What Will Impact Procurement Processes in 2021?
Supply Chain Transformation is ongoing but never more important than in 2021. Every year, The Hackett Group surveys global organizations to better understand their top priorities. The research encompasses organizations across industries and sectors, with focus on North America and EMEA. While 2020 introduced unprecedented challenges for procurement organizations as they struggled to maintain business continuity and keep supply chains operational, 2021 will continue to present unique challenges even as businesses begin to recover from the chaos and instability of last year, and try to build in supply chain resilience and better supply chain resilience into their Procurement strategies.
In a recent webinar hosted by Ivalua, Chris Sawchuck, Principal and Global Procurement Advisory Practice Leader from The Hackett Group shared 10 key issues that will have a significant impact on Procurement organizations in 2021. You can take a quick view of the webinar here or read this summary of those issues and Sawchuck’s take on the research findings:
1.Spend Cost Reduction: According to Sawchuck, over the last 15 or more years, a focus on reducing spend and costs has taken top priority. However, because of the trend toward digital transformation, organizations have had to invest substantially in new technologies. Despite the initial capital investments, these technologies are driving efficiencies that ultimately lead to cost reduction. In 2021, organizations will look to further capitalize on their investments by realizing additional cost benefits.
2.Supply Chain Risk and Supply Continuity: Risk moved front and center of Procurement during the pandemic, as procurement organizations grappled with constrained supply chains. This was due in large part to the way they were designed. “Supply was coming from certain geographical regions that were locked down or restricted,” said Sawchcuk, although there were several types of businesses that were able to continue to operate effectively. “The impact of all of that is that organizations are actively creating geographical supplier diversity within their supply chains, to strike a better balance between cost reduction and agility,” he said.
Sawchcuk added that a lack of supply chain visibility beyond tier-one suppliers made the disruption of the pandemic even more impactful, causing organizations to invest in managing and mitigating risk. “For many organizations risk has become not only an executive committee issue, but a board-level discussion,” he said.
3.Procurement as a Strategic Business Advisor: With an increased focus on reducing risk and increasing agility, and the need for greater supply chain visibility, Procurement has been elevated to a strategic position within the business. “Today’s Procurement organizations must be more intelligent, and provide the data analysis and intelligence to inform our stakeholders as they make critical business decisions,” Sawchcuk said.
4.Procurement Digital Transformation: Although procurement digital transformation isn’t new, Sawchcuk noted that the pandemic has resulted in its acceleration. “Our study found that 77% of organizations highlighted they would moderately to highly accelerate their digital transformation efforts,” he said. “They noticed that organizations that responded effectively during the pandemic were more mature in their digital transformation efforts, and had greater visibility across the supply chain. As a result, we have seen massive acceleration around procurement digital transformation, and in a September follow-up survey, the 77% number increased to 88%.”
5.Procurement Agility: According to Sawchcuk, agility defines your capability as an organization to react to any event. “From a risk standpoint, you must be able to react in a way that prevents the event from having a material impact on the business,” he said. “But there’s also a need for predictive capabilities. In other words, how do we have foresight into what we think might happen?”
Sawchcuk noted that vision statements in many procurement organizations as well as enterprise objectives at the corporate level have agility as a key component. “It’s the reason organizations are accelerating their digital transformations,” he said. “We need to be agile, because there will always be disruptive forces in the marketplace that challenge organizations.”
6.Procurement Application Platform Modernization: A critical aspect of supply chain agility is the move toward modernizing procurement applications. According to Sawchcuk, modernizing technology not only improves agility, it enables customer-centric processes and cost efficiencies. Modernization is also a foundational aspect of successful digital transformation, helping organizations consolidate infrastructure and benefit from unified access to essential data for analytics and reporting.
7.Procurement Skills and Talent Alignment: The ability to attract people with the necessary skills to support a digitally transformed, modernized procurement organization is critical for success. “Many companies are focusing on upskilling and development competencies within their organizations,” Sawchcuk said, adding that competencies in data, analytics and technology are essential as are traditional business skills. “Blending and upskilling will support successful digital transformation.”
8.Analytics and Reporting: In general, there’s a need for unified analytics and reporting across the procurement lifecycle. “Analytics and reporting are central to creating a more intelligent procurement organization — one that’s less dependent on executing processes and more dependent on leveraging data to enable business success,” Sawchcuk said. “To that end, you have to get better at building the data, knowing what assets you have, and bringing in unstructured data from sources that exist outside the four walls of the enterprise.” This includes not only supplier data, but data from social media feeds and other third-party sources that help provide a holistic understanding of an organization.
“Once we have the data, we have to continue to refresh it and engage with it, and that’s where analytical skills come in, Sawchcuk added. “Procurement professionals don’t need to be data scientists, but must to get more comfortable and skilled at leveraging data insights and intelligence to guide their organizations to a better future.”
9.Corporate Sustainability: Sawschcuk said that sustainability is an area in which Procurement can make a big impact. “For the last several years, sustainability was among the top 10 priorities in Europe, and now in the U.S. and some other parts of the world it’s a common theme,” he said, adding that sustainable supply chains goe hand in hand with supplier diversity. In light of the social unrest and concerns we’ve seen around the world, particularly in the U.S., an increased focus on diversity, inclusiveness and sustainability is top of mind with many organizations. Procurement has a big role to play here.
10.Influence Over Spend: Spend influence is among the top measurements of procurement’s performance, leading to reduced purchasing costs, improved quality and better strategic outcomes such as product innovation. As Procurement organizations focus on other key issues — supply chain continuity, digital transformation, business agility and sustainable supply chains for instance — their influence over spend will grow, and Procurement will increasingly be regarded as an organization that adds strategic business value, rather than a cost center.
You can listen to the full webinar recording here.
For more information about how Ivalua can support your organization with initiatives for digital transformation, platform modernization, supplier diversity and corporate sustainability, contact us today at email@example.com
VP Product Marketing
Vishal has spent the last 15 years in various roles within the Procurement and Supply Chain technology market. As an industry analyst, he researched and advised organizations in various industries on best and innovative practices, digitization and optimization. He brings a thorough understanding of market trends and digital technologies that can help enterprises be more effective with their Procurement and Supply Chain strategies. He works to ensure that organizations are empowered with technology platforms that enable flexibility, innovation, and agility.
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