As 2023 begins to wind down and 2024 comes into focus, most procurement teams expect their budgets to rise next year. Many senior leaders are evaluating new tools and technologies that support a more strategic approach to business buying and an optimized procurement process. For example, nearly all (98%) procurement leaders want to invest in analytics and insight tools, automation, and artificial intelligence (AI) over the next few years.
These and other findings were recently revealed in Amazon Business’ 2024 State of Procurement Report, which is based on input from more than 3,100 global procurement decision-makers and senior leaders. Focused on the trends shaping the future of business buying, the report found that more than half (53%) of respondents are anticipating budget increases in 2024. This is good news after nearly a full year of cutbacks, rising business costs, increasing interest rates and high inflation.
“Following a year of focusing on reducing costs, procurement leaders are now planning to use the funds they saved to invest in approaches to optimize their procurement processes and allow them to operate more strategically, with the efficiency and complexity of procurement listed as the top challenge they’re currently facing,” Amazon said in a press release.
95% Acknowledge the Need for Procurement Optimization
As procurement expands within companies and organizations, leaders are seeking new ways to optimize their processes and allocate more time and resources to addressing strategic challenges. Some of the key findings from the report include:
- 95% of decision-makers acknowledge that there’s room for procurement optimization.
- 85% of respondents say the difficulty of sourcing suppliers that follow sustainable practices prevents their company from setting or achieving strategic sustainability goals for procurement.
- 81% of respondents have mandates to buy from certified sellers, which might include sustainable, local or disadvantaged group-owned businesses.
- 80% of respondents would consider integrating AI into their procurement processes within the next two years.
- 44% of respondents listed efficiency and complexity as a procurement challenge
- 95% of decision-makers say their organization outsources procurement activities to third parties.
Dealing with Complex Systems and Processes
Among various industries, procurement professionals see certain challenges as more pressing than others. However, respondents across sectors unanimously agree that complex systems and processes are the top challenges facing their departments today. These challenges only compound as decision-makers plan for the future.
“By trade, procurement professionals are forward-thinking, often strategizing months (if not years) in advance to anticipate their organizations’ future buying needs and evolving network of suppliers,” Amazon Business reports. They’re also contributing to higher-level, organizational goals. This is likely because many of the top risks could disrupt procurement operations with little warning, thus underscoring the need for preparedness.
“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,” one VP of purchasing wrote-in on the survey.
“Procurement departments are making plans to guard against these challenges and risks. Over the next year, it’s no surprise organizations want to prioritize initiatives that aim to increase efficiency and reduce costs—including talent acquisition and retention,” Amazon Business said in the report.
“By focusing on these core priorities, businesses can not only fortify their procurement operations but also improve overall organizational resilience, ensuring they remain agile and competitive.”