Sourcing Strategy

7 strategic sourcing trends for 2021 and beyond

Kait_Ries.pngBy Kait Ries, Digital Marketing Manager, Bid Ops (a strategic sourcing software powered by AI)

Strategic sourcing has been growing in importance in the world of procurement. The traditional sourcing strategy of picking the supplier who offers the lowest cost worked for centuries, but does not cut it in a modern, globalised business climate.

Strategic sourcing has proven to be far more effective. In 2020, we saw the value of this approach as a pandemic pushed supply chains to breaking point. Consumer buying behaviour was upended, while many companies were forced to pivot and produce high-demand products such as personal protective equipment (PPE).

Adding to the challenges, there were travel and shipping restrictions, and many employees rapidly shifted to working from home.

Based on developments in procurement that were already underway - and the many lessons learnt during 2020 - it is clear that strategic sourcing is more important than ever. Looking to the new year and the near future, here are seven strategic sourcing trends for 2021 and beyond that every procurement professional should have on their radar:

Sustainability in procurement on the move

Marcell_Vollmer.jpgBy Dr Marcell Vollmer, Daniel Weise, Wolfgang Schnellbächer, Michael Jonas and Ann-Kathrin Merz (all professionals at Boston Consulting Group)

Growing momentum on bringing sustainability into supply chains
Companies are shining a spotlight on the environmental dimension of sustainability. This is evident especially in the automotive industry. With a small share of a car's parts responsible for most of the environmental harm, automakers have homed in on these categories and their suppliers to drive impact. With some suppliers, such as battery producers, renewable energy commitments are expected to yield an improved carbon footprint. For more difficult to decarbonise materials, such as aluminium and steel, automakers are leveraging design to use more recycled materials and make the cars themselves recyclable. However, there is more to it. The importance of actions like these to address Scope 3 emissions upstream will only rise with the growth of electric cars. Also, over-arching design and architectural levers play a role. While automakers have responded to sustainability challenges with innovation, the true test lies in whether they can sustain this momentum to meet their ambitious targets. Comprehensive ways to measure emissions and to track the progress of abatement initiatives are first and important steps.

Efficient public procurement comes to the rescue

Bosio_Galiano_Reyes_200.jpgBy Erica Bosio, Programme Manager: Growth Analytics, Development Economics Vice Presidency, World Bank, and
Emilia Galiano, Private Sector Development Specialist, and
Nathalie Reyes, Operations Analyst: Private Sector Development, World Bank

Governments around the world are wondering how to save their small- and medium-sized enterprises during the economic downturn caused by the coronavirus (COVID-19). Look no further: just pay your bills on time. Public procurement represents approximately 12% of global gross domestic product (GDP). If governments paid all receipts due to their contractors within 45 days, between $1 trillion to $4.65 trillion in fresh liquidity would enter the private sector, supporting firms' cash-flow needs and preventing them from accessing credit. This is not trivial. It is of the same order of magnitude that G20 countries have so far committed ($6.3 trillion) for fiscal support measures to alleviate the effects of the pandemic.

Silk vs. steel: rebuilding supply chains after COVID-19

Kelly_Barner.pngBy Kelly Barner, Owner and Editor, Buyers Meeting Point

Supply chain disruption was a popular topic long before the world was seized by the coronavirus pandemic. Geopolitical disturbances, natural disasters, labour strikes and changing regulations were already factors, and anyone that has been in supply chain during the last decade has seen all of these play out.

At this point, the phrase 'supply chain disruption' seems as natural as 'supply chain' must have seemed the first time people put these two words together. It would be easy to assume that all supply chains have been disrupted, especially given the breathless news coverage and layman consumer's perception that toilet paper and meat are impossible to purchase. While most supply chains have been affected by today's fluid, unpredictable conditions, few have stopped altogether.

Emergency purchasing cited for non-competitive procurement

StephenBauld_100.jpgBy Stephen Bauld

Emergency procurements are one of the most common reasons cited for non-competitive procurement

Very often there are pressing needs that make more conventional procurement methods unrealistic. Emergency purchasing procedures are followed in unforeseen situations because immediate procurement of materials or services is necessary to continue operations of an essential department, or for the preservation of the health, safety and welfare of people, or the protection of property when there is present, immediate and existing danger.

