Executive summary

The procurement function operates in an increasingly complex environment. No sooner did the effects of the global pandemic begin to recede than the emergence of armed conflict further disrupted supply chains and sent energy and transport costs soaring. As procurement teams helped their businesses adapt to these shocks, commodity price inflation reared its head again after many years of relative price stability. This led executives to rethink some long-standing supply-chain relationships and assumptions. Procurement leaders are having to reckon with an environment of “permanent crisis”.

Key findings:

• Procurement reporting is pivoting towards chief operating officers (COOs): This year, 44% of procurement teams are reporting to the COO, compared with 26% in 2023 and 34% in 2022. By contrast, only 23% now report to the CFO, the typical reporting line. This shift in relationships opens avenues for procurement to align more closely with the strategic goals of the organisation—by involving themselves in discussions on themes like innovation, rather than solely cost containment, for example.

• The impact of inflation continues to make cost management a procurement priority: C-suite executives view monetary uncertainty, including inflation, as the top risk over the next 12-18 months, for both procurement and the business as a whole. Around half (49%) cite it as their top priority compared with other procurement risks, a considerable jump from only 20% last year. Despite easing inflationary pressures, costs remain higher than in previous years, thus they remain a key executive focus.

• Legal and regulatory non-compliance across business operations—a key external risk cited by 70% in 2024—is nudging procurement teams to align its priorities with business’ strategic goals: Stakeholders have also become more socially and environmentally conscious, encouraging procurement teams to incorporate cleaner, more ethical practices within their KPIs. These ultimately contribute to procurement’s expanding remit, particularly around business’s ESG goals.

• Despite making strides in how they interact with stakeholders, procurement teams have considerable room to improve their collaboration skills: While 75% of executives agree that procurement collaborates effectively with the business on issues of strategic importance (up from 53% last year), only a fraction of these (18%) have high confidence in procurement doing so, and only 14% have high confidence in the application of procurement insights across the organisation. Procurement has yet to gain the full trust of stakeholders in this area.

• Perceptions of procurement’s ability to manage technology and spend reflect poorly on the function: In 2024, only 32% of executives are highly confident in procurement’s ability to automate procurement and even fewer (16%) are highly confident in procurement’s ability to manage spend, compared with higher levels of confidence for other KPIs, such as strategic sourcing (39%) and category management (55%). Business stakeholders fixating on return on investment for technologies and skimping on innovation training are leading to the rejection of new capabilities and undermining confidence in procurement’s abilities to manage technology and influence spending.

• Procurement teams are seeking a balance between centralised and decentralised operating models: Asked about procurement operating model changes in the next 12-18 months, companies’ intentions are roughly evenly split between two directions. One is increasing the role of centres of excellence (CoEs), which support best practices in strategic sourcing, knowledge management, performance tracking and other areas. The other is adoption of a centre-led model, in which the central procurement team makes decisions in key areas while leaving business units to decide on unit-specific procurement matters. CoEs complement and support a centre-led approach.

• Regulation is helping to draw organisations’ attention to how procurement can drive sustainability: Meeting sustainability and ESG objectives is ranked second on executives’ list of procurement priorities in both the near and longer terms, an increase in importance from the previous year’s survey. The respondents make clear that regulatory compliance requirements are helping to focus procurement’s efforts on these objectives. This is also evident from growing confidence in procurement’s ability to meet the organisation’s ESG goals, with 68% expressing a positive view of this compared to only 49% in the previous year’s survey.

• Businesses look to reduce supply chain risk in the long term by prioritising supplier diversification—a priority cited by 40% of surveyed executives. In the shorter term, meanwhile, companies are putting stronger emphasis on supply-base consolidation (26% in 2024 v. 10% in 2023) given the push to build trusted relationships to overcome supply-chain challenges.

• Procurement’s success in digitalisation increasingly rests on its ability to adopt and master emerging technologies: Accelerating digitalisation is the highest procurement priority for the majority of respondent organisations over the next 12-18 months, and AI adoption is a centrepiece of these efforts, cited by 44% as a top technology priority. The respondents make clear that AI should play a key role in improving procurement process automation.