It wasn’t so long ago that the term ‘business procurement’ referred to the straightforward, uncomplicated purchase of corporate resources. You had a purchasing department, and it was responsible for sourcing essential assets – be they software or operational equipment – and buying them at the best possible price.
Over the years, things have changed. Procurement has become more than it used to be. Now, for many enterprises, it provides many strategic, digital functions which extend beyond simple savings and efficiencies. It a tool for driving innovation and optimizing supply chains. Ultimately, businesses are starting to realize that there is value in aggregated spend volumes.
By digitizing the source to settle process, they reduce operational investment in tactical responsibilities. This allows for a greater emphasis on interactions with suppliers, robust risk management plans, and sustainable transactional processes. It is just as well because the business world has never been so demanding. Modern enterprises are confronted by an increasingly rigid system of corporate regulation, social ethics, and environmental viability. It means that procurement departments are having to work much harder to develop products and services. They are under intense scrutiny and have, in many ways, become the guardians of brand and reputation.
It’s likely that over the next ten or twenty years, IT sourcing and procurement will become a very extensive part of most businesses. The hope is that these changes will increase transparency, support the need for better risk avoidance, and guide companies through some of the biggest challenges. We’re going to take a look at some of these challenges and how they might shape the future of IT sourcing and procurement.
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The expectation is that procurement will begin to move away from its narrow emphasis on compliance and start to take on a more comprehensive perspective. This broader approach will need to accommodate total risk exposure, risk transfer pricing, and investment in demonstrable risk mitigation.
In order to achieve these objectives, procurement departments are going to have to rethink their strategies for supplier risk management. It will be necessary to adopt new metrics as a way to streamline major sourcing and supply decisions. This will help to minimize waste and ensure that maximum value is extracted from every purchase.
It’s important not to underestimate the impact of a rapidly changing market. Right now, millennials are a purchasing powerhouse. They rule the roost and are set to gain even more of economic dominance. So, procurement functions will have to develop supply chains which satisfy them.
The best way to do this is to think beyond basic cost cutting measures. The reality is that younger buyers are less fixated on price. Compared to previous generations, they are much more likely to prioritize sustainability and CSR over knockdown deals. In time, this could see businesses swapping traditional linear supply chains for circular ones.
The influence of once sidelined economies will come to shape and define IT sourcing and procurement in the years to come. In fact, these emerging markets will transform the supply and demand trends that we have come to depend upon. The hot spots to watch are, unsurprisingly, China and South America, both of which are developing at a rapid rate.
Brazil, in particular, seems set to become a much more dominant market force. Procurements experts are predicting that big businesses will start to construct expertise in this region, as well as in countries like Russia and India. There may be a need for ‘on location’ procurement managers spread across a number of emerging nations.
It is a good idea for businesses to invest in their procurement departments right now, rather than waiting until the corporate landscape has already changed. In the future, procurement chiefs will require dynamic skill sets. They will need to support their companies as they adjust to meet a demanding and fickle global supply base.
In fact, the line between accounting and procurement is likely to become less distinct. If you want to get a head start, think about closing the gap between the two departments by teaching procurement agents key financial skills. The benefit of such crossover training is that they’ll be able to play a bigger role in the monitoring of internal and external costs.
If there is one thing which no business can escape, it is the glare of social media. We are living in an age of unprecedented exposure. It has become normal – expected even – for procurement strategies to be out in the open. While there are advantages to this change, it also comes with some major risks.
You’ve got to be willing to build procurement teams with a keen social awareness so that operational models are seen to fit with the brand message. The aim should be to train your employees so that they are capable of interacting just as successfully with customers and regulators, as they do suppliers. Social media management software is the key to success.
The Road to Procurement Success
The lesson here is that there’s no need to wait for the procurement landscape to change before you start investing in its future. In fact, businesses that are committed to internal development right now will enjoy a bigger competitive advantage in the years to come.
Over time, procurement managers will become so much more than buyers. They’re going to involve themselves fully in IT sourcing and become masters of the purchasing and supply chain, all the way across the board.