Five Ongoing Trends Affecting Procurement into 2020
"After you've done a thing the same way for two years, look it over carefully. After five years, look at it with suspicion. And after ten years, throw it away and start all over." —Alfred Edward Perlman.
I don't think many would disagree, procurement was ready for some changes, and change is what we're getting. Deep tech is revolutionizing industry, as consumers start to buy the change they want to see in the world. Procurement brings both social and economic value to industry, driving sustainability, and social responsibility.
Blockchain
Blockchain, a decentralized, immutable ledger, that in the world of Supply Chain, is bringing visibility to procurement and allowing for traceability and transparency throughout the value chain. What does that mean? It means increased food safety, ethical sourcing, and alignment of values.
In the world of logistics, DHL, UPS, and FedEx are joining forces with standards bodies BiTA (Blockchain in Transport Alliance) and BRI (Blockchain Research Institute) to transform Supply Chain through Blockchain.
Sustainability
According to speakers at an SAP Ariba event, "Sustainability is no longer a choice; it's a mandate." With pressures from both shareholders and customers being a driving force, procurement teams are looking to drive sustainability throughout the supply chain through tighter manufacturing regulations, performance assessments against the United Nations Sustainable Development Goals (UNSDG), and adding compliance clauses in the RFP process.
"Organisations operating with unsustainable supply chains are less likely to attract potential investors, negatively affecting their reputation. As a result, it is critical CPOs include sustainability in their top 10 priorities for 2020 and start thinking of adopting a sustainable supply chain to futureproof their organization."
Digitization
Digitization saves money. In fact, according to the Procurement Leaders, digital processes could reduce purchasing costs for global companies by up to one quarter. A recent study performed by Amazon Business and WBR Insights showed that digitization is no longer a question of if, but when. According to the survey, 84% of executives said they were in the midst of sourcing solutions, and 50% consider their transformation either nearly or totally complete.
A.I. & Robotic Process Automation
Industry 4.0 rages on with A.I., IoT (The Internet of Things), and big data infiltrating the manufacturing floor and bringing with it massive improvements to supply chain. From product design to sales and operations planning and quality control, deep tech is revolutionizing how we make things, with explosive impacts to the bottom line.
Recent research is also beginning to show RPA investments rising in industry, and paying dividends. Procurement is not immune to mundane and repetitive tasks being replaced by software and machines. We’ve seen an increase to 8% of procurement teams using RPA tools, and as the benefits become more widely publicized we believe we will see a sharp increase in the next few years. As an example a tool that’s creating some buzz is Fairmarkit, an AI buying platform that taps machine learning and AI to automate monotonous and repetitive procurement tasks, to optimize the way companies manage their tail spend.
Global Geopolitical & Economic Change
Geopolitical uncertainty and tariff changes continue to increase supply chain complexity, while global economies continue to be impacted by trade wars and protectionism. The effects have been far-reaching, and the depths of the repercussions have yet to be fully understood. Nevertheless, inflation remains below "ideal" levels, and Supply Chain Management Review believes it may be due to Supply Chain holding down the fort, and finding alternative, cost-saving options.
And of course, there's what seems like a mass exodus out of China, having started even before Trump's demands for U.S. firms to find alternatives. According to a May 2019 AmCham Shanghai survey, some 40% of U.S. companies are relocating at least some of their supply out of China.
And so the trade wars rage on.
"There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success than to take the lead in the introduction of a new order of things." —Niccolo Machiavelli
Embracing the future, focusing on process improvements, and incorporating digital solutions may not be easy tasks, while also managing the challenges of the day-to-day; however, it is part of becoming a World-Class procurement organization. Achieve great bottom-line benefits, raise the status of procurement in your organization, and maybe even do some good for the planet while you're at it.