Summer Reading: Eleven Critical Stats on Procurement and Sourcing in 2024

Navigating the complexities of today’s ever-changing, globalized markets continues to pressure “traditional” supply chain practices.

Midway through 2024, we still face economic and geopolitical uncertainty. As-yet unchecked inflation, rising expenses, and ongoing supply scarcity have made it clear that most enterprises need more than just an evolution of their supply chain practices – they need to adapt and transform to keep up with modern business demands. 

The good news? Technology – in the form of AI-enabled workflows and new digitization trends is coming to make your supply chain programs markedly more efficient – all while driving better supplier and consumer relationships. 

And as times and supplier strategies change, procurement leaders need to keep up. We’re here to help. We’ve combed through leading ERP modernization, supply chain, and procurement articles to pull together the 11 most relevant stats – and why they matter.  

If you’re trying to mature and modernize your sourcing and supplier strategies, here’s what you need to know. 

• 40% of Companies Report Increased Sourcing Costs in the Past Year

Still rebounding from the pandemic, the economic landscape has a direct impact on procurement activities, with many companies experiencing rising costs. According to the Hackett Group, 40% of companies have reported increased sourcing costs over the past year.

Driving this trend are factors including inflation, supply chain disruptions, and increased demand for raw materials. 

This rise in costs poses challenges for procurement professionals, who must balance cost management with the need to maintain quality and supplier relationships. To counteract this, we recommend using omnichannel communications and AI to predict where sourcing costs are headed. From here, workflows (like the ones in modern platform offerings such as ServiceNow) can be developed or adjusted as necessary to improve efficiency.

• Supporting Procurement is a Lift - Many Companies Dedicate 15% of Their Total Budget Supporting Sourcing and Procurement Programs

Procurement activities represent a significant portion of a company’s overall budget. According to JPMorgan, businesses allocate an average of 15% of their total budget to procurement, reflecting the strategic importance of sourcing and supplier management.

This substantial investment underscores the need for effective procurement strategies that optimize costs while ensuring the quality and reliability of materials. 

By providing companies and teams with a single lens of their end-to-end procurement experience, ultimately, requests across disparate systems can be consolidated, investments can be optimized, and both employees and suppliers can enjoy a different, more modern layer of engagement.

• The Average Procurement Professional Spends 2 Hours and 45 Minutes a Day on Sourcing Activities

In the dynamic world of procurement, sourcing activities are a crucial component of a professional's daily responsibilities. Recent data by the General Office of New York reveals that procurement professionals dedicate an average of 2 hours and 45 minutes each day to sourcing tasks.

This time investment, translating to nearly 14 hours per week, underscores the significant role that sourcing plays in the procurement process. It highlights the intensive nature of these activities, which are essential for securing quality suppliers and negotiating favorable terms.

• Onboarding a New Supplier Takes an Average of 30 Days

Efficient onboarding processes are crucial for integrating new suppliers into a company’s supply chain. On average, it takes about 30 days to onboard a new supplier, from initial evaluation to final approval.

This period includes due diligence, contract negotiations, and system integration. Streamlining this process is vital for minimizing disruptions and ensuring a smooth transition, allowing companies to quickly leverage new supplier relationships.

• 87% of Companies Use E-Procurement Tools for Supplier Sourcing

The adoption of digital tools in procurement has become nearly universal. According to recent statistics, 87% of companies now utilize eProcurement tools to enhance their supplier sourcing processes.

eProcurement platforms offer a range of benefits, from increased efficiency and transparency to better supplier relationship management. 

This widespread use of technology reflects a broader trend toward digital transformation in the procurement sector, facilitating more streamlined and effective sourcing operations.

• Supplier Diversity Programs Have Been Implemented by 62% of Organizations

The importance of diversity in supplier sourcing is gaining recognition. Recent Coupa research shows that 62% of organizations have implemented supplier diversity programs, aiming to include businesses owned by underrepresented groups in their supply chain.

These programs not only promote inclusivity but also foster innovation and resilience by tapping into a wider pool of suppliers. 

The growing adoption of such initiatives reflects a commitment to corporate social responsibility and the long-term benefits of a diverse supply base.

• 60% of Businesses Report Improved Collaboration with Predictive AI

The integration of predictive AI tools has also led to improved collaboration across different departments by 60% of businesses as reported by Hype Innovation. Enhanced communication and data sharing are critical for cohesive and efficient procurement operations.

By breaking down silos and fostering a culture of collaboration, predictive AI tools enable teams to work together more effectively, ensuring that procurement strategies are aligned with overall business objectives. This collaborative approach enhances decision-making and drives better outcomes for the organization.

• 85% of Companies Using Predictive AI See a 20% Increase in Forecast Accuracy

A recent survey reveals that 85% of companies implementing predictive AI in their procurement processes have experienced a 20% increase in forecast accuracy, as found by The AI Journal. This improvement underscores the significant impact of AI on enhancing the precision of procurement strategies.

With better forecast accuracy, companies can align their procurement activities more closely with actual market demand, minimizing waste and optimizing inventory levels – ultimately driving more effective cost management and (hopefully) improved profitability.

• Sustainability is a Key Factor for 54% of Companies When Choosing Suppliers

Sustainability has become a pivotal consideration in supplier sourcing. A recent ESG Today article found that more than half of the companies (54%) now prioritize sustainability when selecting suppliers. 

This trend is driven by increasing consumer demand for environmentally responsible products and regulatory pressures. Companies are seeking suppliers that align with their sustainability goals, focusing on reducing environmental impact and promoting social responsibility throughout the supply chain.

• AI-Driven Procurement Results in a 15% Reduction in Operational Costs

Implementing AI-driven procurement strategies has resulted, according to a recent Forrester report, in a 15% reduction in operational costs for many companies. This cost-saving is achieved through optimized processes, better supplier negotiations, and more accurate demand forecasting.

Reduced operational costs directly contribute to higher profitability, allowing businesses to reinvest savings into growth initiatives and innovation. AI-driven procurement provides a competitive edge by streamlining operations and enhancing financial performance.

• AI-Enabled No Touch/Low Touch Planning Improves ROE by 2 - 4%

The increasing complexity of supply chains necessitates AI-enabled sales and operational planning (S&OP) and integrated business planning (IBP). These advanced technologies enhance predictability and streamline processes by eliminating gaps between planning and execution, thus reducing manual work and leveraging advanced analytics for deeper insights with minimal human intervention. 

As a result, low touch planning not only improves Return on Equity (ROE) by 2 to 4 percentage points but also adds 1 to 3 percent to gross margins across revenue, cost, and assets, according to a 2024 study done by KPMG.

The evolving landscape of supplier sourcing and procurement demands agility, innovation, and strategic partnerships. Through digitalization, prioritizing sustainability, and strengthening supplier relationships, businesses can navigate the complexities of the global market and drive success in the modern era.

As the dynamics of supply chains continue to evolve, staying ahead requires a commitment to adaptation and continuous improvement.

Time is of the essence, and those who are ready and willing to adapt quickly will be better able to unlock value, reduce costs, and embrace new models of success.