Mastering Spend in 2024: Insights into 4 Crucial Direct Categories
- The chemical industry is focusing on sustainability while also facing challenges like high inventory and the need for supply chain resilience.
- Metals and agricultural commodities are seeing shifts in demand and supply, necessitating risk mitigation and technology adoption.
- Packaging industry trends are towards sustainability and efficiency, with a steady move back to pre-COVID levels.
January 15, 2024 | Procurement Strategy
The past few years have been a rollercoaster for procurement and supply chain professionals. The challenges have been manifold -- from supply chain disruptions to volatile market conditions. Yet, with every challenge comes an opportunity for growth and improvement.
And 2024 has finally given supply chain and procurement leaders the breathing space they need to redefine strategies and build a competitive edge.
This blog will delve into four key direct categories – chemicals, metals commodities, agricultural commodities and packaging – discussing the challenges faced in 2023 and offering insights and recommendations for the year ahead.
Chemicals
The chemical industry moved cautiously in 2023, leveraging data and modern tools to optimize production and supply chains. There was a significant shift toward sustainability, with a spike in demand for eco-friendly products and renewable chemicals. Despite a stable supply, the re-entry of China into the international market brought a surplus, causing price declines and high inventories.
2024 Outlook: Recovery seems tentative in early 2024 but hope springs with potential economic revival. Key themes include high inventory, supply chain resilience and a continued push towards sustainability and eco-friendly practices.
Recommendations:
Sustainability objectives: Clearly define and pursue sustainability goals to drive eco-friendly practices and regulatory compliance.
Inventory management: Implement effective strategies for cost control, timely production and waste minimization.
Global sourcing: Consider global sourcing for select chemicals and build stronger supplier relationships to balance risks and rewards.
Metals Commodities
After a tough 2022, the metals sector saw a more positive year with abundant production outpacing lower demand. Despite this, base metals experienced mostly downward trends, with a few exceptions like iron ore.
2024 Outlook: The demand is expected to be subdued, providing opportunities for procurement leaders to secure long-term costs. However, volatile prices, supply chain disruptions and geopolitical risks are anticipated.
Recommendations:
Risk mitigation: Develop comprehensive plans encompassing geopolitical and supply chain risks.
Supplier collaboration: Forge strong partnerships for innovation, cost reduction and sustainability.
Market intelligence: Invest in tools and analytics to monitor price trends and emerging risks.
Agricultural Commodities
There was an easing of supply tensions for most agricultural commodities, with increased production and global output. However, geopolitical tensions and weather-related events posed significant disruptions in 2023.
2024 Outlook: Export restrictions and climate-related supply chain vulnerabilities remain key risks. However, increasing land use and crop yield offer a somewhat optimistic outlook.
Recommendations:
Invest in resilience: Diversify sourcing and invest in predictive analytics for climate-related risks.
Technology adoption: Implement IoT, AI and blockchain for improved supply chain transparency and efficiency.
Sustainability focus: Integrate sustainable practices and support regenerative agriculture among suppliers.
Packaging
The industry experienced a transition with drops in key raw material indices and a shift toward sustainability and circular solutions in 2023. However, recessionary concerns led to decreased product demand.
2024 Outlook: The focus will remain on sustainability, with trends like higher post-consumer resin content and eco-friendly materials. While inflationary pressures might taper, the industry is expected to take time to stabilize.
Recommendations:
SKU rationalization: Focus on reducing complexity and driving synergies.
Strong supplier relationships: Develop and maintain robust partnerships.
Total cost of ownership models: Leverage these models to drive value from negotiations and make informed decisions.
The road ahead in 2024 is paved with challenges and opportunities. For procurement and supply chain professionals, it's a time to be bold, innovative and resilient. By understanding the market dynamics, embracing technology, and committing to sustainability, organizations can navigate the complexities of spend management and emerge stronger and more efficient.
For full details on what to expect in 2024 and detailed recommendations, read the GEP Spend Category Outlook 2024.
