2. Inflation

As inflation rates in mid-2022 pass around 9% in the UK, USA and New Zealand, and also escalate significantly in Australia – CFOs face the prospect of mathematically doubling relative cost (and halving purchasing power) within 10 years or less at these rates.

Moreover, with the nature of current inflation being “COST-PLUS” orientated, maybe the ‘C’ suite might imagine that procurement could have a disproportionate influence in mitigating the effects of high inflation for their organisation?

And, if inflation is soaring in more advanced economies, is it possible to source more aggressively from other countries less affected by inflation?

3. Deglobalization

Deglobalisation is a gradual process of diminishing interdependence between countries around the world, largely through declining economic trade and investment and exacerbated, or even caused, by the myriad of forces listed above.

This trend has notably accelerated through the pandemic as supply chain bottlenecks have become so apparent and, more recently, the effects of the war in Ukraine have spread globally at the same time as economic issues like inflation and commodity shortages have become more pronounced.

In sourcing terms, however, maybe are we reaching a point where regional ‘trading blocs’ are re-emerging as countries strive for strategic autonomy? Russia and its allies increasingly trading alone, the EU becoming more insular post-Brexit, America more concerned with domestic issues than international ones, China proving more awkward to work with?

Fuelled, maybe, by the rising profile and influence of groups of nations such as the G7, ASEAN, APEC, BRICS, AUKUS, The Quad and others? What does this all mean for genuinely global sourcing – from ANZ at the tip of the global supply-chain? Or does this now mean we will increasingly be restricted to sourcing more from certain nations and trading blocs over others? Or, simply to rebalance RISK and COST individually for every critical overseas sourcing decision?

Indeed, has “lowest cost” sourcing strategy already simply given way in 2022 to “most secure” sourcing, from either single or multiple suppliers? Supply-resilience more important that best-margin, in a world of growing shortages? Lean supply chains are attractive, but the total cost can be crippling when they fail. The Economist 24th June 2022 reports global inventories for the largest 3,000 firms have grown from 6% to 9% of world GDP and that, “the West is seeking long-term supply deals from allies rather than relying on spot markets dominated by rivals.” It concludes that supply, “resilience comes from diversification, not concentration.”

Of course, in addition to these THREE main forces, other factors that have altered procurement’s course during Covid have not gone way. In many ways, they have laid the groundwork for our changing profession;

• the strengthening of stakeholder relations during the crisis,
• the reality of the paperless office, when working from home,
• the limitations of eProcurement systems and potential of digitalisation,
• the increase in governance requirements,
• the rise and rise of Agile Procurement
• the power of SRM
• pressure to support small suppliers, and the Payment Times Reporting Act,
• global supply chain failures,
• the reality that savings tend to zero over time, the ‘low-hanging fruit’ already harvested