Inflation, fewer resources increase pressure on procurement, sourcing pros

Global inflation has impacted 91% of businesses, according to a survey of global procurement and sourcing professionals by sourcing automation firm Keelvar.

The Cork, Ireland-based company said that inflation, the Russia-Ukraine conflict, and uncertain and varied economic conditions around the world are impacting supply chain operations. Inflation and recession were cited by 58% of those responding to the survey, while 44% said the semiconductor shortage and Russia’s invasion of Ukraine were causing “significant operational impact” on their operations.

Sourcing professionals are increasingly looking to regain a level of control, Keelvar said, pointing to a the survey results showing that 83% said overcoming supply chain disruption is at the top of their agenda, and 78% noting that battling inflation and rising costs are at the top of the list.
Market volatility (74%) and navigating geopolitical risks (71%) also received top billing.

How these professionals are managing these challenges varied, with 54% looking to source from sustainable suppliers – a 20% increasing of a year ago – and 52% looking to develop more toward improving supplier diversity. Nearshoring (49%) and modernizing sourcing technology (39%) also were cited.

“Tracking more supplier KPIs, such as on-time delivery and load acceptance percentages, then factoring them into award decisions, is just one of the ways sourcing professionals intend to deal with supply chain disruption,” David Siedt, senior analyst with Keelvar, noted in the report, “2023: The Year of Autonomous Sourcing.”

Rising costs

Inflation has driven up costs across the board, and procurement professionals are feeling the heat. Almost two-thirds of respondents are dealing with cost increases of 5% or more, with almost half saying those increases have been 10% or more.

There doesn’t appear to be a single answer to addressing increased costs, instead a series of steps are being implemented to rein in costs, which 25% of respondents said have shown no sign of decreasing in the near term. Among these efforts are emphasizing more favorable payment terms and discounts (65%), strategically negotiating long-term contracts (62%), increasing competition among sourcing providers (56%), and incorporating more supplier attributes (53%) into the decision-making process.
“Demand and supply curves change rapidly, and pricing is moving fast. As a result, I’m seeing sourcing teams leverage e-auctions to allow quick and easy negotiations on recurring items,” Dylan Alperin, head of professional services, said.

Fewer people, resources

Complicating matters for procurement professionals are the lack of resources. Whether that is people, money, or technology, 86% of respondents said they saw an increase in their workload in 2022 yet 52% reported having fewer resources available to handle the workload.

Workforces are either stagnant or shrinking according to 72% of respondents, leading to 55% citing higher levels of burnout and stress. Nearly 40% of respondents said they are now onboarding suppliers they would not have previously and 36% said long, complex sourcing processes is contributing to burnout. The result is an increase in what Keelvar said is “malpractice and rogue spending.” The firm found that 24% of respondents admitted to cutting corners to ensure supply and 22% have gone outside approved supplier lists to secure products.

Turning to automation

Increasingly, procurement professionals may be looking to technology to help, Keelvar found. Almost three-quarters (73%) believe automation tools will reduce time spent on repetitive, manual tasks, and 86% think it will open additional time to spend on strategic initiatives.

Companies seem to be providing some help in this area. While 36% are cutting budget for capital expenses, only 12% said they have cut the budget for technology and innovation initiatives.

The survey results were drawn from a global audience, with 47% of respondents residing in North America and 32% in Latin America. The remainder were split between Europe/UK (15%) and the Middle East and Asia Pacific (3% each). Respondents came primarily from procurement (24%), sourcing (20%), supply chain (16%), transport/logistics (18%) and operations (19%) with 76% of reporting their company’s annual revenue exceeded $500 million.