Procurement challenges in 2025 and how to overcome them

Procurement has never been more critical—or more complex. As businesses navigate economic uncertainty, supply chain volatility, and rising regulatory pressures, procurement teams are under immense pressure to control costs, ensure supply chain stability, and meet sustainability goals.

In 2025, the role of procurement has evolved beyond simple cost-cutting and supplier negotiations. It’s now a strategic function that directly impacts business resilience, risk management, and long-term profitability.

Let’s take a closer look at why these procurement challenges exist and why overcoming them is essential for business success.

Why procurement challenges exist and why they matter

Procurement is no longer just about sourcing materials and negotiating costs. It’s a multifaceted, strategic function that impacts everything from financial stability to corporate sustainability. However, as the global economy becomes more complex, procurement challenges are becoming harder to predict and control.

Several factors contribute to these challenges:

• Globalization and supply chain interdependencies
• Regulatory shifts and ESG requirements
• Technological advancements
• Economic instability and inflation
• Workforce shortages and skills gaps

These challenges create operational inefficiencies and can disrupt entire supply chains, increase costs, and expose businesses to financial and reputational risks.

Here are the five biggest procurement challenges in 2025—and the best strategies to overcome them.

Challenge 1: Supply chain disruptions in procurement

Supply chain disruptions are no longer temporary setbacks—they are an ongoing challenge. Whether it’s geopolitical conflicts, extreme weather events, cybersecurity threats, or labor shortages, businesses have to prepare for constant volatility.

Instead, procurement teams need flexible, data-driven strategies to anticipate risks and keep operations running smoothly.

Why are supply chains volatile?

Supply chain volatility stems from multiple factors, many of which have compounded over time. Here’s what’s driving the instability:

• Geopolitical conflicts: Ongoing tensions between major economies have disrupted supplier relationships, restricted access to key materials, and driven up costs.
• Climate-related disasters: Wildfires, floods, and extreme weather events are shutting down factories, delaying shipments, and reducing global agricultural output.
• Cybersecurity risks: Ransomware attacks and software vulnerabilities are targeting logistics firms and supplier networks, leading to system shutdowns and stolen procurement data.
• Raw material shortages: Essential materials such as semiconductors remain in short supply, causing price spikes and production delays.
• Transportation bottlenecks: From truck driver shortages to shipping delays at major ports, labor disruptions continue to slow the movement of goods across supply chains.

Each of these factors can cause cascading failures—a disruption in one part of the world can trigger delays, price increases, and shortages across entire industries.

How do supply chain disruptions impact procurement?

When a supply chain breaks down, procurement teams feel the effects immediately. The impact isn’t just about delays—it affects pricing, supplier relationships, operational efficiency, and even compliance.

Here’s how supply chain volatility leads to major procurement challenges:

• Cost fluctuations: The unpredictability of raw material pricing makes it difficult to budget and negotiate long-term contracts. Procurement teams are often caught in a cycle of rising costs and supplier price adjustments.
• Supplier instability: Key suppliers may struggle to meet demand, go out of business, or reduce order fulfillment capacity. This forces businesses to find alternatives, sometimes at a premium.
• Production slowdowns: When essential materials are unavailable, manufacturing and product delivery timelines suffer, impacting revenue and customer satisfaction.
• Regulatory and compliance risks: Sourcing from new suppliers to bypass shortages can introduce compliance concerns.
• Cybersecurity vulnerabilities: Increased reliance on digital procurement platforms and third-party suppliers exposes businesses to data breaches, ransomware attacks, and operational shutdowns.

If procurement leaders don’t take proactive steps to address these risks, supply chain disruptions can slow down operations and hurt financial performance.

Strategies to mitigate supply chain disruptions in procurement

To counter supply chain volatility, procurement teams should adopt a multi-layered strategy that focuses on diversification, real-time data, supplier relationships, and nearshoring.

Each of these elements plays a critical role in ensuring business continuity and minimizing the impact of disruptions.

Diversify the supplier base

Diversifying the supplier base is one of the most effective ways to reduce risk. Relying on a single supplier or a concentrated region for key materials increases exposure to disruptions. Instead, procurement teams should source from multiple geographic locations and maintain relationships with backup suppliers to ensure supply continuity.

