Why 2025 Could Be the Toughest Year Yet for Procurement Professionals

Posted on January 08th

After forty years in the world of commercial and procurement, I foresee 2025 shaping up to be one of the most challenging years yet. The pressures we’re facing are both numerous and unprecedented, many of which are beyond the control of procurement teams. To better understand the road ahead, I’ve broken these pressures into four key categories:

1. Economic Pressures
2. Environmental Pressures
3. Regulatory Pressures
4. Market Demand

Let’s delve into each category and the specific challenges they entail.

1. Economic Pressures

Economic headwinds are gaining momentum, with inflation still rising in parts of the world. Persistent geopolitical conflicts, like the war in Ukraine, are creating significant financial strain on governments and economies. Unfortunately, these conflicts are unlikely to see resolution in 2025.

The Middle East remains another area of concern, especially regarding its impact on global fuel markets. Additionally, if President-elect Trump follows through with his proposed policies around the Panama Canal or Greenland, we could see supply chain disruptions akin to the Evergreen incident in the Suez Canal.

2. Environmental Pressures

The clock is ticking on various environmental regulations, especially those targeting the automotive industry. Despite looming deadlines, necessary upgrades to the electricity grid remain incomplete. Compounding this is the public’s reluctance to adopt electric vehicles at the scale needed to meet these regulatory targets. As a result, we’re likely to see continued instability in this area throughout 2025.

3. Regulatory Pressures

Brexit’s ripple effects continue to complicate the regulatory landscape for UK businesses, and this instability shows no signs of abating in 2025. Perhaps the most critical concern, however, lies with tariffs. Should the President-elect implement new tariffs from day one of his presidency, as promised, retaliatory actions from other nations are likely. This would result in a highly volatile demand-and-cost environment for goods worldwide.

Additionally, recent changes in the UK’s tax policy, particularly regarding National Insurance, are expected to pose challenges for both costs and growth.

4. Market Demand

Market demand appears to be softening, and the combined pressures outlined above suggest little hope for improvement in 2025. Businesses will need to brace for a year of sluggish demand and heightened uncertainty.

How Procurement Can Help Navigate 2025

In the face of these challenges, procurement must play a proactive role in helping businesses weather the storm. The focus should be on planning for crises rather than simply reacting to them. Here are some key strategies procurement teams should consider:

1. Develop Alternative Supply Chains • Collaborate with product managers and engineers to identify and vet alternative suppliers. • Conduct thorough due diligence on potential new partners to ensure reliability and quality.
2. Embrace Relational Contracting • Bring suppliers into product development discussions to explore cost-saving innovations or alternative methods of production. • Foster stronger relationships with suppliers to create mutual benefits and reduce costs. Airbus has proven this model to work very well.
3. Prepare for Supplier Insolvencies • Create a contingency handbook for managing supplier bankruptcies, outlining step-by-step actions to minimise disruption. • Build financial and operational resilience into supply chain strategies.
4. Be Coordinators, Not Reactors • Act as a central hub for collaboration, helping teams anticipate problems and craft solutions before they arise. • Develop crisis-response plans that can be implemented swiftly and effectively.

Looking Ahead

While it’s unlikely that procurement teams will be able to reduce costs significantly in 2025, their role will be critical in ensuring business continuity. By focusing on resilience, proactive planning, and collaboration, procurement professionals can help their organisations navigate this challenging year. Success in 2025 won’t just be about cutting costs; it will be about keeping the doors open and positioning the business for long-term stability.