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    Blog

    The Procurement Economy in 2019: The United States

    Procure to Pay

    As we start 2019, it’s critical to understand how current events, changes in governmental policy and the general economic climate may affect the global procurement market and supply chain. In this blog series, JAGGAER will dive into the 2019 economic outlook both in the U.S. and the European Union, and examine how procurement organizations can best prepare in the new year.

    While the current economic climate is healthy, tumultuous stock prices and changes to tax and trade policy paint a different picture. News headlines, along with a lack of clarity into future interest rate changes, suggest that the United States is heading into an unstable market. Here, we outline some of the biggest stories and what they mean for American industries and procurement teams.

    Tariffs

    President Trump initiated numerous changes to tariffs, levying increased tariffs against Canada and Mexico, China, and the European Union. These countries provide about 53 percent of imports to the United States, so these new tariffs have potentially massive implications.

    While the impact of these tariffs is not fully clear yet, they are likely to slow economic growth, decreasing companies’ efficiency and profits. Production bottlenecks may become more common and supplies more scarce, and companies may begin to shift toward regions with fewer tariffs and more growth opportunity. With slowing growth, the procurement market may see many organizations decrease spending budgets and change focus to cost-saving measures.

    Global Trade

    With uncertainty over the pending exit of the United Kingdom from the European Union, European supply chains are in limbo. Should Brexit happen in 2019, economists expect a ripple effect across the world. Supply chain, logistics, and distribution will all be severely impacted, and companies that do not act to mitigate risks will see rising costs in the UK.

    Changes to NAFTA may see similar disruptions in North American supply chains. With the new United States-Mexico-Canada agreement requiring more raw materials in American manufacturing to originate in North America, industries like automobiles, steel, and aluminum may see changing landscapes.

    The US-China trade dispute is increasingly pushing manufacturers to rethink supply chains, with many looking to move production to other countries. China is the world’s largest supplier of manufactured goods, and a move to diversify could change the larger manufacturing landscape. Companies with higher flexibility and effective risk management processes will better prepared should the trade dispute continue through the year.

    Security & Data

    Several recent headlines, led by alleged Russian involvement in the 2016 Presidential election, have sparked concerns about cybersecurity. With the growing digitization of supply chain and the increased commoditization of big data, organizations are looking for secure, reliable solutions to protect their information. By the end of 2019, cybersecurity will have surpassed physical security as a top concern for more than half of manufacturers. As more and more organizations transition to digital supply chains, cybersecurity must be a top investment priority.

    Shifts in policies may impact manufacturers’ costs, customer/supplier relationships, and distribution strategies. The best way for a procurement team to mitigate the negative impacts of ongoing market shifts is to have a reliable, secure solution that they can depend on. Risk management and workflow streamlining software will allow procurement teams the agility they need to adapt in 2019. Software-as-a-Service solutions that receive consistent security updates and provide integrated solution suites will provide the most secure platform, and enable organizations to minimize cost and risk while driving maximum value.

    Additional Resources

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