Friday, 17 October 2014

The Future’s So Bright, I Gotta Wear Shades...

By Steven Low

Disruptive technology and new start-up companies taking unique approaches to traditional markets are a common news item nowadays. From Uber, Airbnb through to wearable gadgets and self-driving cars, we are on a never ending journey of discovery, adaptation and re-invention. Looking into the future of procurement and how technologies and working practices might change our industry, I think it leads to an interesting, challenging - if maybe a little uncertain - time ahead.

Industries change to adapt to the circumstances around them and just as legal, medical and finance sectors have changed immeasurably over the last 20-30 years, we see the same within our sector. Not to dwell too much on history but 30 years ago, I’m not sure there was such a thing as a Chief Procurement Officer and if there was, he/she was certainly nowhere near company board level. Similarly, paper based tenders and carbon copy paper has been phased out for technology solutions that have elevated the role and capabilities of procurement out of the back corner of the office and to the forefront of how a company spends money.

I was at a session at BravoCymru yesterday where Peter Smith from Spend Matters talked about bona-fide research that estimated almost 70% of a company’s revenue is spent with third parties. Companies make less in house and have outsourced many functions that give them a better chance at flexing their organisation to meet future challenges. Now, I had no idea that around 70% of a company’s revenues were being spent with suppliers. Peter argued that Chief Communications roles usually made it to board level even though their department and scope wasn’t that high. Those roles had a certain ‘risk’ factor attached that no company would choose to ignore. However, not every CPO is at board level and they are somewhat responsible and certainly accountable for 70% of their revenue being spent with a wide spectrum of suppliers for goods and services critical to the organisations continued success.

So how are we to deal with a changing portfolio? What is going to change within our industry which will allow us to adapt and evolve. Here’s my take on what I see happening.

1. I see continued evolution in Supplier Risk Management and Supplier Performance Capabilities. It’s certainly one that we at BravoSolution are continuing to question our customers over their needs and desires in this space. Our release in early 2015 will take our technology offering around this to a higher level than ever before as we seek to assist Procurement in automating, tracking and measuring Supplier Risk and performance.

2. I see less emphasis on hard cost savings and more on ‘value’. Not everything is measurable in pounds and pence. How does the supplier fit in with your culture and ethos, what innovations are they bringing to the table, how flexible and adaptable are they to your changing needs. These will help shape future agreements between suppliers and buyers. Cost of course, will always remain a factor.

3. Mobility – as technology in general is in a rush to go mobile and be always available, I see companies such as ourselves continuing to push the capabilities of procurement technologies in the mobile arena. Not everything is going to be possible through mobile technology as a lot of what procurement do is relatively complex but there are further enhancements to be made on what is do-able regards mobility.

4. The connections between procurement and the business line will be further blurred. As procurement practices become more mainstream and better understood, I see a further shift of decision making powers move back towards the business. This will in theory, release Procurement from the more mundane low risk, low value procurement exercises. The converse of this maybe is the monitoring and compliance role they may have to take up to ensure departments follow the guidelines.

5. Continued pressures of local sourcing, SME and diversity suppliers being involved in Strategic Sourcing award decisions. This is one that myself and my colleague Pavel have written about previously (http://www.strategicsourcing.co.uk/2014/04/procurement-savings-targets-vs.html and http://www.strategicsourcing.co.uk/2014/01/natural-selection-versus-positive.html). This won’t go away and will need formalising further about how organisations should deal with this effectively.

6. Google-Like Spend Analytics. I think Spend Analysis is going to go through a fundamental change. The traditional scrape, cleanse and categorisation of data will be replaced with more real-time data search functionality. Data will be fed back to the user using powerful algorithms (similar to what google do to feedback results across the mighty and fragmented internet). The move to real-time I think is inevitable as people continue to push for fresher, more relevant data to act upon.

7. There will be a rationalisation/reduction in the number of companies offering these technologies. The last few years in our sector, we have seen a number of challenging competitors come to the market with new, niche approaches to Procurement processes. My punt on this is that there will be some to leave the industry, some will merge to offer complimentary services (and more size and scale) and some will be bought and subsumed into technology players not necessarily only focused on Procurement and the supply chain. I might be wrong, but industries tend to go through a cycle of rapid expansion before hitting a peak and then reducing through mergers/acquisitions and players leaving the industry. Not sure if we have hit the peak or not?

8. One I will credit to Peter Smith in his session above was the evolution of the B2C model. We as consumers go to the likes of Amazon and can see product ratings and supplier ratings on goods we are interested in purchasing. It’s inevitable that we will see this flow into the business world. Why shouldn’t I be able to see what fellow buyers thought of an organisation across quality, cost and delivery metrics? Not sure if it will take the form of star ratings etc but this will aid buyers in their buying decisions just as it aids them in the household. Some in our industry are looking to develop in this area. It will be interesting to see how this develops and who will be able to fully market and monetise it.

There are a multitude of other considerations that I have surely missed. You all have a unique angle on procurement.. I would love to hear what you see coming down the procurement evolution pipeline? Good and bad please!

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