology: Implement procurement software and analytics tools to gain better visibility into spending patterns, identify areas of inefficiency, and automate processes. This can free up procurement professionals to focus on higher-value activities.
- Supplier Collaboration: Collaborate with suppliers to explore joint cost-savings initiatives. This could involve process improvements, shared technology investments, or volume discounts.
Shielding Your Supply Chain: Ensuring Continuity in a Volatile World
Supply chain disruptions have become the new normal. Ongoing geopolitical instability and potential trade shifts, especially with the changing US administration, make supply continuity a critical concern. Maintaining revenue and profitability depends on a resilient and adaptable supply chain.
This is also reflected in a Maersk and Reuters Events report, which found that 68% of European businesses prioritize supply chain visibility and monitoring solutions.
The Challenge: How do you build a supply chain that can withstand unexpected shocks and ensure the smooth flow of materials?
Solutions:
- Diversification of Suppliers: Avoid over-reliance on a single supplier. Identify and onboard alternative suppliers to reduce the impact of potential disruptions.
- Supply Chain Visibility: Invest in technology that provides real-time visibility into the supply chain. This allows you to track inventory levels, monitor supplier performance, and identify potential bottlenecks.
- Risk Management: Develop a comprehensive risk management plan identifying potential disruptions and outlining mitigation strategies. This should include contingency plans for key suppliers and critical materials.
- Collaboration and Communication: Maintain open communication with suppliers and key stakeholders. This allows you to anticipate potential problems and respond quickly to emerging challenges.
Evolving to Thrive: Transforming Your Operating Model for the Future
The need to transform operating models (processes, technology, and people) has significantly increased. Procurement must adapt because of rising business expectations, the need for simplified processes, and the potential impact of generative AI.
PwC’s 2024 Digital Procurement Survey highlights the importance of this shift. Despite cost pressures that might limit investment in digital solutions, digital transformation remains a top strategic priority. This indicates that procurement departments expect tangible results from these transformations, particularly in reporting, regulatory monitoring, and operational efficiency gains.
The Challenge: How do you modernize your procurement operations to meet evolving business needs and capitalize on emerging technologies?
Solutions:
- Process Optimization: Streamline procurement processes to eliminate redundancies and improve efficiency. This may involve automating tasks, implementing lean principles, or redesigning workflows.
- Technology Adoption: Embrace innovative technologies such as cloud computing, AI, and machine learning to automate tasks, improve decision-making, and enhance collaboration.
- Talent Development: Invest in training and development to equip procurement professionals with the skills and knowledge they need to succeed in today’s procurement climate. This includes skills in data analytics, negotiation, and stakeholder management.
- Agile Procurement: Adopt an agile approach to procurement, allowing greater flexibility and responsiveness to changing business needs.
The Path Forward
Each of these three challenges – cost reduction, supply continuity, and operating model transformation – are interconnected. Addressing them effectively requires a holistic approach, leveraging data, technology, and strategic partnerships. By proactively tackling these issues, CPOs can position their organizations for success in today’s dynamic manufacturing landscape.
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