Use predictive analytics for early disruption detection

Predictive analytics and real-time monitoring allow businesses to identify risks before they escalate into full-scale disruptions. AI-powered demand forecasting can assess supply chain vulnerabilities by tracking supplier performance, shipment delays, and material shortages.

By using data analytics, procurement teams can make proactive adjustments rather than reacting after a disruption has already impacted operations.

Invest in nearshoring and regionalized supply chains

Shifting to regionalized supply chains is a growing trend as businesses lean towards moving away from dependence on globalized networks. Nearshoring and local supplier partnerships provide greater flexibility, reducing the risk of delays caused by international shipping bottlenecks.

Companies investing in regionalized supply chains gain greater control over logistics, making it easier to adapt when global disruptions occur.

Challenge 2: Inflation and cost management pressures

Inflation remains a major challenge for procurement teams in 2025, driving up the cost of raw materials, labor, energy, and logistics. Unlike short-term price fluctuations, today’s inflationary pressures are systemic, requiring businesses to adopt long-term cost management strategies to remain competitive.

How inflation creates cost management challenges for procurement

The effects of inflation extend beyond higher prices. Procurement teams face several challenges that complicate budgeting, forecasting, and supplier negotiations:

• Reduced profit margins: As supplier costs rise, businesses either absorb the expenses—cutting into margins—or pass them to customers, which can affect competitiveness.
• Unpredictable pricing fluctuations: The cost of materials, shipping, and production can change rapidly, making it difficult to plan long-term budgets.
• Increased supplier resistance to price negotiations: Suppliers dealing with rising operational costs are less willing to offer discounts or flexible pricing structures.
• Cost-cutting risks: Reducing procurement costs through lower-quality materials or alternative suppliers may lead to quality control issues, regulatory compliance concerns, or supply chain instability.

Given these challenges, procurement teams must shift from reactive cost-cutting to strategic cost optimization.

Strategies to manage inflation and procurement costs

To maintain financial stability and improve cost efficiency, procurement teams should focus on three key strategies:

Use advanced spend analytics for cost optimization

A data-driven approach to procurement is essential for controlling costs in an inflationary environment. Spend analytics tools powered by AI and machine learning allow businesses to track purchasing trends, identify inefficiencies, and pinpoint opportunities for cost savings.

By consolidating purchases across departments, reducing maverick spending (unauthorized purchases), and renegotiating supplier contracts based on real-time data, procurement teams can optimize spend without sacrificing supplier relationships or quality.

Strengthen supplier collaboration and contract flexibility

In a high-inflation environment, long-term supplier partnerships become more valuable than transactional relationships. Procurement teams should negotiate contracts with indexed pricing mechanisms, which adjust prices based on predefined market conditions.

Additionally, open-book pricing models—where suppliers transparently share cost structures—can lead to fairer negotiations and stronger partnerships. Building these long-term relationships helps companies secure more stable pricing and priority access to materials during periods of volatility.

Increase automation and procurement efficiency

Procurement automation is one of the most effective ways to reduce costs and improve efficiency without directly impacting supplier pricing. Robotic process automation (RPA) and AI-driven procurement tools can streamline invoice processing, contract management, and supplier payments, reducing labor costs and minimizing human errors.

Automated procurement workflows also help enforce compliance with budget controls, ensuring that purchases align with cost-saving strategies. By eliminating manual inefficiencies, businesses can better manage their procurement expenses in an inflationary market.

Challenge 3: ESG and sustainability compliance

Environmental, Social, and Governance (ESG) compliance is no longer just a corporate initiative—it’s a regulatory and competitive requirement. In 2025, procurement teams must ensure that their supply chains meet stringent sustainability standards while balancing cost, efficiency, and supplier relationships.

Companies that fail to comply face fines, reputational damage, and loss of investor confidence. However, achieving compliance is not simple—many businesses struggle with supplier transparency, complex reporting requirements, and the higher costs of sustainable materials.

