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The next decade of procurement

During the eWorld Procurement and Supply event in March, Charlotte Carter, Solutions Specialist at headline sponsor Proactis, identified and explored what we can expect for procurement in the next decade.

Despite the current challenges which businesses around the world are facing, they cannot just stop, and her outlook on the changes that are coming down the line for procurement, based on the projects she was working on, will still hold true as we emerge from the current situation.

In McKinsey's "A next-generation operating model for source-to-pay" it is identified that effective procurement has long been recognised as a source of competitive advantage, but achieving excellence requires a concerted effort to align a variety of capabilities, insights, and activities in an integrated manner. While the previous decade has been very value-driven, with good practice leading to savings, the next decade’s onus is on how that value is realised.

Ultimately, Procurement should always start with strategy and focus on aligning that to the business are we in growth or profit mode for example? And when it comes to value capture, it is about identifying value already available from your business – being the business partner that brings value to the table, aligns to other department needs, and has that strategic position to identify opportunities. Value sustainment is more about implementing a solid structure which prevents said value from leaking out.

Through thousands of implementations and associated dialogue, it is clear that value can be realised through data, collaboration and digital processes, where appropriate. This eventually leads to:
  • Recognition at board level.
  • Robust alignment with Finance.
  • Strong collaboration with all departments – where the Procurement team is a strong strategic partner.
  • Well managed suppliers and contracts – accountable for performance and minimal tail-end spend.
  • Seamless automation and self-service processes across Source-to-Pay.
With these considerations in mind, here are the four areas that were identified as likely to, and needing to change:

Business partner approach
Quite simply, the internal awareness of Procurement must be raised. Many Procurement functions just sit within another department, but they must strive to be more visible around the organisation. Procurement must help functions around the business understand what ‘procurement’ actually is, and why it’s crucial to success in the business environment. And one way to do this is by helping customers achieve goals and explaining the strategy to achieving them. Tools are available to do just that, and in doing so, closer relationships with Finance will be created. The more the Procurement team helps others, the greater the impact within the business.

Digital and process automation
It’s widely agreed  that the digital infrastructure of many businesses is way behind consumer digital environments in terms of capabilities, meaning that employees experience a "digital downgrade" when at work. Solutions now need to deliver a consumer-style experience that meet the employees of today and the future, with functions that are extremely intuitive, fast and easy to use.

Despite this, The Hackett Group reports that only 32% of executives have implemented a digital procurement strategy – even though many tasks can be digitised with minimal change to process. What’s preventing more digital adoption? Is it budget, lack of tools, and/or a preconception that “making anything digital” needs to be a complex process – which of course, is not the case?

Data
You are only ever as good as your data, so ensuring that both Procurement and Finance are categorising data in the same way is vital. For example, having access to extensive information about past, present and future purchases is a key strategic tool. Better access to data will drive better strategy, to predict, plan and therefore model. Whilst there is plenty of data – around things such as spend, transactions, sourcing cycles, lead times, etc, – it is often not integrated. Organisations need a view across all business areas, something which Procurement is perfectly placed to do.

In the current climate, however, actionable data is needed immediately, rather than having to wait for it to be included in a report. This is where AI can come into play. It can show the situation and what the most likely outcomes will look like, leading to more time saved, more compliance and less risk.

Collaboration
Managing all relationships will be key, but particularly for supplier collaboration as Corporate Social Responsibility (CSR) becomes more and more important. It’s now every business’ responsibility to look at sustainable supply, ethical manufacturing and labour, fair contract terms for suppliers, and economical logistics. But, supplier collaboration is a joint activity that can increase the capabilities of the supplier and business, in areas of cost management, process improvement, and product/service innovation.

For Procurement Managers, supplier collaboration is among the top priorities in today’s on-demand age where supply chain competitiveness is a value creator. To go about creating this value, Procurement leaders need to make data-backed supply chain decisions – with better visibility and insight into who it is the company is dealing with.