10 Challenges that will transform global sourcing



FutureProcurement.jpgMany challenges in the next 10 years have the potential to disrupt the dynamics of supply chains.

Organisations that begin adapting to the new procurement landscape today will be poised to seize a competitive edge in the decade ahead.

1. Risk: By 2025, procurement risk management will move away from emphasising compliance to adopting a more holistic strategy that includes total risk exposure, risk mitigation investments and risk transfer pricing. To push this transition, procurement leaders need to develop category managers who can develop next generation approaches to supplier risk management and factor new metrics into major sourcing and supplier management decisions.

2. Sustainability: Procurement functions will move beyond managing cost and seek to develop supply chains that create and sustain economic and social value. Younger professionals are particularly likely to embrace economic growth that is not dependent on exploiting resources and will ultimately encourage organisations to reject the “linear economy” of consumption and disposition in favour of a “circular economy” based on continuous use and reuse.

3. Globalisation: As emerging markets assume a greater role in the global economy, traditional demand and supply that have shaped global commerce over the last 50 years will change dramatically. By 2025, global organisations will have procurement managers based in China to source materials and services not only for their operations in that country, but for the entire organisation. To handle this task capably, procurement teams need to start developing expertise in local emerging market sourcing in China, Brazil, Russia and India, as well as other developing economies.

4. Integration: By virtue of its position within the organisation, procurement teams are aware—or should be—of all supplier and market information flowing into the enterprise and for demand and product data flowing out to collaboration partners. Looking ahead, savvy procurement teams will begin to play a critical role in sharing information about internal and external costs throughout the organisation. They will also become the go-to source for tracking information beyond costs, but also on how the organisation is meeting its sustainability and social responsibility commitments. And with its insights into cross-enterprise performance metrics, procurement will also help identify suboptimal business processes.

5. Finance: Procurement managers will need to broaden their skill sets to help their organisations adapt to the complex challenges of managing the global supply base. Many will need to develop financial acumen that rivals those of their finance counterparts. Leading companies should start taking steps to tighten the relationship between finance and procurement and to enhance the financial skills of their procurement teams.

6. Innovation: Procurement organisations will serve as a primary channel for finding new ways to create value from the global supply base, whether by streamlining new product development or outsourcing non-core functions. As a way to move this evolution forward, procurement organisations need to gain a better understanding of the role outside-entities play in driving innovation in their industries. To support this, many procurement teams will need to expand their expertise in engineering, design and new product development.

7. Collaboration: Leading procurement organisations will deploy external collaboration models far removed from traditional “buy and audit” models. Procurement professionals will need to orchestrate complex outsourcing and service management arrangements with multiple vendors. Starting now, procurement organisations need to begin moving toward establishing collaborative outsourcing and service acquisition models to replace adversarial constructs that encourage zero-sum or win/lose scenarios.

8. Transparency: Social media and the increasing acceptance of information transparency will amplify the degree of scrutiny on procurement organisations. This disruptive change, coupled with the adoption of real-time social technologies, will make procurement one of the most visible corporate functions to the outside world. To that end, procurement leaders need to encourage their teams to adopt a social mindset and operating model that will sustain the corporate brand in this more transparent era. By 2025, the best procurement officers will be as comfortable speaking to consumers, regulators and the press as they are with suppliers.

9. Information: As big data is increasingly intertwined into corporate decision-making processes, best-in-class procurement organisations will need to become more comfortable with advanced data mining and analysis techniques. These skills will be integral to all high-performance procurement organisations, especially in the consumer, high-tech and automotive sectors. Chief procurement officers in 2025 will live in a vastly different data-driven world, one in which they will have access to real-time updates on transactions and financial activities across a wide spectrum of the organisation. Leading companies need to begin assessing their master data, data management and analytical capabilities and ask how those skills and technologies need to evolve in the coming decade.

10. People: The preceding nine change dimensions make the case for an extremely different procurement function within 10 years. To adapt to this evolution, savvy chief procurement officers are already thinking about ways to find and nurture the next generation of procurement leaders, which will require them to assess their intellectual and geographic diversity and recruiting sources.

Adapted from an article published in Industry Week, authored by Niul Burton.

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