Procurement leaders are facing a period of fundamental change. The latest EY Quarterly Supply Chain Update (Q1 2025) highlights a mix of economic shifts, trade realignments, and structural supply chain adaptations that are reshaping procurement strategy at a global level. While protectionist trade policies continue to dominate headlines, the bigger picture is more complex. Businesses are responding by rethinking sourcing models, redesigning inventory strategies, and investing in resilience amid shifting global supply chain dynamics.
As organizations enter 2025, procurement is no longer just about managing costs—it is about ensuring business continuity, securing supply, and adapting to structural shifts that will define competitiveness for years to come.
Trade Fragmentation Demands a Smarter Sourcing Strategy
Global supply chains are becoming increasingly regionalized, with tariffs, trade barriers, and geopolitical shifts accelerating the move toward more localized supply networks. The U.S. is not alone in implementing new trade restrictions—Canada, Mexico, and the European Union are also reassessing trade agreements, introducing countermeasures, and reinforcing regional partnerships to protect domestic industries.
EY’s report points to a growing realignment of supply chains, particularly in key industries like manufacturing, technology, and consumer goods. Many companies are reducing their reliance on single-source suppliers and expanding their footprint in alternative production hubs. India, Vietnam, and parts of Southeast Asia are attracting investment, while nearshoring in North America and Europe is gaining momentum as companies seek to mitigate trade risks and shorten lead times.
Procurement teams must take a data-driven approach to supplier diversification. The strategy cannot simply be about moving away from China or responding to short-term tariff pressures. Instead, it requires a holistic evaluation of supplier capabilities, risk exposure, and long-term competitiveness across multiple regions. Successful organizations are not just shifting sourcing locations but also developing supplier resilience programs that improve visibility, agility, and contingency planning for future trade disruptions.
Inventory Strategies Are Evolving—But at a Cost
The past decade saw just-in-time (JIT) inventory management dominate procurement strategies, driven by cost efficiencies and lean supply chain principles. However, increasing volatility—from trade disputes to extreme weather events—has exposed the risks of over-reliance on minimal inventory levels. EY’s report highlights a 9% increase in 3PL warehouse leasing activity over the past year, signaling a shift toward more adaptable inventory management approaches.
Companies are now taking a more balanced approach between JIT and just-in-case (JIC) inventory models, strategically stockpiling critical materials while maintaining flexibility through outsourced warehousing and diversified supplier networks. In some cases, businesses are investing in regional distribution hubs to reduce reliance on long-haul global shipping routes, minimizing disruptions linked to port congestion, labor disputes, and transportation bottlenecks.
For procurement leaders, the challenge is managing inventory resilience without driving up working capital costs. Organizations are re-evaluating safety stock thresholds, securing multi-source agreements for critical inputs, and leveraging real-time demand forecasting tools to optimize stock levels dynamically rather than making reactive bulk purchases.
Rising Logistics Costs Require Smarter Supplier Agreements
Transportation costs are becoming a critical factor in procurement decisions, as freight rates fluctuate and carrier contract strategies evolve. EY’s report notes that spot trucking rates are increasing, suggesting a potential recovery from a prolonged freight downturn. With contract rates also forecasted to rise, procurement teams must anticipate cost increases in global shipping, domestic freight, and intermodal transport.
The challenge for procurement leaders is twofold. First, carrier negotiations must account for market volatility, ensuring that logistics costs remain predictable even as supply chain conditions shift. Second, organizations must increase collaboration between procurement and logistics teams, integrating transportation planning into supplier agreements to minimize cost spikes and improve end-to-end visibility.
Leading companies are taking a total cost of ownership (TCO) approach, viewing procurement decisions beyond just supplier pricing to factor in logistics costs, landed cost calculations, and sustainability trade-offs. Those that fail to integrate transportation strategies into procurement will face cost unpredictability, delayed shipments, and potential supply shortages.
Procurement Leaders Must Lead the Resilience Agenda
The EY Quarterly Supply Chain Update (Q1 2025) makes it clear: procurement is now at the center of global business resilience. Trade uncertainty, supply chain fragmentation, and rising costs are not temporary disruptions—they are indicators of a long-term structural shift in how companies source, store, and transport goods.
Procurement teams that proactively redesign their sourcing models, integrate supply chain intelligence, and optimize logistics agreements will be in a stronger position to weather future disruptions and secure long-term competitive advantage. Those that remain reactive risk higher costs, weaker supplier relationships, and greater exposure to geopolitical and economic instability.
The coming months will be defining for procurement strategy worldwide. Organizations that rethink their supply chain agility, supplier resilience, and cost structures now will lead in the next phase of global trade realignment. Those that don’t may find themselves struggling to adapt in an increasingly fragmented, high-risk environment.
Read the full EY Quarterly Supply Chain Update (Q1 2025) here.
