Procurement shifts to centre of corporate decision-making with focus on strategy and sustainability

Procurement is becoming more closely tied to the centre of corporate decision-making, with a growing share of teams now reporting to chief operating officers rather than chief financial officers. The Economist’s survey shows 44% of procurement functions report to the COO this year, up from 26% in 2023 and 34% in 2022, while only 23% report to the CFO. That shift suggests the function is increasingly being judged not just on cost control, but on its contribution to wider business pri...

Cost remains the immediate pressure point. The Hackett Group’s 2024 research, as reported by consulting and supply-chain publications, found that procurement leaders have made cost reduction their top priority, overtaking supply continuity as economic conditions have tightened. High interest rates, lingering inflation and recession risk have pushed companies to focus on savings, margin protection and more disciplined spending. The Economist’s survey reaches a similar conclusion: almost half of respondents named inflation and monetary uncertainty as their leading concern, a sharp rise from the previous year.

At the same time, procurement’s remit is widening. Regulatory compliance and broader legal risk are forcing teams to work more closely with business leaders, while sustainability has moved up the agenda. The Economist survey says environmental and social objectives are now among the top procurement priorities, with confidence in the function’s ability to support ESG goals rising materially year on year. That reflects both customer expectations and the practical effect of regulation, which is increasingly shaping procurement policies and supplier choices.

Yet the function still has work to do to earn trust inside the organisation. Although three-quarters of executives say procurement collaborates effectively on strategically important issues, far fewer express strong confidence in its ability to apply insights across the business or manage spending well. Confidence is also weaker around technology, with procurement still being asked to prove the value of automation and digital tools. A separate Amazon Business survey cited in supply-chain reporting found that many organisations expect procurement budgets to rise and plan to invest in analytics, automation and artificial intelligence, suggesting the opportunity is there if teams can demonstrate clear returns.

The operating model is also in flux. Companies appear split between expanding centres of excellence and moving towards more centre-led structures, indicating a search for the right balance between standardisation and local flexibility. In practical terms, procurement is being asked to do more than negotiate lower prices: it is expected to manage risk, support sustainability, embrace technology and help shape business strategy.

Source: Noah Wire Services