What trends should Procurement & Supply-Chain execs be looking for in 2013? Part 1, the Economy

We published our light-hearted look ahead to 2013 last week, but more seriously, what are the trends that we might see in the procurement world – or affecting the procurement world -  this year?

We’ve got a few posts on that theme this week – covering economic issues, the general procurement trends, the UK public sector specifically, and procurement technology.  Let’s start with the wider economics, where really, I won’t even pretend to have any clear view. It seems to me that the outlook, even just directionally, is even cloudier than usual.

I’m reading learned commentators predicting a global crash, driven by  the Euro finally collapsing, the US falling off the fiscal cliff and into recession, and the potential for China’s property bubble to finally burst.

Others see the prospects as better than they’ve been for years.  A  new boom is just around the corner, as Europe gets through the worst of its problems, a strong US recovery kicks in, and the BRIC countries and indeed Africa steam ahead on the back of strong commodity markets and global firms who have historically strong balance sheets and are ready to invest.

Indeed, the USA managing to avoid the immediate fiscal cliff last week was greeted by an immediate stock price rebound, but since the initial euphoria has worn off, many feel the day when some tough decisions about taxes and spending have to be taken has simply been delayed by a few months. So that hasn’t clarified the immediate or medium term prospects much.

So for anyone in the procurement and supply chain world, I guess that means looking to combine caution with flexibility, and being able to respond quickly to events. It’s tough to forecast inflation or demand (either for raw materials or finished products) in this situation, so protecting against the most serious risks whilst keeping options open seems like a sensible approach. It’s a brave commentator who predicts commodity prices for instance (but of course you should read our sister publication Metal Miner to get the best possible insight and news).

In the UK, there are particular risks. The general population still doesn’t seem to realise the government is borrowing more than pretty much any other developed country in the world. If tax revenues continue to disappoint, firms and individuals are cautious about spending and investment, whilst government spend remains stubbornly high, we could see a full-blown crisis sometime in 2013. More painful spending cuts, tax rises or inflation driven by the government printing money would then be the only real options.  (Note – I wrote this before Friday’s dreadful CIPS PMI Services data, which did nothing to suggest I’m wrong on this point).

The other macro level business trend that will be very interesting to observe is “re-shoring” – moving production and / or the third party supply base back home, or closer to home, from far-off low-cost sourcing countries. There’s no doubt it’s happening in North America, but will we see significant moves in Europe this year? I’m sure that will be a topic we return to in 2013, along with everything else we’ve mentioned here I suspect.

And tomorrow we’ll look in more detail at some specific procurement trends and issues for 2013.

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