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Inflation and Supply Chain Disruption are Procurement’s Biggest Headaches

Nov. 16, 2022
New report reveals the major worries pressuring procurement as we close out 2022 and move into the new year.

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When Procurious and Ivalua set out to learn more about global procurement organizations’ biggest concerns as 2022 closes out and the new year emerges, the responses they got weren’t that surprising. Most are concerned about inflation and the rising costs of business, their companies’ lack of digital investment, and labor-related issues like the Great Resignation.

The organizations reported their findings in Procurement Under Pressure, a report based on input from 170 global procurement and supply chain professionals. For these respondents, inflation now tops supply chain disruptions and shortages as the number-one pressure facing procurement teams. This is a significant shift after two-and-a-half consecutive years of worrying mostly about supply chain disruptions and shortages.

“There’s never been a more pressure-filled time to be in procurement or supply management,” the companies state in their report, which details key findings including:

  • 81% of procurement teams feel pressured by executive teams to more quickly and effectively respond to challenges—inflation, disruptions, and shortages, the Great Resignation—but few are being “equipped to thrive.”
  • About 21% of procurement organizations have seen team headcounts increase and just 14% have received budget increases that would help them counter today’s market challenges.
  • 32% of procurement teams admit to cutting corners with their sourcing criteria and suppliers to secure supply. 
  • 25% of respondents believe that the global business community is in a recession; 17% believe it will enter one during the fourth quarter of 2022; and another 23% see a recession coming around the corner during the first quarter of 2023.
  • 24% of executive teams have fast-tracked investments in new technology for procurement.
  • 52% of respondents are prioritizing business continuity and operational resilience over other objectives, with 46% focusing on customer satisfaction, service, and experience.

The survey also found that nearly half of respondents (49%) believe global supply chains won’t fully recover to pre-COVID operational norms until 2024 or beyond. And, 39% of respondents believe that 2023 is the year when supply chains bounce back (9% believe they’ll never bounce back).

“Either way, it’s clear that the new normal of supply chain disruptions, stockouts, inflation, and the perennial threat of a new Covid variant and its potential impact will persist,” the companies point out in their report.

Inflation and Disruptions Top the List of Headaches

According to Procurious and Ivalua, the two top pressures reported this year—inflation and disruptions/shortages—continue to impact many industries and their supply chains. “These pressures, along with ongoing capacity constraints, shutdowns, and war,” they say, “are driving fears of a new recession, which many believe is already here.”

In the survey, 87% and 85% of respondents report that inflation and supply chain disruptions and shortages, respectively, are significant-to-severe risks to procurement.

“As the cost of commodities and finished products increases, and the security of supply and their reliable and timely delivery remain compromised,” the companies noted, “organizations face greater financial and operational uncertainty, which jeopardizes their ability to achieve profit targets.”

Of course, procurement and supply chain professionals aren’t just sitting around waiting for the situation to improve. Many of them are taking proactive steps now to tackle their current challenges and prepare for the future. According to the survey, 34% of respondents have enabled cross-enterprise collaborative measures, for example, and 32% say they’ve adjusted their procurement key performance indicators (KPIs).

Look Out for Future Headwinds

Furthermore, in response to today’s challenges, procurement departments continue to actively collaborate with suppliers (79% of firms say they’re doing this) and increase their focus on risk management (64%). 

Calling a digitalized approach to procurement “more important than ever,” Ivalua’s Alex Saric says technology can go a long way in helping supply chain teams cope with the ongoing pressure of disruptions, stockouts, inflation, and widespread political instability without negatively impacting other objectives.

In a press release, he said "Procurement teams need greater investment in people, processes, and technologies to uphold sourcing standards, maintain ESG commitments and values, navigate today's stormy markets, and insulate their organizations against future headwinds.”

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About the Author

Bridget McCrea | Contributing Writer | Supply Chain Connect

Bridget McCrea is a freelance writer who covers business and technology for various publications.