Supply Chain Roundtable: As Summer Heats Up, Demand Could Be Too
Despite consumer sentiment mired at historic lows, the ISM® PMI® Reports indicate companies are stocking up inventories because they are confident demand will be there — yet another sign of the U.S. economy’s resilience.
The monthly roundtable of experts from Institute for Supply Management® (ISM®) examined that dynamic, as well as other issues supply chain organizations are dealing with as the summer heats up.
Around the table: Michelle Rohlwing, MBA, ISM Manager, Product Development, Innovation and Learning; Charlotte de Brabandt, DBA, a procurement and supply chain executive, author and digital transformation expert who serves as Co-Chair of the ISM Thought Leadership Council; and Jeffrey Wincel, D.Min., MBA, former senior vice president and CPO at NXP Semiconductors.
They discussed how procurement organizations can convey their value beyond cost savings (though that’s still the primary metric they’ll be graded on) and how AI will change the profession in the next five years.
Inside Supply Management® regularly tries to spotlight often-overlooked supply chains: those that make events possible. In the final question, the panelists expressed appreciation for those working behind the scenes — whether helping facilitate sports spectacles or pool relaxation — to make their summer more enjoyable.
Q: The ISM® PMI® Reports indicate companies are building inventories despite economic uncertainty. What signals are supply chain leaders seeing to justify that confidence, and what are the risks?
De Brabandt: Companies operate in an environment where uncertainty has become the norm rather than the exception. Many supply chain leaders are building inventory not necessarily because they are confident in demand growth, but because they are trying to create optionality. Geopolitical tensions, tariffs, climate-related disruptions and ongoing supplier constraints have shown how quickly supply chains can be impacted. Meanwhile, advances in predictive analytics and AI are giving organizations greater visibility into demand patterns and risk signals, allowing them to make more informed inventory decisions. The challenge is finding the right balance. Too little inventory can expose a business to disruption, while too much can tie up working capital and create inefficiencies if anticipated demand does not materialize.
Rohlwing: Companies are stocking up more inventory because they see signs that demand might rise soon and that supplies could get harder or more expensive to get. New orders are ticking up, deliveries from suppliers are slowing, and potential tariffs are pushing some businesses to buy early. At the same time, shipping costs are climbing, which makes leaders want to lock in materials before things get worse. The risk is that some of this demand may just be temporary buy‑ahead activity rather than real growth. If that’s true, companies could end up holding too much expensive inventory at a time when the economy is still a bit volatile.
Wincel: I think it’s important to understand that there is inventory and then there is inventory. The best-managed procurement and supply organizations do not treat all inventory the same, they analyze risk factors and build inventory based on potential interruption or delay. Coming from the semiconductor industry, I witnessed a global supply crisis that was created when supply was treated as unconstrained and non-fungible. Customers dropped demand signals assuming (incorrectly) that the capacity and ultimately the supply would be waiting for them when they returned. The current building of inventory may be a function of this type of risk analysis and perhaps not so much on the confidence of hot market demand.
Q: Procurement has long been measured on cost savings, but many organizations now talk about resilience, innovation and supplier collaboration. How should procurement leaders quantify and communicate those forms of value to the C-suite?
Wincel: This is the “what was old is new again” question. Every couple of years, the idea surfaces that cost savings are of lesser importance to procurement organizations and some other KPIs are going to take its place. The kernel of truth in this is that business cycles require adapting to current conditions and prioritizing immediate demands. In my nearly 40 years of procurement, I have seen cost savings — be it called value management, total cost of acquisition/ownership (TCA/TCO) or something else — never move more than one place from top priority. In slow markets, cost savings become increasingly important, while in hot markets supply continuity rises to the top — but cost savings is always a close second. The yardstick for any procurement team is always how well it performs in managing and reducing costs. It won’t be the only measure, and integrated supplier management provides the broadest means to supplier value management. Cost savings as the key procurement metric is here to stay.
Rohlwing: Historically, procurement has notoriously been judged on cost savings, but today leaders are expected to show how they strengthen the business in other ways. Some examples: making the supply chain more resilient, helping the company be more innovative, and building stronger supplier partnerships. To get the C‑suite’s attention, procurement needs to translate those efforts into simple results. That means showing how supplier collaboration prevents disruptions, speeds up product launches, reduces risk or creates new revenue opportunities. Metrics like fewer supply interruptions, faster time‑to‑market, supplier‑led innovations, or reduced total cost and risk help make the value of these initiatives clear.
