The year ahead presents great challenges for the modern chief procurement officer, sourcing executive, category manager, and other members of the procurement operation. Procurement must work harder to keep pace in 2017 in order to drive continued, strategic value to the greater organization and prove that this function remains at the core of true business agility.
Business continues to change at an accelerating speed. Enterprises and their suppliers are forced to adjust to new, disruptive technologies, intensified competition, and a marketplace that continually resets expectations. As a result, business requirements have become more diverse and dynamic, lead times are shrinking, and the definitions of performance and success have become moving targets. 2016 was a historic year, with multiple factors pushing the procurement profession into new territory. 2017 promises more of the same… with an added layer of uncertainty.
Procurement 2017: Big Trends and Predictions, a recent webinar with our partner Ardent Partners, delivers great insight.
The two biggest trends of 2017 are somewhat counterintuitive, yet inherently intertwined—globalization and global sourcing, and isolationism and protectionism. As globalization increases, both have made procurement a pivotal role when it comes to a company’s success. Faster options for transit and digitization and a global market catapulted by manufacturing capabilities have made distance a non-issue when it comes to global sourcing, creating more opportunities to improve strategic sourcing and cost efficiency.
And on the flipside, as we’ve talked about in depth, the growing air of uncertainty—Brexit, Trump, new US global trade policies, immigration, and EU and NATO organizations face heightened pressures—Procurement will need to better understand and prepare for a changing trade landscape.
The webinar covers key risks for procurement, here are the most immediate:
Corporate security risks will increase
Trade wars and changing policies and regulations could substantially impact the tax landscape. The risks here aren’t new–political risk, economic implications, currency considerations, and more competition for raw materials—but procurement organizations need to act now to address a developing situation. It’s key to begin reviewing and assessing security risks across the supply chain and support the needs of functional partners (like IT, HR, and Finance) as they do their own assessments.
Big Data is key for efficient procurement decisions
What is big data for procurement? Spend data, supplier performance, operational metrics, supply market pricing, unstructured data, third-party sources—all data that, if used well, can unlock value and make procurement more relevant and agile. Making big data part of your strategy, including technology, resources, and organizational capabilities, starts with leveraging technology and analytics. New sources of insights, intelligence, efficiency, and experience, expand procurement’s opportunity to truly become a competitive differentiator and a value-add organization.
Commodity inflation might bust your budgets
As markets tighten and interest rates rise new strategies will be needed to avoid inflation. Hello commodity sourcing. Buyers that have already locked into long-term pricing will reap the rewards and be able to become more strategic—2017 will show the value of commodity hedging strategies.
Talent management comes into the procurement wheelhouse
The world of work is changing. Adaptation has become the core focus. More and more businesses are tapping into more talent resources, known as the “Gig Economy,” where contingent labor—freelance and contract workers—make up 38% of the workforce. How do you manage them? What about the compliance issues? Vendor management translates directly to talent management, especially when looking at managing spend. Cross-functional coordination between Procurement and HR will result in a higher utilization of non-employee workers.
Smart buying, increased risks, procurement’s new role in talent management, and leveraging technology will all require agility. Agility will be a defining characteristic of procurement leadership over the next decade, and collaboration will become a top strategy. The context of what procurement can do for the enterprise has changed, presenting major opportunities.
See the rest of the big predictions for procurement in 2017 by watching the webinar on demand. Watch now.