Procurement teams are still facing challenges like supply disruptions and managing cash flow, says Mohammed Kafil, a procurement consultant with Kissflow Procurement Cloud. He outlines five trends of top-performing procurement teams and how technology helps them maintain a competitive edge.
COVID-19 changed the world as we once knew it. While every business activity was affected in one way or another, procurement processes suffered the most as restrictions on the movement of people and goods wreaked havoc on supply chains around the world.
According to McKinsey, 73% of CEOs stated COVID-19 caused challenges in their supply chain. COVID-19 had the most immediate and visible influence on these supply networks in terms of supply. Due to customer concerns regarding supply, there was a noticeable spike in demand for specific items.
This worsened problems that were already prevalent across the supply chain, resulting in true supply stress. As a result, challenges emerged like demand and supply concerns, managing cash flow and working capital, sustaining profitability and assuring access to crucial commodities.
These pandemic-driven disruptions taught us to adapt with the help of new strategies and technologies. Here are the five most important procurement trends that successful organizations are embracing to mitigate procurement challenges.
1. Digital Procurement
The emergence of digital technologies like procure-to-pay software and their influence on procurement has been forecasted as a procurement trend for quite some time. However, COVID-19 made it evident that our procurement processes critically require the use of technology to help businesses reap numerous benefits.
According to a Hackket Group report, procurement will make significant investments in cloud-based business applications and data management technology, including data visualization, master data management and advanced analytics.
The adoption of spend optimization analytics and dashboarding is also increased. As a result, the deployment of e-procurement technologies is predicted to roughly double in the next several years.
The use of mobile computing and robotic process automation (RPA) has also skyrocketed, reflecting a shift toward more efficient, flexible procedures across the procurement lifecycle. As a result, RPA has the fastest adoption rate among digital technologies, with a growth rate of 2.3x.
2. Delivering Value Beyond Cost Savings
In 2022 and beyond, smart procurement will entail not just pursuing traditional cost-cutting objectives but also lifting the bar and demonstrating how it can generate real, concrete, genuine value.
But questions may arise on how organizations are looking beyond cost savings and trying to deliver value through procurement. Generally, organizations prefer suppliers that can provide the opportunity to cut their costs while factors that actually create value – such as quality, compliance and time – are overlooked.
Organizations have now realized that in order to achieve a competitive advantage in the market, they have to deliver what their customers expect of them. If you exceed your customer's expectations with the help of high-standard procurement processes, you are providing the value they are looking for.
3. Building a Trusted Supplier Base
COVID-19 taught organizations to build a trusted supplier base that they can rely on in unexpected situations. Suppliers are a crucial part of every supply chain and managing them is one of the top priorities of every business right now.
People management and the additional value that human elements of the business provide to operations are at the heart of supplier management. Maintaining these relationships will guarantee that both parties work fast to fix issues, search for ways to enhance operations and assist each other in reaping the benefits of the connection.
With a limited number of suppliers, it’s imperative to try to build longer, stronger ties. This is a better deal than typical contract turnover. So, to get the most out of your supplier relationships, look for quality and reliability, value for money, and – most importantly – great service and clear communication from the start.
4. Change in C-Suite Perception About Procurement
According to a procurement survey conducted in 2020, 83% of executives said their procurement department isn't strategic. Prior to the pandemic, they didn’t think procurement was critical to corporate leadership or that major input from the procurement department was required to make high-level strategic decisions.
But now, the C-suite has realized the importance of procurement to their organization and is welcoming the input of their chief supply chain and procurement officers.
The duty that lies on chief supply chain and procurement officers now is to recognize the board's priorities and deliver on them. To cope with the board's evolving goals, supply chain leaders must focus on increasing performance while controlling risks and pursuing new technology, products and services to build the business.
5. Procurement Sustainability
The year 2022 will be the year of procurement sustainability. Economic sustainability will be the focus for the coming year due to the world's economic problems caused by a global pandemic that forced almost all businesses to close for a time.
More nations are beginning to use their purchasing power to force reforms toward a better market and environment by including environmental concerns in public procurement. As a result, public procurers are increasingly looking for products with ecolabels.
On the business side, sustainability is no longer merely a hot topic; it is increasingly being explored independently or even incorporated into the company strategy.
As consumers are now more aware of the green products and the deteriorating condition of the environment, they demand environmentally friendly products right from the start of the supply chain. Organizations that ignore the importance of sustainability in the supply chain will lag behind their competitors and fail to gain recognition from their consumers.
The world of procurement is evolving at a fast pace. The technological revolution has made procurement tools more useful, up-to-date and user-friendly, and provides a promising solution for unforeseen disruptions and risks. Procurement leaders around the world are learning from their past mistakes and evolving with the new trends to gain a competitive edge and stay on top of the market.