2024 is going to be the year of Elections!Â
This will have an impact on Supply chains globally. Here is what 2024 looks like from a Procurement Perspective:
1) Commodity Price Slowdown:
- Basic metals have already declined YoY, but now the inventory levels are hitting new highs. The inventory of Aluminum, Nickel, and Steel are all running high in December!
- Combined with a slow demand outlook, this will put additional pressure on your suppliers for revenues.
- The Chinese PMI data, which was already below 50, decreased further in the month of December!
- US port volumes have also decreased! So, for Procurement folks, Volume is going to be the leverage in 2024! Also, restructure your Cost Models!
2) Consulting World Shakeup:
- A lot has been happening in the world of the Big 4s, and it has been quite a scandalous one for many. While they struggle with their compliance and PRs, the rise of short-term freelancers will see many chipping into the wallets of these Big 4s. Generic consulting vs Specialists will become more intense.
- Look for gain-pain share models!
3) Biggest of the Macroeconomic Events:
- More than 60 countries will hold their election, including the US, India, Taiwan, South Africa, the UK (technically on Jan-25), and the EU!
- Expect economically conservative geopolitics and, hence, de-risking of the supply chain to be at the center stage.
- In my view, we will see a rise in Safety stocks across the manufacturing organizations as a measure of de-risking, especially with the events at Red Sea. I have already spoken about higher transit times.
4) Significant slowdown of GenAI API-driven services:
- OpenAI Api has given access to "gimmick" services where startups/digital procurement companies are all claiming GenAI capabilities. All of these are singularly powered by a single OpenAI API and have zero Procurement intelligence behind their services.
- Without the specific Procurement insights and data, we will see a significant decrease in investment in these API-driven startups. Users of Chatgpt in Europe can now request the deletion of their data and opt out of having their data used to train its AIs.
- Without the security of enterprise data, I see little adoption of these API-driven startups into mainstream procurement problem statements.
5) Accelerated Supplier Developments:
- Many Procurement teams will now be required to accelerate their Supplier development programs by following Apple and Tesla's moves (they invested in India as a diversification from China). We will see an increase in shared services and satellite offices.
6) USD Depreciation:
- I think Global monetary policies are turning towards easing the money supply (As inflation cools off), and hence, broadly, USD depreciation is looking increasingly likely (towards H2).
- What it means for Procurement is to renegotiate the payment terms and delay your USD payment remittances. You'll save some money in your local currency terms
I will post Part 2 soon!
Part 2 will contain my predictions about Freight and Incoterms, Payment Terms, Procurement Digitization and Sustainability.