Procurement today must be played like a game of chess. We should always be thinking five moves ahead to anticipate unexpected changes. These emerging procurement trends will impact how we work well into the future.
Below, we share emerging trends that can facilitate future success. We also discuss why you must adapt your operating practices today to ensure you remain competitive tomorrow.
But, before we dive in, let’s address a key baseline question for any newbies in the house.
WHAT IS PROCUREMENT MANAGEMENT?
To fully understand procurement management, it’s important to first understand what procurement is and how it differs from purchasing.
Second, you must grasp these critical stages of the procurement process:
- Identifying needs
- Purchase requisitions and approvals
- Finalizing budgets and handling quote requests
- Establishing vendor agreements
- Invoice reconciliation and quality assurance
With that knowledge, it’s easier to answer our initial question, although it’s still a complex concept with many nuances.
Procurement Management: Theory and Practice
In theory, effective involves efficiency in the five stages above. Effective procurement planning also requires constant data measurement and spend analysis to reduce costs.
However, as we know, things are often different in theory and practice. Traditional procurement are giving way to new, innovative tactics and trends. These trends are changing the face of procurement.
5 PROCUREMENT TRENDS TO WATCH FOR
Technological progress and generational shifts are causing major transformations in the procurement space. A business-as-usual approach is increasingly ineffective as we move forward in the 21st century. Those who anticipate change on the horizon and prepare for it now will be those that inch ahead of the competition.
Below, we cover five trends that procurement specialists should adopt today to maintain a competitive edge tomorrow. Today, the global marketplace faces a higher volume and intensity of unexpected change than ever before. Embracing these trends and those to come will be critical to success.
1. The Rise of End-to-End Procurement Automation SaaS Solutions
The days of relying on spreadsheets or even traditional enterprise resource planning (ERP) solutions are gone. Success today calls for the use of end-to-end procurement automation software solutions. They automate previously manual processes, streamline workflows, and reduce costs. Welcome to the era of e-procurement.
- Increased compliance with suppliers’ guidelines
- Better visibility into the status of goods along every step of the supply chain
- Significant time savings and increased productivity
- More and better insight to smarter, data-driven decisions
- And more
Plus, they help you embrace most of the trends discussed in this article, such as fostering better vendor relationships. Expect to see software drive procurement management well into the future.
2. Increased Focus on Interpersonal Business Relationships
Tomorrow’s successful procurement agent will increasingly maintain a heavy focus on vendor relationship management. This can already be seen and will continue to grow in importance.
Executives agree that maintaining solid relationships with business partners and stakeholders is increasingly key to business success. Consider these statistics from a recent Gartner poll:
- 79% of procurement executives say obtaining a view into stakeholder needs is a top priority.
- 75% want to spend less time on low-value tasks and more time working with business partners.
3. Accurate Data Analysis and Reporting Become Essential to Success
The age of Big Data is upon us and it is increasingly challenging to remain competitive if you rely on instinct and gut feeling to make important business decisions. The collection and management of enormous data sets is now a necessity.
Accurate data analysis and reporting are essential to the success of businesses in most industries today. Decision-makers need constant insight into what’s moving the needle to make informed growth decisions.
Modern procurement management software often includes robust reporting that facilitates these decisions. Some even include built-in custom report builders and dashboards that display the data you need to see at a glance. Managers and executives can easily view loads of metrics with these powerful spend analysis tools.
Not only does this help businesses grow and procurement teams operate more effectively. It also brings a new level of transparency and accountability to everyone involved in the supply chain.
4. Generational Change is Transforming How Businesses Operate
Millennials are now the largest consumer demographic in the United States. They represent the most tech-savvy generation that’s ever existed and are moving into business leadership roles much earlier than previous generations.
Indeed, 48% of millennials in management roles have already reached director-level positions or higher. They are redefining business and work culture as we know it and will continue to do so.
As they drive a paradigm shift in business, millennials are increasing companies’ willingness to adopt new technologies and embrace innovation. Research from American Express indicates that 76% of millennial executives are keen to work with new types of partners (and technology) to achieve business goals.
That same study shows us that 67% view risk as an opportunity to innovate. Finally, millennial executives’ highest priority is fair treatment of employees, followed by retaining talented employees and keeping pace with innovation and technological evolution.
These changes are and will continue to profoundly change how businesses operate. They will also continue to redefine how procurement teams operate. For example, their comfort level with technology will lead to increased adoption of procurement software.
5. The War for Talent Heats Up
As we adopt new procurement management technologies and observe generational shifts, finding and retaining top talent is a growing challenge. Employee turnover can kill an organization’s bottom line.
Millennials tend to change jobs more often than any other generation. Moreover, turnover from that generation is costing the US economy roughly $30 billion annually.
What does that mean? It’s now more important than ever to focus on employee satisfaction and understand what drives it. Then put in place measures to ensure it.
“Any leadership transformation in the procurement area must take into account the 3 Ps: people, processes and how to develop a change program. By mistake, the last two always seem to be the hardest to achieve, but it’s still people who really make a difference. Select well and learn technical skills but, above all, form a resilient team, with different personalities, and have fun along the way”. -
Patrick Dunne, Procurement Director at Sainsbury’s
TIGHTEN YOUR SEATBELT FOR RAPID TRANSIT
We can already see the trends discussed above changing the procurement space. Therefore, we should expect to see the velocity of that transformation increase. We live in a strange, new world and must adapt to remain competitive.
Fortunately, procurement isn’t going away, it’s just changing. The faster we adopt new trends and the better we train our long-term vision, the easier this transition will be.
A great first step is to embrace the above-mentioned trends today. That will set you on the right course for new, unexpected trends and transformations that we’ll surely see in the coming years.