Navigating Turbulent Times in Procurement

How procurement professionals are addressing the challenges of 2024

Research by RS and CIPS reveals a number of significant challenges facing procurement professionals, ranging from economic and political conditions to reducing downtime and counterfeit products. But there are ways in which these can be mitigated.

The conditions of the last few years have conspired to create almost the perfect storm for procurement and supply chain professionals, who have had to contend with rampant inflation, supply shortages and a volatile global and political environment.???

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37% identify inflation and higher costs as a major challenge for the next 12 months, while 20% believe global political uncertainty will be a significant issue.

Source: 2024 Indirect Procurement Report, produced by RS in conjunction with the Chartered Institute of Procurement & Supply (CIPS)

These are all still live issues; according to the 2024 Indirect Procurement Report, produced by RS in conjunction with the Chartered Institute of Procurement & Supply (CIPS). For procurement professionals responsible for supplies supporting maintenance, repair & operations (MRO), some 37% identify inflation and higher costs as a major challenge for the next 12 months, while 20% believe global political uncertainty will be a significant issue. Supply chain disruption is a concern for 30%, while 27% believe managing suppliers’ sustainability practices will be a challenge in the next year.???

Michael Lewis is Professor of Operations and Supply at the University of Bath School of Management. He says the ‘volatility’ in VUCA (volatility, uncertainty, complexity and ambiguity) has “hit a level that few senior procurement professionals have seen in their career”. “VUCA thinking can help leaders and organisations emphasise the need for agility, flexibility and adaptability in decision-making processes, strategic planning and leadership development,” he adds.??

His specific advice is for procurement professionals to think as much about what they can influence as what they control. “It’s about understanding how much authority they have directly in the scope of what they procure and indirectly via who they interact with in the firm,” he says. “How do they work with product or service development or with their technology partners? The extent of their influence is often much bigger than their actual span of control.”?

Yet it’s not just the wider economic and political situation that is keeping procurement professionals awake at night. The biggest challenge identified by the survey was that of talent acquisition and retention, with 39% believing this will prove a challenge over the next year.??

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"There’s already software that will find you the best deal and place orders for you, and that might help free up some of procurement’s time from operational activities and drive focus on to where it can add value, such as sustainable and ethical activity."

- Helen Alder (FCIPS) , Head of Knowledge & Learning Development at CIPS

“Talent is a very big issue across the board,” says Helen Alder, Head of Knowledge & Learning Development at CIPS. “But there’s an opportunity here in terms of productivity, with technology able to take away some tasks that do not add value. There’s already software that will find you the best deal and place orders for you, and that might help free up some of procurement’s time from operational activities and drive focus on to where it can add value, such as sustainable and ethical activity.”?

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MRO concerns?

In the indirect procurement space, a major challenge is improving asset performance, which 32% of procurement professionals identify as a business pressure. This is also reflected in the 28% who point to maintaining ageing assets as a daily challenge; potentially the result of a lack of investment during and following the pandemic.??

Working closely together with engineers can help support their planned maintenance efforts, as well as helping with preventative maintenance, which signals failure of parts and systems before they break. “That way you can start to put operational plans into procurement plans,” says Kate Davies , Global Head of Commercial Services at RS Group. “Planned and preventative maintenance have a huge influence on what needs to be purchased and when.”?

Contract compliance is also a challenge, with 30% putting this forward as an issue. This is likely linked to ageing assets and downtime. Davies says it’s important here to understand the operational pressures engineers and production teams face, and to make it as easy to buy through authorised channels as it is to find alternatives through other, non-agreed routes.??

“This often involves highly mobile individuals who need to be able to order anywhere and at any time, to deliver on whatever project they’re working on,” she says. “You’ve got to take that into consideration when thinking about your organisation’s procure-to-pay processes.”???

A further challenge for procurement functions is that of counterfeit products. More than four in ten procurement professionals (42%) believe this is an issue for indirect materials such as MRO purchases. While this leaves 58% who do not consider it a problem, it’s possible some of those are blissfully unaware of the issue, rather than there not being one in the first place.??

This is a growing issue, says Lewis, citing the recent example of jet-engine manufacturer CFM International, which acknowledged that thousands of engine components may have been sold with forged paperwork by a British distributor.??

“This story is one that should be told much more widely inside the procurement space because that’s one of those industries with incredible inspection, management, monitoring and measuring regimes,” he says.??

The key here, says Davies, is to undertake thorough due diligence on suppliers before making any purchase. “The onus is on procurement teams to make sure that compliance checks have been done,” she warns. “If that’s not possible, perhaps in a company that’s got less mature processes, you need to collaborate very closely with your compliance colleagues and establish as many automated processes for quality assurance as you can.”??

Making the case?

Responding to the challenges facing procurement requires strong soft skills, with professionals required to influence, advise and cajole others in the business. But this in itself is also a challenge; a third of respondents (33%) admit managing change with stakeholders is either “quite” or “very” difficult. Common problems faced by procurement here are a general resistance to change, concern around costs, and a lack of time or resources on the parts of both procurement and the stakeholders, which can hinder initiatives.?

The days of the analytical type of procurement person stuck at their desk and looking at prices or spreadsheets all day are increasingly rare. Being able to talk to and negotiate with people, whether they’re internal or external, is essential.

- Helen Alder, Head of Knowledge & Learning Development at CIPS

"The whole relationship management piece is becoming centre stage for procurement,” says Alder. “The days of the analytical type of procurement person stuck at their desk and looking at prices or spreadsheets all day are increasingly rare. Being able to talk to and negotiate with people, whether they’re internal or external, is essential.”?

It’s important that relationships are developed over time, too, warns Davies. “Today’s procurement manager cannot successfully deliver performance-related outcomes if they are not managing stakeholders effectively,” she says. “But it’s a continuous practice rather than just reacting to what comes through the door. We see much bigger benefits where we’re engaging on a continuous basis. It opens up a lot more opportunities for the business.”?

For more insight on the challenges facing procurement professionals, download the 2024 RS & CIPS Indirect Procurement Report here.