Procurement Update (Jan) - AI, Hydrogen, India, Defense & CSDDD

I thought I'd share some of the most interesting insights related to procurement and supply chain I've come across during the past weeks. From AI transforming productivity to the emergence of green hydrogen, strategic shifts towards sourcing from India, and debates around EU regulations - these are just some of the topics reshaping procurement... 🚀

Procurement: The AI opportunity? 🌧

At the recent Davos summit, the PwC CEO Study revealed a notable prediction: one in four CEOs expect AI to reduce jobs by at least 5% within the year, aiming to tackle the administrative inefficiencies plaguing companies, estimated at around 40%. With emails ranking as the top inefficiency at 45%, and procurement and contracting processes not far behind at 41%, it's clear that AI initiatives in procurement are on the horizon.

This shift opens up immense opportunities. Many buyers are currently overwhelmed with operational tasks that, while essential, do not directly contribute to significant business value creation. These activities often overshadow strategic, impactful work. AI is poised to change this, automating routine procurement functions such as order processing and supplier management, thus freeing up buyers for more strategic, value-adding activities.

Moreover, AI will bolster buyers' strategic decision-making through advanced analytics and insights. This enables a sharper focus on strategies that foster value creation, including optimizing supply chain efficiency, enhancing supplier relationships, and driving procurement innovation. The move towards automation and enhanced analytics through AI is not just about streamlining processes; it's about redefining the procurement role within organizations as a central driver of competitive advantage and innovation.

More exciting news:

Hydrogen on the horizon: A new chapter for industry 💧

thyssenkrupp Steel is stepping into the future with its search for up to 151,000 tonnes of hydrogen for its Duisburg plant. This initiative towards using green or blue hydrogen for steel production is a bold step, backed by nearly €2bn in government support. It marks a significant move towards slashing emissions and changing our approach to industrial energy use.

🔗 TED, Hydrogeninsight

India's rising role in global sourcing 🔔

Last year marked a notable shift towards India in the global supply chain, with leading companies like Apple, Tesla, and Walmart making significant moves. Apple aims to make 10-15% of its iPhones in India, leveraging the country's manufacturing strengths. Tesla plans to double its auto parts purchases from India to $1.9 billion, and Walmart has increased its sourcing of US goods from India from just 2% in 2018 to a quarter now. Airbus is now also joining the trend, planning to double its sourcing from India to $1.5 billion, tapping into the booming aviation market.

This shift highlights a valuable opportunity to diversify supply chains, enhancing resilience and creating a strategic balance with sourcing in China. Exploring suppliers in India is definitely a smart move for businesses looking to strengthen their procurement strategies in the current global landscape.

🔗 Bloomberg, Reuters (1), Reuters (2), CNBC

Speeding up defense procurement: A call to action 💣

"Give us the orders!" echoes the plea from German arms manufacturers to Defense Minister Pistorius, urging for accelerated procurement processes. The president of the Federal Office of Bundeswehr Equipment highlights a record in new contracts but reminds us, "You can't compare us to a car manufacturer's purchasing department."

This plea spotlights the struggle between the need for rapid defense procurement and the reality of a bureaucratic system. It's a call for a more agile, responsive approach to meet today's defense demands.

🔗 Handelsblatt, Yahoo

EU's Supply Chain Act: Going too far? 🌍

The EU's plan to enforce stricter accountability for supply chains' environmental and human rights impacts is facing pushback from German officials. By proposing rules stricter than Germany's current ones, it could lower the employee count threshold, affecting more companies, and introduce civil liability and damage claims. This heightened scrutiny, especially on smaller firms, raises concerns about its extensive reach. Even larger companies are currently struggling with Germany's LkSG.

While the regulations' goals are vital, there's a need for better approaches that empower companies rather than burdening them with excessive bureaucracy and implementation efforts.

🔗 Reuters

Interesting chart: Global PMI for manufacturing and new export orders 2018-2024 🛒

The global PMI in January 2024 reveals significant economic indicators: new export orders at 48.8 and manufacturing at 50. Manufacturing experienced its lowest in August 2020 and has since been affected by the Russia-Ukraine conflict and rising inflation, consistently remaining just below the 50 threshold. These figures highlight the ongoing challenges in global markets, underscoring the delicate balance between recovery and sustained economic growth amidst external pressures.

🔗 Statista

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