A new report from Ivalua, the enterprise AI platform for procurement, has found that 52% of businesses say cost pressure is driving “skimpflation” in their supply chains – quietly trading down on component or ingredient quality to protect margins. In the UK, this rises to 64% – the highest of any market surveyed.
The report finds businesses are struggling to balance cost, risk and resilience. Constrained by manual processes and limited supplier visibility, the fastest route to saving is skimpflation. This is happening on two fronts: businesses are either reworking product specifications to bring the cost of goods down (59%) or switching to cheaper suppliers or goods outright (36%). The savings, however, rarely reach the consumer. Among businesses that made those changes, just 10% cut their prices, while 43% raised them and 47% left them unchanged. The result is a quiet trade-down where shoppers pay the same, or more, for products and goods made to a lower standard.
The squeeze is showing up elsewhere too, as more than half (53%) of businesses experienced delayed product launches, likely tied to supplier quality issues, poor collaboration or missed warnings of disruptions. And consumers aren’t the only victims of the scourge, as 49% of businesses are seeing skimpflation from their own suppliers.
“Skimpflation is the silent inflation. It never shows up in the headline CPI figure, but consumers feel it every time something breaks sooner, wears thinner or runs out faster,” says Alex Saric, Smart Procurement Expert at Ivalua. “But short-term cost and quality decisions can conceal long-term risk. Businesses spend years building brand loyalty, then a single reformulated product or cheaper component undoes it. The firms cutting hardest today aren’t just protecting margins. They’re borrowing against their reputation, and that debt comes due the moment consumers notice the difference.”
Brittle Foundations Behind the Squeeze
Businesses are also rethinking where they buy from as cost pressure, shortages and trade disruption reshape supply chains. Over the past year, organisations have replaced, reduced or exited suppliers across every major region, including Eastern Europe (44%), China (43%), Western Europe/UK (40%) and The Middle East (32%).
Supplier cost inflation (33%) ranks as the biggest trigger for these regional shifts, closely followed by shortages of critical components (32%) and efforts to reduce tariff and trade exposure (30%). The pressure of managing a supply base in constant flux across every major region is forcing businesses to make decisions faster than traditional processes allow.
To address this, 76% of organisations are using or experimenting with AI, with a further 14% planning to adopt it. Among those already using it, 89% say it has been effective at identifying and qualifying new suppliers and sourcing hubs. The catch is that almost half (44%) admit their supply chain data isn’t AI-ready. Until that gap closes, AI won’t fix supply chain problems, it will expose them.
“When businesses can’t see across their supply chain, cost pressure forces their hand. They cut components, switch to cheaper suppliers and hope customers turn a blind eye,” concludes Saric. “AI changes that by giving procurement teams the visibility to find savings and qualify suppliers before quality problems reach the customer. But it only works on clean, connected data. Run it on spreadsheets and scattered systems and it doesn’t surface better decisions – it just makes the wrong ones faster. Get the foundations right and businesses stop having to choose between protecting their margins and protecting their customers.”
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