Procurement Ahead: Your Action Plan to Prepare Now

Over the last two decades, procurement function has not only become one of the most important and powerful functions in organizations but has come to a strategic focus rather than an operational focus. Going forward this function is expected to mature catalyst for organizational transformation.

Considering the procurement managers as transformation catalyst, they will have multiple challenges and opportunities while managing this function in the future. The procurement manager can surely help the organization in a substantial way by successfully handling these challenges:

Data management

The MNCs with world-wise establishments have huge data for spend, supplier base, pricing, etc. and it’s becoming more complex with a variety of supply chain models and solutions. Management of the data and extracting the required information at the right time with appropriate analysis for designing solutions is the demand of the current and future procurement professionals. 

The biggest emerging challenge in front of professionals is handling this easily available huge data.

However, this challenge is going to open up a lot of job opportunities like data analysts, data managers and senior data consultants. These jobs will further get developed toward senior positions which will support the CEOs and CPOs offices.

Digitization of procurement processes – less human interface 

Automatized triggering for floating RFP to suppliers, online benchmarking for competitiveness and direct system allocation of share of business volumes considering performance indicators is the upcoming procurement excellence. 

This will help organizations to remove personal biases in decision making with minimal human intervention. This will minimize the face to face negotiations and reduce the negotiation lead timelines too.

Financial risk assessment

Over the years, lot of cases of financial risks and mismanagement of working capital are cropping up from small to large organizations. This will remain a big challenge in front of procurement managers due to shrinking profit levels and scarcity of cash to run the business. 

The procurement professionals would need to seriously look at this aspect while taking sourcing decisions and keep monitoring the financial performance of the business partners.

Collaboration and business partnership approach than a supplier supplying parts or services – Integrated solutions 

Over the years, the buyer-supplier relationship has got converted into business partner relationship in which the business partners have been involved in lot of design, process optimization solutions for operational efficiencies. In future, the business partners will not only look at buyers as partnering for suggestions/ solutions for some processes but will be offering total end to end solutions so that their added value is more and can compete on value propositions than part level or process by process costs.

Cost optimization – new collaborative models needed 

The biggest upcoming challenge is the shrinking cost optimization opportunities. In last few years most of the matured procurement teams in organizations have been working on cost reductions from suppliers with operational efficiency improvements. Negotiations, cost models implementation, eRAs, benchmarking and other initiatives. These initiates have been quite successful for long years but in recent years the scope of cost reductions has started going down. 

Keeping this in mind, the buyers will have to work for more collaborative, long term and total solution provider partnership approach rather than localized efficacies of cost reduction on parts or small processes.

Global sourcing 

Most of the organizations are working on best cost country sourcing and also moving the sourcing hubs to emerging economies like India and Eastern Europe. However, the governments in many matured economies are politically pushed to ensure that the businesses in home countries are protected.

For procurement professionals, this is going to be a challenge as the local governments will push for anti-dumping duties for imports whereas the same quality partners might not be available locally. On the other hand, this will also open up lot of opportunities for localization with industrial growth opportunities locally.

Supplier responsiveness is the key 

In the changing market scenarios, the high level of responsiveness towards customer expectations and changing requirements is going to be very critical parameter on which the business partner performance will be evaluated. While selecting the suppliers/business partners the procurement profession needs to keep this in mind along with cost competitiveness and financial stability. 

Supplier expectations in comparison against competition

While organization expectations from business partners are increasing, the expectations of suppliers are also increasing from their customers. Many suppliers work with multiple customers which are competitors. This gives privilege to suppliers to compare their customers with each other and naturally increases the expectation level for professional partnership. The suppliers are looking for more and more high level of long term visibility of business association, volumes and transparency in procure to pay process. They will also be expecting strong support in real sense in their bad time of financial or operational crises.

Networking, keeping updates 

Development of a strong network has always been a key success factor for procurement professionals which will further increase its importance.  There is a growing need of developing a strong network to get quick information, alerts, faster and early signals of new happenings, upcoming trends, crises or emerging scenarios in various part of world.

Environment focus 

Whatever we do in business is ultimately for human being and the importance of preserving nature for human cannot be ignored.

Environmental protection is going to be a most impacting and influencing factor in sourcing decisions as the long term sustainability of the business association will come at stake if these factors are not considered in advance.

Healthy Mind – Last but not the least 

There is a growing awareness in people for “peace-full mind’’. Though lots of people around the world realize that only a calm and peaceful mind can generate ideas and innovation, very few really work on this. 

With the bombardment of data, analytics and pressure for performance, one should not forget the importance of peaceful and calm mind. Procurement professionals will require to be in correct state of mind for the success of the business!