Depletion of stock through normal routine usage is not considered an emergency for the purpose of invoking such procedures, nor is poor planning.

Unfortunately, the abuse of emergency procurement is not only notorious but extensive, and it seems to be omnipresent in all municipalities in North America.

How a data-enabled supply chain can help the vaccine rollout

KevinSample_100.jpgBy Kevin Sample, Senior Consultant at healthcare supply chain firm GHX

As COVID-19 cases continue to rise, the spotlight is once again on the healthcare supply chain

The rollout of the COVID-19 vaccine has once again put the global healthcare supply chain under the magnifying glass. As inoculation programmes are established, the demand for full vaccination kits, which include syringes, glass and personal protective equipment (PPE), is likely to put strain on the supply chain. If not addressed properly, this could lead to delivery delays and critical supply shortages similar to those seen earlier this year. So, what can hospitals and other healthcare providers do to mitigate the supply chain risk they faced at the onset of the pandemic?

A large part of the answer lies in how they use data.

Streamlining public works procurement

BosioDjankov.pngBy Erica Bosio, Programme Manager: Growth Analytics, Development Economics Vice Presidency at the World Bank, and
Simeon Djankov, Director, World Development Report 2019

Seventeen years ago, in the inaugural Doing Business 2004 study, our team found that it took as few as 18 procedures to start a business in Algeria, Bolivia and Paraguay, or 19 in Belarus, Chad and Colombia. The same process required as many as 152 days in Brazil, 168 days in Indonesia, or 215 days in the Democratic Republic of the Congo. We argued that it should be possible to reduce the number of procedures and the time required to start a business.

We suggested at the time that this could be done in one step online, from anywhere. Today, this is exactly what entrepreneurs in Tbilisi, Georgia, or Auckland, New Zealand, can do.

Sales trends for 2021: procurement needs to be solutions salespeople too

SueBarret_100.jpg

"One of the sales trends for 2021 is procurement needs to be solutions salespeople too," says By Sue Barrett, Founder and CEO of www.barrett.com.au and www.salesessentials.com

Times are, indeed, changing with the procurement function becoming increasingly important as a conduit, an orchestrator if you will, for the co-creation of value with suppliers and internal stakeholders as well as right down the value chain to end-consumers and back again.

Procurement can no longer rest its case on 'lowest cost', 'cheapest price' or 'supply of goods and services'; it must assume responsibility for the creation and delivery of real value beyond price and general supply.

This sales trend highlights how the skills, knowledge and mindset of procurement professionals are being expanded to include the capabilities of highly-competent solutions sales professionals.

Perfect delivery: the new rules for survival, innovation and growth

SteveBanker_100.jpgBy Steve Banker, Vice President: SCM, ARC Advisory Group

Customer loyalty begins with excellent service and timely delivery. Companies have come under pressure to unify their buying experience across channels, capture orders easily, and deliver them rapidly and accurately.

When it comes to gauging the loyalty of an organisation's customer relationships, the net promoter score (NPS) survey typically represents best practice. The NPS is correlated with revenue growth and calculated based on responses to a single, simple question: how likely is it that you would recommend this company/product/service to a friend or colleague?

COVID-19 vaccines and the supply chain challenges

AmbrishKumar_100.jpgBy Dr Ambrish Kumar, Founder and Group CEO, AAA 2 Innovate Pvt Ltd

The world is waiting for the COVID-19 vaccine. Distributing it globally from its points of production is a gargantuan task. In fact, it is a task some feel should best be left to the expertise of military logistics.

The vaccine is beginning its rollout on the heels of large scale, global logistics and distribution stoppages. Those tasked with its distribution are on the backfoot.

The spread of the virus has grown exponentially in certain regions, compelling lockdowns and an unprecedented hindrance to countless businesses. One of the most affected sectors, since the very beginning and still, is the aviation and air travel sector.