How ESG and sustainability compliance create challenges for procurement

Procurement teams face several challenges when integrating ESG principles into sourcing and supplier management:

• Supplier non-compliance risks: Many suppliers, particularly in regions with less regulation, fail to meet sustainability and labor standards, making compliance difficult to enforce.
• Regulatory complexity: ESG regulations differ across regions and industries, requiring extensive documentation and reporting to avoid legal penalties.
• Higher procurement costs: Sustainable materials, fair-trade sourcing, and ethical labor practices often come at a premium, making cost management more challenging.
• Supply chain transparency issues: Many businesses lack real-time visibility into supplier operations, making it difficult to verify ESG claims or ensure compliance across multiple tiers of the supply chain.

Because ESG compliance is multi-dimensional, procurement teams need a strategic, technology-driven approach to ensure both sustainability and operational efficiency.

Strategies to ensure ESG compliance in procurement

To meet sustainability goals while maintaining cost efficiency, procurement teams should focus on the following:

Implement supply chain traceability and ESG reporting tools

Without real-time visibility, it’s difficult to ensure ESG compliance across an extended supply chain. Procurement teams should invest in digital traceability solutions, such as blockchain-based tracking and AI-powered ESG analytics, to verify supplier adherence to environmental and labor standards.

Automated ESG reporting platforms can simplify compliance by gathering data on carbon emissions, ethical sourcing, and supplier certifications, ensuring that businesses meet regulatory requirements without excessive manual work.

Develop ESG-based supplier selection

Instead of treating ESG as a separate initiative, procurement teams should embed sustainability criteria directly into supplier selection and evaluation processes. This includes establishing ESG scorecards that assess suppliers based on sustainability practices, ethical labor policies, and emissions reduction efforts.

Long-term partnerships with ESG-compliant suppliers can also reduce supply chain risks while ensuring regulatory alignment. By prioritizing vendors who meet sustainability criteria, procurement teams can drive industry-wide improvements while securing more stable, responsible supplier relationships.

Shift towards circular procurement and sustainable sourcing

A circular procurement strategy focuses on reducing waste, increasing material reuse, and prioritizing suppliers that incorporate recycled or environmentally friendly materials. This shift not only lowers carbon footprints but also helps companies cut costs over time by minimizing resource dependency.

Sustainable procurement practices—such as choosing suppliers with strong carbon reduction commitments or prioritizing local sourcing to reduce transportation emissions—can create a competitive advantage, particularly as governments impose stricter sustainability mandates.

Challenge 4: Talent shortages in procurement

The procurement function has become increasingly complex, requiring expertise in data analytics, AI-driven sourcing, supplier risk management, and regulatory compliance. However, in 2025, companies are struggling to find procurement professionals with the right mix of technical knowledge, strategic thinking, and digital proficiency.

Why procurement talent shortages are a growing challenge

The talent gap in procurement is fueled by multiple factors, including digital transformation, changing job expectations, and a limited pipeline of skilled professionals. Here’s what’s making it harder to find and retain top procurement talent:

• Increased reliance on technology: Procurement roles now require expertise in AI-driven sourcing, spend analytics, and supply chain visibility platforms. Many professionals lack experience with these tools, making hiring more difficult.
• Skills mismatch: Companies need procurement specialists who understand data analytics, ESG compliance, and risk management, but most candidates have traditional procurement backgrounds focused on cost negotiation.
• Higher job expectations: Procurement professionals are seeking greater flexibility, career growth opportunities, and roles that align with sustainability initiatives, making retention more difficult.
• Global competition for talent: Companies are competing for a limited pool of procurement experts, with some organizations offering remote work, higher salaries, and better benefits to attract top candidates.

With procurement evolving beyond transactional sourcing into a strategic, data-driven function, companies need to adapt their talent strategies to keep up.

Strategies to overcome procurement talent shortages

To bridge the talent gap and build a high-performing procurement team, organizations should focus on three main approaches:

Upskilling and reskilling existing employees

Rather than relying solely on external hiring, companies should invest in training programs to develop procurement expertise internally. Certifications like Certified Professional in Supply Management (CPSM) and Chartered Institute of Procurement & Supply (CIPS) can enhance employees’ strategic sourcing and risk management skills.

Additionally, cross-training finance, operations, and supply chain employees in procurement functions can help close skill gaps without relying on new hires.

Use AI and automation to reduce workload

With talent shortages making it difficult to staff procurement teams adequately, companies should turn to AI-driven procurement automation to handle repetitive tasks. RPA can streamline supplier onboarding, contract management, and invoice processing, reducing the need for manual intervention.

