Firms Adapt Procurement Strategies to Changing Conditions

Enterprises worldwide are revisiting their approaches to procurement as business requirements and technologies rapidly change, according to a new research report published today by Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm.

The 2024 ISG Provider Lens global Procurement Services report finds that organizations that have already transformed their procurement systems once, often outsourcing some functions and implementing new software platforms, are now considering new approaches. The series of disruptions that began with the COVID-19 pandemic continues to shape companies’ procurement strategies and the services providers offer, ISG says.

“Procurement consulting and outsourcing have changed significantly since 2022,” said Robert Stapleton, partner and Business Outsourcing Services lead for ISG. “Many state-of-the-art solutions adopted before the pandemic do not serve companies well today or prepare them for the future.”

Effective procurement now needs to do more than keep costs low, ISG says. Enterprises are working with providers to build procurement systems that are agile, efficient and resilient amid changing economic and geopolitical conditions. These systems use data-driven decision-making and smoothly interoperate with finance and supply-chain management departments, vendors and suppliers.

As they update their approaches, many companies are also adopting strategic sourcing, unlocking value beyond cost savings by collaborating more deeply with key suppliers, the report says. Long-term supplier partnerships can increase trust and mitigate supply chain risks, enabling better product development and faster innovation.

AI is also beginning to transform procurement processes as enterprises implement end-to-end solutions that can automate repetitive tasks, predict market trends and optimize the choice of suppliers, ISG says. Along with improving efficiency, this development is reducing errors and allowing procurement teams to focus on strategic initiatives instead of routine work.

“The rise of AI and ML represents a fundamental shift in procurement practices,” said Jan Erik Aase, partner and global leader, ISG Provider Lens Research. “It has the potential to improve decision-making and foster better supplier relationships.”

Increasing interest in environmental, social and governance factors among consumers and investors has turned enterprise and service-provider attention toward sustainable and ethical sourcing, ISG says. Anticipating more stringent requirements and penalties in some regions, companies are investigating these concerns as an aspect of risk management.