Why CPOs should report directly to CEOs

Betina_Nygaard.jpgBy Betina Nygaard, CEO, SCANMARKET A/S

Short-term results like savings are here to stay, but Procurement is also responsible for longer term results like improving profitability, time-to-market, innovation and risk management. It is time to broaden both the way Procurement is judged and also its role within the reporting structure.

Ingredients for a successful IT sourcing strategy

Ronald_Flockhart_100.jpgHow do you take your information technology (IT) procurement beyond price negotiation and vendor management?

In this month's SmartProcurement, Ronald Flockhart, Group Head: Sourcing and Category Management at First National Bank, takes a look at creating a meaningful and relevant IT sourcing strategy that considers long-term, holistic perspectives to maximise enterprise value, while minimising costs and optimising risk exposure.

Alexander the Great needed great supply chains

MilitaryLogistics_150.pngPopular history tells us that Napoleon said "an army marches on its stomach".

However, he was not the first military leader to understand that combat is only one part of a successful military campaign.

Alexander the Great's 'greatness' was not owing to his ability to dream up bold moves and cut a dashing figure in the saddle: he was a master of supply chain management and could not have succeeded otherwise.

COVID-19: a run-down of the effects of the pandemic on logistics and supply chains

AmbrishKumar.jpegBy Dr Ambrish Kumar, Founder, LogYcode Tech Solutions

The COVID-19 outbreak that engulfed nations across the globe is forcing governments, national and international authorities to take unprecedented measures, such as the lockdown of cities and the restriction of people's movement to check and control the spread of the pandemic. This, consequently, affected global trade and supply chains, which, in some industries, came to almost a standstill.

The Sustainable Procurement Pledge

#SSP_100.jpgImagine a world, where all people thrive on our planet. A world, where the immediate threat of climate disaster has been avoided and where global businesses have evolved their business models to support a responsible and low-carbon economy.

"Whilst it seems a bit far-fetched looking at today's realities, this world vision is possible and the millions of procurement professionals distributed across the planet are mission-critical in making this come true", says the movement behind the Sustainable Procurement Pledge, or #SPP, on social media.

Living in interesting times: procurement 2020

PartProcure_100.jpegBy Nicolette Emmino

We were not even at the end of Quarter 1 of 2020 when tariff wars seemed to be the least of our problems. Even before the coronavirus started to disrupt supply chains, procurement analysts had identified several things to watch out for and necessary transformations that needed to happen within the procurement world.

Here are a few things procurement professionals should be focussing on within their organisations this year:

Rules vs. discretion in public procurement

EricaBosio_90.jpgBy Erica Bosio, Programme Manager: Growth Analytics, Development Economics Vice Presidency, World Bank

The trade-off between rules and discretion has been a central topic of research in public procurement. Kelman's (1990) early work stressed the costs of rigid regulation in United States government procurement and made the case for discretion. Since then, research on the benefits of discretion has progressed rapidly in Europe. New research confirms that politicians do not trust the bureaucracy, even in countries with high human capital and efficient institutions.

My new paper (joint with Simeon Djankov at the London School of Economics and Professors Ed Glaeser and Andrei Shleifer at Harvard) adds to these studies with a broader geographic and theoretical focus. We cover 187 countries and the complete path of the procurement process.

The theory delivers a basic prediction: that procurement regulation is more valuable when the incentives of the bureaucrats are not closely aligned with support for social welfare. Properly motivated bureaucrats require fewer rules. Countries with weak bureaucracies need strict laws to regulate them; countries with strong bureaucracies can allow the regulator more discretion.

COVID-19 pandemic: a rocky road to a new business norm

RockyRoad_150.jpgBy Gordon Reid with input from Mieka Cleghorn, SA Managing Director, Transparent

As a semi-retired business executive, and after spending the past twenty plus years working for some of South Africa's leading companies, the COVID-19 lockdown has afforded me valuable time for some serious thinking.

Many businesses will need to change the way they operate to remain afloat. Useful insights and lessons from company closures will undoubtedly surface in time, but for now we should focus on the future and what can be done now to keep our businesses running.

The intention of this article is to stimulate discussion, thought and imagination with a view to developing a roadmap to traverse the rocky road to economic survival post-COVID-19.


 

 

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