How are CPOs Preparing for and Overcoming Inflation, Geopolitical Risks, and Changes in Trade/Tariff Policies? ~Considerations Including Challenges Facing Japanese Corporate Procurement~

Overview

EY Japan has released a research report titled "How are CPOs Preparing for and Overcoming Inflation, Geopolitical Risks, and Changes in Trade/Tariff Policies? ~Considerations Including Challenges Facing Japanese Corporate Procurement~". Based on a global CPO (Chief Procurement Officer) survey, it analyzes the challenges and strategic responses facing procurement departments in Japanese companies. ## Key Points ### 1. Report Overview - **Publisher**: EY Japan - **Publication Date**: July 1, 2025 - **Survey Target**: Global CPO survey (also analyzing Japanese corporate characteristics) - **Main Theme**: Strategic evolution and challenge response of procurement departments ### 2. Three Major Challenges Facing CPOs - **Inflation**: - Continuous rise in raw material and component prices - Soaring energy costs - Increasing pressure on labor costs - **Geopolitical Risks**: - Intensifying US-China confrontation - Prolonged Ukraine situation - Concerns about Taiwan Strait issues - **Changes in Trade and Tariff Policies**: - Additional tariffs under Trump administration - Expansion of protectionist policies - Supply chain fragmentation risks ### 3. Inflation Response Strategies - **Advanced Price Management**: - Continuous monitoring of market prices - Building price prediction models - Introduction of dynamic pricing - **Cost Reduction Measures**: - Specification review and standardization - Expansion of joint purchasing - Price fixing through long-term contracts - **Supplier Collaboration**: - Transparency in cost structure - Joint efforts for productivity improvement - Innovation partnerships ### 4. Strategies for Addressing Geopolitical Risks - **Supply Chain Diversification**: - Breaking away from single-country dependence - Promoting regionally distributed procurement - Utilizing friend-shoring - **Enhanced Risk Assessment**: - Country risk assessment systems - Scenario planning - Setting early warning indicators - **Ensuring Flexibility**: - Securing alternative suppliers in advance - Reviewing inventory strategies - Promoting modular design ### 5. Adapting to Trade and Tariff Policy Changes - **Nearshoring Strategy**: - Production transfer to neighboring countries - Building regional supply chains - Developing tariff-avoiding routes - **Strengthening Trade Compliance**: - Refining origin management - Optimizing tariff classification - Promoting FTA/EPA utilization - **Policy Monitoring**: - Continuous understanding of regulatory trends - Participation in lobbying activities - Collaboration with industry associations ### 6. Challenges Specific to Japanese Companies - **Organizational Challenges**: - Distance between management and procurement departments - Insufficient strategic positioning of procurement - Limited role as manufacturing support function - **Digital Lag**: - Insufficient AI/ML investment - Immature data utilization - Remaining legacy systems - **Talent and Skill Shortages**: - Lack of strategic procurement talent - Absence of global response capabilities - Unclear career paths ### 7. Sustainable Procurement Challenges - **Current State of Japanese Companies**: - Insufficient linkage with management strategy - Inadequate budget allocation - Lack of effective initiatives - **Gap with Global Companies**: - Delayed systematization of ESG evaluation - Insufficient supplier engagement - Qualitative inferiority in information disclosure ### 8. Direction of Digital and AI Utilization - **Automation of Procurement Processes**: - Efficiency through RPA introduction - Demand forecasting with AI - Automatic ordering systems - **Data Analytics**: - Advanced spend analysis - Supplier performance management - Risk prediction models - **Digital Twin Utilization**: - Supply chain visualization - Simulation analysis - Optimization algorithms ### 9. Recommendations for Organizational and Talent Transformation - **Redefinition of Procurement Function**: - Evolution to strategic business partner - Participation in management-level decision making - Contribution to value creation - **Talent Development and Acquisition**: - Hiring highly specialized talent - Continuous skill upgrading - Global talent exchange - **Organizational Culture Transformation**: - Innovation orientation - Data-driven culture - Agile decision making ### 10. Roadmap for Implementation - **Short-term (6-12 months)**: - Current state assessment and issue identification - Execution of quick wins - Pilot projects - **Medium-term (1-2 years)**: - Building strategic procurement systems - Developing digital infrastructure - Talent development programs - **Long-term (3+ years)**: - Complete transformation - Ecosystem building - Continuous innovation ### 11. Critical Success Factors - **Management Commitment**: Recognition of procurement's strategic importance - **Securing Investment**: Appropriate investment in digital and talent - **Change Management**: Organization-wide consciousness reform - **External Collaboration**: Utilizing partnerships - **Continuous Improvement**: Establishing PDCA cycles This report provides practical guidance for Japanese corporate procurement departments to evolve as strategic functions while responding to global challenges and overcoming inherent organizational and cultural constraints. It particularly emphasizes that closing the gap between management and procurement, promoting digitalization, and strengthening talent are keys to improving competitiveness.