AI-powered analytics tools can identify cost-saving opportunities, monitor supplier risk, and improve decision-making, allowing procurement teams to focus on high-value strategic work rather than administrative tasks.

Modernize recruitment and retention strategies

To attract and retain top procurement talent, companies need to adapt to changing workforce expectations. Offering hybrid and remote work options, competitive salaries, and clear career progression paths can help attract skilled professionals.

Additionally, procurement leaders should focus on employer branding, showcasing how their organization values innovation, sustainability, and strategic decision-making in procurement.

Challenge 5: Digital transformation and system integration challenges

Digital transformation has become a necessity in procurement, with companies adopting AI-driven sourcing, automated contract management, and real-time spend analytics to improve efficiency. Many organizations struggle with system integration issues, data silos, and resistance to new technology, making it difficult to realize the full benefits of digital procurement.

To successfully navigate digital transformation, procurement teams must take a strategic approach to system integration, automation, and user adoption.

Why digital transformation is a challenge for procurement

While digital tools offer significant benefits, many companies struggle with adoption and integration due to:

• Legacy system compatibility issues: Many businesses rely on outdated ERP or procurement platforms that do not integrate well with modern AI-driven procurement tools.
• Data silos and inconsistent reporting: Without seamless integration, procurement teams lack real-time visibility into supplier performance, spend data, and contract compliance.
• Resistance to technology adoption: Employees and suppliers accustomed to manual processes may be reluctant to embrace automation and AI-driven decision-making.
• High implementation costs: Upgrading procurement systems and training staff can be expensive, making leadership hesitant to invest in digital transformation.
• Cybersecurity risks: The increasing use of cloud-based procurement tools raises concerns about data breaches, compliance risks, and third-party security vulnerabilities.

Without proper system integration and user adoption strategies, digital procurement initiatives can fall short of expectations, leading to wasted investment and operational inefficiencies.

Strategies to overcome digital procurement challenges

To ensure a successful digital transformation, procurement teams should focus on:

Standardizing procurement technology across systems

One of the biggest barriers to digital transformation is fragmented procurement technology. To address this, companies must ensure that ERP systems, procurement platforms, and supplier management tools are fully integrated.

Using API-based integrations and cloud-based solutions allows for real-time data sharing across departments, reducing inefficiencies caused by disconnected systems.

Driving user adoption and change management

New procurement technologies often face resistance from employees who are accustomed to manual processes. To ensure smooth adoption, companies should invest in training programs, provide ongoing user support, and involve key stakeholders in the transition process.

Additionally, establishing clear change management strategies—such as pilot programs and phased rollouts—can help build confidence in new digital tools and increase adoption rates across the organization.

Strengthening cybersecurity in procurement

As procurement becomes more digitally connected, companies need to make sure that supplier data, financial transactions, and procurement systems are protected from cyber threats. Implementing zero-trust security models, multi-factor authentication, and supplier compliance checks can reduce vulnerabilities.

Procurement teams should also establish data governance policies to ensure accurate and compliant reporting, especially as regulatory requirements for digital procurement data continue to evolve.

Turning procurement challenges into strategic advantages with Ramp

The challenges procurement teams face today are not temporary roadblocks. They are ongoing complexities that require long-term, strategic solutions.

Companies that transition to digital tools and invest in procurement talent will be better positioned to navigate uncertainty. With the right technology, procurement teams can turn challenges into opportunities, ensuring their organizations remain resilient, competitive, and financially sound.

That’s why we built Ramp Procurement and Vendor Management. Ramp simplifies the entire procure-to-pay process by automating repetitive tasks and centralizing procurement, bill pay, and vendor management in one streamlined platform.

And with Ramp Intelligence, we offer a better way to manage your vendors and make the most of every dollar:

• Uncover spend insights: Get a unified view of all vendor transactions, details, and contracts in one dashboard—no more sorting through multiple data sources.
• Discover the best price on software: Benchmark your software costs against millions of Ramp transactions to see if you're overpaying, with price comparisons down to the cost-per-seat.
• Instantly track contract details: Upload vendor contracts, and Ramp’s AI extracts key details and sets renewal reminders, saving you time and preventing unexpected renewals.

A better way to manage your vendors. Learn how to save time and money with Ramp.