In light of persistent high interest rates and the unpredictability brought on by global elections, cost savings have emerged as the primary concern for procurement executives in 2024. This marks a return to the top priority status for cost savings, which had not been at the forefront since 2021, as indicated by The Hackett Group’s January CPO Agenda survey.
Strategic Cost Management in the Spotlight
Amy Hillcox, senior research director at Hackett Group, highlighted that procurement teams are taking a proactive stance on cost reduction. They are planning their cost-saving strategies in advance to support their companies’ financial goals, rather than waiting for directives.
Operational Advancements to Drive Savings
The survey revealed that 75% of respondents have developed plans to enhance data and reporting, which is anticipated to contribute to cost reduction. Technologically advanced businesses, as per Hackett’s analysis, realize 96% greater savings compared to their less advanced counterparts, and also enjoy a 2.4 times higher return on investment.
In addition to data and reporting improvements, 56% of procurement teams are focusing on strategic sourcing, and 50% are working on bolstering supplier relationship management.
Adapting to Economic Shifts
The 2024 Key Issues research by Hackett, which draws from insights of over 375 executives across various sectors, reflects a shift in procurement strategies. Initially, as the pandemic’s effects waned, businesses were optimistic. However, the invasion of Ukraine by Russia and subsequent inflation spikes necessitated a shift in procurement strategies to manage these inflationary periods and supply market disruptions.
As inflation rates decelerate and supply stabilizes, procurement organizations are now cautiously observing the economic environment, which is fraught with uncertainties. Factors such as the anticipated U.S. recession, which has yet to be declared unlike in other major economies, and the over 50 national elections scheduled globally, contribute to this cautious stance due to their potential impact on economic policies and supply markets.
The focus on cost savings among procurement executives in 2024 reflects a proactive approach to navigate economic uncertainties and achieve financial goals. By implementing strategic cost management practices, investing in operational advancements, and adapting to shifts in the economic landscape, organizations can strengthen their procurement strategies and drive sustainable savings.
