Procurement Trends 2025

Markets and industries have been continually buffeted since COVID spread around the world, driven by geopolitical tensions, volatile commodity prices and unpredictable shifts in global dynamics. For 2025, there are additional challenges. Not only has the geopolitical situation tightened, further impacting trade flows and supply chains, but changes in politics in the USA, Europe, and the Middle East will evolve, creating further ambiguity for businesses.

The consequence is an increasingly complex outlook. Against this background, procurement leaders need to broaden their perspective and consider the entire value chain: the CPO must think more than ever cross-functionally. Times are challenging, no question.

However, procurement leaders should accept it as an invitation to start 2025 with proactivity and a “can do” attitude.To thrive in our current environment, CPOs should prioritize these four key topics over the coming 12 months.

The last years have reminded us about the importance of geopolitics for global trade flows. While the idea of free world trade seems to be in decline and more different perspectives occur, geopolitics will only become more important in 2025. Building stronger geopolitical risk management will prove to be a “no regret” decision.

If new regulations will be implemented and divergent forces continue to expand, we expect to see shifting zones of economic collaboration as tariffs and export restrictions are put in place, in many areas such as the export of sensitive technology and international trade in critical raw materials. Established trading relationships might face disruption.

Our annual risk management study confirms that companies are facing poly-crises, with a number of risk factors almost synonymous – rising energy costs (32%), input cost inflation (29%), the threat of recession and declining demand (28%), and price volatility (26%) – create a climate of cost pressures and financial uncertainty.

Over the next five years, many study participants plan to restructure supply chains, focus on regional suppliers while consolidating their supplier base around fewer partners. In remodelling supply chains, it will be vital to evaluate suppliers’ financial health and risk exposures to ensure resilience

Economic and geopolitical pressures will force procurement leaders to revisit their cost strategies. Potential changes in US economic policies are likely to affect interest rates and inflation. We expect a higher pressure for selected markets, e.g. further competitive pressure on companies that already face the threat of recession and insolvencies in key industries, while other markets will benefit from the prospected changes. In addition, European consumers are curbing their spending and being more selective, whilst in the US consumers are still feeling squeezed but are more optimistic about their personal finances according to recent research from BCG.

Faced with a prolonged squeeze on margins from higher input prices and increased financing costs, we expect companies to redouble efforts to optimize costs and to improve liquidity by releasing working capital from their balance sheets. In this context, a recent BCG study found that companies with continuous cost management programs achieved an average 62% of their savings targets, compared to 43% for those with ad-hoc programs.

Major climate trends are pushing in contradictory directions. The momentum behind global climate action is diminishing, as evidenced by the outcome of the COP29 meeting in Baku. However, the impacts of climate change are increasing – climate-related disasters such as hurricanes, droughts and floods, are becoming more frequent and serious.

Companies face regulatory uncertainty as political commitment to climate action currently seems to wane – in particular in those regions where recession is looming. In response, corporate leaders may be tempted to compromise on their climate commitments. This would be a mistake – the costs of inaction will prove prohibitive. Research by BCG finds that physical climate risks represent a major financial threat, jeopardizing up to 25% of Ebitda by 2050. In addition, under the most likely scenario of increased carbon pricing, BCG calculates that businesses which decarbonize proactively can cut 50% of their emissions at low or no cost.

Companies should therefore adopt and fund a long-term decarbonization strategy, combined with keen cost control to minimize the pass-through to consumer prices. Supply chains must be strengthened – especially in vulnerable sectors such as soft commodities – and predictive technology tools should be adopted to forecast and manage climate-related risks.

AI and GenAI are not simply optimization tools to automate low-value repetitive tasks, they can also enhance speed and quality in many other aspects of procurement. Quicker decision making and more effective risk management, detailed scenario planning, improved category management and support for dynamic pricing models are the most relevant use cases. AI tools will also be particularly helpful for sustainability and ESG compliance, both through tracking tools and easier comparison of alternative scenarios.

To leverage the full potential of GenAI, organizations must invest in their digital infrastructure, integrate existing systems and prioritize cleaning and harmonizing data to enable the implementation of AI-driven procurement platforms. Success will also require collaboration with internal stakeholders, and partnerships with suppliers to align technology and processes.

There are also important considerations for the organization’s evolving capabilities and culture. Upskilling of procurement teams will be essential to deepen their digital literacy and enable cultural change that blends AI with human expertise.

Conclusion

Beyond Procurement

Looking to 2025, procurement leaders must broaden their perspective to encompass the entire supply chain, shifting from reaction to anticipation and using uncertainty as a catalyst for new solutions and competitive advantage:

• Anticipate Change: Use scenario planning to prepare for policy shifts and new regulation, while fostering a culture of change within the procurement organization
• Foster Agility: Build flexible supply chains, diversify sources and empower teams with the skills and tools to adapt to unstable market conditions
• Secure liquidity: Strengthen financial resilience by optimizing working capital and building robust strategies to manage cash flow
• Embrace Technology: Invest in AI and digital infrastructure to optimize costs, improve risk management and enhance decision-making
• Commit to Accountability: Despite current hesitation, decarbonization and adaption to climate risk are essential to secure long-term success and stakeholder trust

It is up to everybody to decide whether to see current risks as a threat or an opportunity. So, let’s start the new year with trust in the capabilities to develop and grow.

Get in contact with our expert

Daniel Weise

CEO INVERTO - Managing Director & Senior Partner BCG

contact@inverto.com Contact

Thibault Pucken

COO & Managing Director

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