Vision 2020: Taking procurement challenges in stride
When we talk about procurement, we are well aware of the uncertainty that impacts this function, and the level of uncertainty is set to only increase in the coming few years. With the new industry dynamics such as supply chain localisation and return to re-shoring, overall business climate is moving at a rapid pace in the backdrop of continued volatility in both macro and micro economic environment. Thanks to sharp fluctuations in foreign exchange rates, commodity prices and continued changes in global regulatory and tax environment, global procurement leaders have a whole range of challenges flying in the face.
But when we talk about procurement in 2020, there are likely to be extended supply chains and expanded risks involved such as locations of suppliers of both virtual and physical goods and services, and the geographical location of the internal staff responsible for procurement. Unlike today, when localisation of supply chains such as in Southeast Asia is pressurising organisations even if they are not resource constrained, real-time prediction of outcomes in keeping with transfer price, costs, compliance and credit (tax) and related inputs will be the key to procurement in 2020.
Though supply risk factors are increasing with each passing month, supplier financial stability still relates closely with customer perceptions, supply assurance, regulatory concerns and price or margin risk. Considering business expectations and requirements as well as risk elements, conventional procurement is balancing near-term cost management with strategic opportunities in the long-term and fighting a war on multiple fronts. With advanced capabilities in procurement organisations, there is emphasis on innovation, product management strategies, and focus on forex risks.
While many of today’s essential functions like baseline procurement, category sourcing, human resources management, knowledge management and purchasing performance are likely to be so in 2020, the purchasing capabilities of businesses will have to be supplemented by a lot more. This new approach will include the emphasis on localisation, thus enabling regions to take the lead with global support systems. Though the execution and centralisation decisions may vary, the need to lay out organisational and functional structure will always remain to be so with focus on leadership, sourcing and execution roles. Such a structure would help procurement to have an insight and adjust for balance of trade questions with customers as well as support internal customers and their needs at the regional levels.
A business, for instance, can choose to support global infrastructure with data-driven activities that support planning and organisation all the way to the bottom at the local level. These measured outcomes can be achieved through collaboration between global marketing organisations and local agencies for media planning. In support of in-country procurement teams such as development resources and supplier quality, companies take a hybrid approach for metal stampings and centralising vendor management data collection. Much in keeping with conventional transformation efforts, stakeholder and leadership engagement will remain essential along with new and finance-centric orientation.
Procurement needs to be in tandem with IT, legal, HR, marketing, supply chain, engineering or design and manufacturing departments. It also needs to be well adopted within the function, with the finance partners and across the entire scope of business. Another critical subject to focus on would be on who does procurement rather than who works in procurement as a number of professionals in the procurement teams comprise of the individuals who carry out the responsibilities on a rotation basis. The key words that will remain quintessential to procurement would be innovation, benchmarking, collaboration, reporting processes and tools along with measurement but their scope is only going to grow in vision 2020. These will soon develop to include health and safety of team members, supply chain auditing and vendor development activities with previously internally-focussed environment.
In order to plan for the uncertainties and unforeseen risks, procurement leaders need to focus on delivering tangible outcomes keeping track of the prime factors that impact procurement and supply chain functions the most.