4 Major Procurement Trends to Watch for in 2020

Posted: 01/02/2020 - 04:01
With 2020 just in the door, progressive CPOs and their teams are planning for the year ahead. Here are four major procurement trends to factor into your thinking.

With 2020 just in the door, progressive CPOs and their teams are planning for the year ahead. Here are four major procurement trends to factor into your thinking.

1. Increased Volatility

With shifting trade tariffs and barriers, the unpredictability of Brexit and fluctuating commodity prices, market volatility could be at an all-time high over the next 12 months.

As already complex global supply chains become even more unpredictable, finding ways to manage this risk should be at the top of your 2020 agenda. What does this mean in practice? At a bare minimum it means having processes in place to track suppliers, pre-empt problems and manage commodity-related volatility.

The foundation is forward visibility and relevant market intelligence that can be translated into insights and tangible actions.

In addition, investments in analytics and predictive modelling can go a long way to help in these areas. In fact, there are tools specifically designed to help procurement organizations predict change and manage the disruption in stride.

2. Ongoing Digital Transformation

There’s a strong chance that we’ll be talking about digital transformation for many years to come. That’s because true digital transformation is an ongoing process. 

Digital has fast become an imperative for top-performing procurement functions. Those who find themselves behind the times will need to play catchup this year, especially as the wider organization is likely to be on its own digital transformation journey.

There is now more technology than ever before aimed at the procurement space. The trickiest part, perhaps, is knowing which tools to choose and whether to opt for end-to-end services or a mix of best-of-breed capabilities. It goes without saying that it’s essential to focus on tech for its value and not the tech itself.

What’s best for your organization will depend on your specific circumstances. In general, we expect to see big investments in tools targeted at spend analytics, SRM, contract management and risk management in 2020. Underpinning this should be an emphasis on data: clean, quality data; high visibility; and the ability to manage and dive deep as and where necessary.

3. Building Deeper Supplier Relationships

At some point, you’ve almost certainly had a conversation within your department about building better supplier relationships. Everyone agrees that it’s a strategic priority for procurement organizations.  However, actually putting plans into practice is easier said than done.

We often see procurement organizations implement manual processes that are inconsistent across both categories and supplier segments. In 2020, however, we expect to see a more structured and successful approach adopted by the most forward-thinking and progressive departments.

This approach will begin with suppliers being segmented into tiers, separating those that are an integral part of the supply chain, and are therefore truly strategic, from those that aren’t.

The next step will see the implementation of a set of measures and tools for each tier, helping to better monitor strategic partners and improve relationships where needed.

You’ve probably heard this idea floated before, but the difference is we’re now at the point where the technology and analytical capabilities exist to make the required processes both manageable and economically beneficial.

Ideally, the result will be broader, more innovative open-book partnerships that foster deeper connectedness between customers and suppliers.

4. Delivering Value Beyond Savings

Driving savings will always be a primary goal of procurement. It’s increasingly understood that procurement organizations can deliver value that goes way beyond cost savings, cost containment and cost avoidance.

The sophistication of the procurement function, and the available talent within the space, has increased dramatically over the last few years. There have also been greater expectations placed on SG&A functions in general. With C-level strategies demanding greater growth, faster innovation, tighter budgets and increased competitiveness, 2020 is the time for procurement to really show how it can contribute to wider strategic goals.

It is procurement’s time to shine.

There are many ways procurement organizations can do this, from increasing the speed of project delivery and growing revenue through new supplier-enabled initiatives to directly participating in the enterprise’s innovation agenda to help shape activities early.

See What Else Is in Store for 2020

Of course, these aren’t the only trends set to impact procurement over the next 12 months, but we think they’re the ones CPOs should prioritize.

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About The Author

Omer Abdullah's picture

Omer is a co-founder of The Smart Cube and leads its business across The Americas. He has more than 25 years of management consulting, global corporate and industry experience across North America, Europe and Asia. Prior roles include A.T. Kearney (North America), Warner Lambert (USA) and The Perrier Group (Asia-Pacific). Omer has an MBA from the University of Michigan at Ann Arbor, USA, and a BBA from the University of East Asia. Follow him on LinkedIn. Omer also hosts The Smart Cube’s Inside Procurement podcast.