As our vendor procurement predictions series for 2020 has come to an end, we are also looking towards the processes and strategies that procurement organisations are getting into place as they aim to tackle the year ahead. Not an easy task given that the procurement organisation role is an ever evolving one, with higher emphasis today on helping the wider enterprise to meet its strategic objectives.
Now is the time to think about the trends that are most likely to further transform and impact procurement’s role in the coming year, and what you can do to ease the load. We heard recently from business intelligence and analytics firm The Smart Cube. Co-Founder and Managing Director, Omer Abdullah, has a few tips to help us prepare for what the year ahead might bring.
Manage volatility
We live in uncertain times. With Brexit and its impact on trade deals, not to mention the regular shifts in commodity prices and tariffs, managing market volatility will be more important than ever over the next twelve months. For this reason, we believe risk management needs to be at the top of your agenda, and there are some important actions you can take to make sure you do it well:
- Get the basics right: The foundations of risk management start with the ability to monitor and track your key suppliers, which requires the right set of tools. These are the table stakes, but to truly set your organisation up for success you also need to invest in the tools and processes that help you pre-empt changes and mitigate risk before it poses a real threat.
- Prepare for the worst: You can’t always see risk coming, so implementing the right processes and systems to manage adversity when it strikes is vital. Keeping a log of alternative mitigation actions to help you prepare for the unexpected is a great failsafe.
- Monitor commodities: Continually monitoring commodity prices and implementing effective tools to help forecast them (and the resultant practical implications for category economics) will be vital in managing commodity-based volatility.
- Position alternatives: Finally, it’s important to have a list of alternative suppliers and supply markets on hand, so you can recover quickly in the event of rising tariffs or unexpected regulatory changes.
Take the next step in your digital transformation
There are now more tools than ever to help procurement professionals gain insight into spend analytics, SRM, contract management, risk management and more. Taking digital transformation seriously will be essential for procurement organisations in the coming year, especially as the wider enterprise is likely to be doing the same. So it’s important to consider the following:
- Audit the talent in your organisation. Do your employees understand tech? Are they equipped to handle analytics and adjust to a more digital way of working?
- Good, clean, quality data sits at the heart of every successful transformation. If you don’t currently have this – along with the processes and capabilities to quickly analyse and act on that data – now’s the time to put them in place.
- Focus on tech for its value, and not for the tech itself. It’s easy to get drawn in by the latest offerings with all the bells and whistles, but first and foremost you should consider the fundamentals, like purpose, interoperability, a strong UX, and ease of use.
- Assess which tasks you should automate first to make processes more efficient and agile. The most common examples are P2P and e-tendering tools, which can take a lot of time and effort out of fundamental procurement activities.
Focus on building deeper supplier relationships
Building strategic supplier relationships can have a huge impact on the performance of your supply chain. The key to achieving this is segmenting your suppliers into tiers, clearly identifying the strategic partners who will play a pivotal role in driving business value. Once you’ve done this, you can implement a disciplined set of measures for each segment.
There are a number of ways of organising and managing these tiers based on depth of coverage, level of automation, or even your supplier review criteria. For strategic suppliers, you should use a wide variety of metrics to evaluate performance in terms of financials, operations, risk and innovation. For non-strategic suppliers you can use automated dashboards to flag those who may present problems.
Finally, surveying your suppliers and getting feedback on their view of your relationship will help to identify those who are integral to your supply chain, and allow you to improve relationships with those who currently aren’t.
Deliver value that goes above and beyond
With corporate strategies demanding more growth, faster innovation and greater competitiveness, procurement is increasingly being asked to demonstrate how it can contribute to wider business goals. There are a few fundamental things you can think about to help procurement deliver more value:
- Look for opportunities via the supply market to enhance revenue through alternative delivery models, new product ingredients, or innovative packaging techniques that appeal to evolving customer expectations.
- Increase speed to market by tapping into unique supplier capabilities or looking at local market access for globally dispersed manufacturing and product distribution.
- Play a proactive role in achieving sustainability goals by assessing the supply base to identify new processing or packaging options, or alternative ways to reduce carbon footprint across the supply chain.
As we reach a tipping point in consumer behaviour, sustainability, ethical sourcing, and the introduction of procurement policies on reducing carbon footprint, both inside and outside of the organisation, are topics that we plan to cover more fully this year on Spend Matters as they become our hot topic for 2020.
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