De Brabandt: Cost savings will always matter, but the role of procurement has expanded significantly. Today’s procurement leaders sit at the intersection of risk, innovation, sustainability and business growth. To communicate value effectively to the C suite, procurement needs to connect outcomes to business objectives. That means quantifying how supplier innovation accelerates growth, how resilience reduces disruption costs, and how strategic partnerships improve speed to market. Executives respond to metrics that impact revenue, risk and competitiveness. The more procurement can demonstrate its contribution to those areas, the more it will be viewed as a strategic business partner rather than simply a cost-management function.
Q: A quote from a recent ISM webinar: “Negotiators using AI will replace negotiators not using AI. That’s a promise.” Five years from now, what will supply chain professionals spend significantly less time doing because of AI, and what will they spend more time doing?
De Brabandt: Five years from now, supply chain professionals will spend far less time gathering data, creating reports, analyzing contracts and managing routine transactions. AI will increasingly handle those repetitive and data-intensive activities at a speed and scale humans simply cannot match. What will become more important are the uniquely human skills: strategic thinking, relationship building, stakeholder alignment, creativity and decision-making in complex situations. The winners will not be those who compete with AI, but those who learn how to work alongside it. AI will augment procurement professionals, allowing them to focus on higher-value activities that drive innovation and business outcomes.
Rohlwing: In five years, AI will take a lot of the busywork off supply chain teams’ plates, like cleaning data, running forecasts, tracking suppliers and handling routine negotiations. Instead, people will spend more time on strategic work that actually moves the business forward: building stronger supplier relationships, making judgment calls on complex decisions, shaping overall strategy with other teams, and guiding how AI gets used. The job should shift from firefighting and spreadsheets to a more strategic position.
Wincel: AI is merely the next progression of procurement automation that has been going on for years, perhaps decades. Automation tools have allowed transactional repetition to become a far less time-consuming job for buyers and commodity managers. The success of AI does not lie in its availability, but in the data management and analytics that it enables. Large language models depend on the data sets available for reference and the query structures posed. While data sets and data integrity will be improved through repeated cleansing, the query structure will be far more dependent upon the skill, creativity and thought clarity of the user. When all procurement organizations have AI tools available, none will have any advantage. The advantage will come through higher order professional skills and strategic thinking of the next generation procurement professional.
Q: What’s a summer product or experience — concerts, airline travel, amusement parks, baseball, barbecues or something else — that makes you think, “If people only knew how much supply chain work goes into that”?
Rohlwing: In the summer in Arizona, our favorite thing to do is float in the pool with a cocktail. It’s amazing how much supply chain work makes that simple moment possible. Chlorine and pool chemicals come from a fragile national supply chain that can falter with one plant outage. The pump, filter, and replacement parts have components sourced from multiple countries and need to arrive on time so our pool doesn’t turn green. Even the drink in my hand depends on cold‑chain citrus, global spirits bottling, and appliances built from chips and metals that have all seen shortages. It’s funny to me that doing nothing in the pool is actually the end result of a whole lot of supply chains working efficiently.
Wincel: Also being an Arizona resident, I’ve had the opportunity to attend the Waste Management Phoenix Open at Tournament Players Club (TPC) of Scottsdale. As a member at TPC, I get to see the immense effort that goes into hosting the event. While the tournament is played the first weekend in February, the materials for construction begin arriving on-site around October 1. Construction of the stands begins within a couple of weeks afterward and continues almost to the week before the tournament. Then hospitality, merchandise, parking, spectator logistic, and more all begin merging at the event site. This all happens while the course remains open, with over 200 golfers per day. Then comes the event — really, a series of events — where over 700,000 spectators park, enter the event site, watch concerts, have food and drinks, buy merchandise and make their way home. The toilet facilities are a supply chain in and of themselves. After the tournament, everything is taken down (within two months) and the course returns to its original condition — again, while being open to golfers. Seven months later, the process begins all over again.
De Brabandt: For me, it’s the 24 Hours of Le Mans sports car race. In 2017, I was part of the procurement team supporting Porsche Motorsport, and I personally negotiated more than 300 contracts and supplier agreements related to the race. Most people see the drivers, cars and the excitement on the track, but very few realize the enormous supply chain operation required behind the scenes. Every component — from vehicle parts and specialized equipment to logistics, hospitality, technology, transportation and temporary infrastructure — must arrive at exactly the right place and time. Hundreds of suppliers and partners have to work together flawlessly, often under intense deadlines where there is little room for error. What makes Le Mans so fascinating is that success isn’t determined only by what happens during the race itself, but also in the prior months of planning, sourcing, contracting and coordination. World-class performance on the track is only possible because of an equally world-class supply chain operating behind the scenes. If people only knew how much procurement, logistics and supplier collaboration go into those 24 hours, they would view the event very differently.
(Photo credit: Getty Images/Johnce)