In order to sustain in the prevailing global economic conditions, a Corporate Procurement Officer’s mantra needs to be ‘Think Global, Act Local; Think Strategically, Act Tactically’, writes Milind Tailor, Director – Procurement, Asia Pacific & Supply Chain, India at Diebold Nixdorf. In this thought provoking piece, he shares with us the five big procurement trends that are going to become tomorrow’s tradition.
In today's economic environment, doing what you've always done— even if you do it very well—is no longer acceptable and certainly does not assure future success. Under pressure to contain costs and produce results despite challenging circumstances, procurement professionals must transform rather than simply improve current operations. That means adopting the philosophies, methods, and processes that will make the organization future ready. The top Procurement functions will not simply focus on making incremental improvements on what they do today. Instead, they will proactively make fundamental changes in the way they operate including how they harness digital technology, the ways they manage & use data, and how they interact across the end-to-end value chain and with business partners.
When we think about trends – in procurement or in general – we probably think about things that come in and go out of style very quickly. However, some trends have the staying power and become the “Business As Usual (BAU)” of the future. Here are some of the current procurement trends that are likely to evolve into BAU and traditions of the future:
As we talk about the future trends, it’s certainly very tempting to talk about blockchain, artificial intelligence, robotics process automation, etc., and while I will touch upon these as well but one of the things that I really see the maximum change in is the perception about procurement practitioners. The conventional stereotype of “pencil pushers” is becoming less relevant as organizations begin to rely more heavily on procurement to create value. We were often accused of being obstructive, out of touch and in conflict with the business functions. “Gatekeeper” is one word that summarizes the perception of procurement. However, that is changing and changing at a rapid pace. Today, procurement is moving much beyond just “buying stuff” by supporting product development, market research, risk management and problem solving. The transition from “cost savings enabler” to “trusted business partner” is in the making for majority of the corporations and the next level would be of “supply chain innovator”. To reach this stage, we would need to establish a vision for procurement transformation and require outcome based trust development with the stakeholders.
Procurement will be expected to deliver solutions to business and implement new innovations that align with the organizations’ strategic objectives and deliver business value. Value is in the eyes of the beholder! While for most, the value that procurement delivers is defined by the ability to generate cost savings or mitigate cost increases, they are not the only ways of generating value. Value is a multidimensional concept that provides procurement professional with a wide range of tools towards contribution to a firm’s goals & objectives. The challenge for procurement organizations however, is to expand the scope of responsibility to create more opportunities for adding value. Value is created when sourcing professional span traditional functional boundaries, functional silos are broken and end to end view is taken in to consideration. The delivery of value is one of the most important goals that we must focus on to be relevant in tomorrow’s world.
Today we are more connected than ever. The developments in digital technologies have completely changed our lives – in the old days, we’d have the morning paper delivered to our doorsteps and read it on the way to work or while sipping the morning cuppa. Today, the news stories are automatically delivered to our mobile devices, and we scan them while enjoying the beverage that was ready and waiting for us at the local coffee shop after we ordered it via mobile app. Technology has enabled us to gather a lot of data and convert it into usable information, which can enable us to learn about the future & shape it to our advantage. This is happening in Procurement as well & fundamentally transforming the function. We already see that with IoT & Big Data, procurement is becoming smarter & more predictive than ever, yet to me this just the beginning of the transformation. As analytics gets more dynamic, procurement teams will have the data they need to make better decisions than ever before. This will mean that procurement finds itself becoming increasingly involved in the development, rather than merely the execution, of business strategy.
Enabled with data, future procurement teams will be much closer to the strategic leadership of the business. Procurement can be expected to play an active role in the financial thinking & analysis. Analytics will give the organizations access to valuable data about their supplier’s business as well as customer priorities and align their supply chains to customer priorities. Several business models built around procurement have met with grand success – Amazon & Flipkart are classic examples who have changed the face of retail by managing a complex network of supplier thru use of technology. In both cases, procurement shaped the strategy and lead the change. In future, procurement teams will be moving decisively from “serving” a business to being a truly integrated part of its management and long-term strategy. Data will be the new Global Currency & the key will be to unlock its true value.
Today, strategic spend is managed by Global Categories or on regional level with strategic &/or preferred suppliers. However, the challenge is that the Tail spend and countries with smaller spend are not managed or partially managed leading to missed savings and also compliance risk. Intelligent & innovative organization models are required to manage this untapped spend and/or small areas as well as drive the compliance. Global Shared Services Models, either outsourced or captive, would be used extensively to expand the reach of procurement organization in the future. Organizations could have one central global shared services center for all countries, while providing their own services from human resource to finance and accounting to marketing to travel management. It’s not that shared services model does not exist today, but its adoption is very fragmented and only a few transactional pieces of procurement end up folding into finance shared services model (accounts payable). As more organizations realize the strategic nature of procurement, an integrated vision for shared services in procurement will get into prominence with more focus on adding value and will encompass numerous activities like -
Sourcing Support – Specialized sourcing analyst can support category manager with data analysis, supplier profiling, e-sourcing requests, RFP analysis and preparations for fact-based negotiations.
Spot Buys – Handle one off purchases, ensuring proper follow up for on time delivery.
Master Data Maintenance & Compliance – Maintain the master data in the ERP, ensure compliance to the data integrity, requisition to pay and reporting.
Contracts Services – Maintain all contracts centrally and also monitoring contract related follow-up activities.
The world will be moving from Knowledge Based Society to a Human Economy, where abilities like collaboration, communication, creativity & flexibility are in demand. Innovation, authenticity & services are the driving force of the times. The classical career ladder to CEO would start in procurement and require CPO experience. This is due to the fact that the CPO would possess the complete supply chain “data treasury,” the necessary IT and risk assessment skills and comprehensive budget management expertise. Data analysis, IT competence, risk and budget management would be the four future-ready proficiencies, making CPOs the only logical choice for the CEO position.
Any business function is only as good as its people — and particularly its leaders. But the new generation of procurement leaders will need new skills. And since the leaders of tomorrow are the recruits of today, procurement teams need to think carefully about the future as they make recruitment decisions. Future procurement leaders need to be comfortable looking at complex categories, information on suppliers, and third-party data on supply chains, suppliers and markets. Beyond the traditional skills in category expertise and negotiation, the ability to collaborate and build lasting relationships with value chain stakeholders will be central.
Procurement will employ people from variety of backgrounds – statisticians, physicists, social scientists and financial risk specialists, to name a few. Further, the procurement professionals will be uncompromising on issues of sustainability and ethical practices. They will operate on the mindset of reuse rather than waste. Therefore, the future procurement teams should be ready to think of themselves as business, rather than simply function leaders.