FUTURE OF PROCUREMENT – 2021 and BEYOND
At RREVENU, we believe the FUTURE IS NOW!!!
The roles of procurement departments and functions are changing, and more companies are realizing the valuable benefits that can be realized from the procurement departments. The procurement function is becoming more strategic, more collaborative, and more technology-driven than ever before and these transformative trends are ongoing. But at most companies, procurement departments experience a multitude of challenges to address in terms of technology, organization, and human capital.
One of the first priorities if not already, companies will need to realize the importance of a business relationship between the procurement and finance departments. If the standard operating procedures (SOPs) are not formulated to combine the two groups and to hold regular meetings between the two departments, it is highly beneficial for such interactions and understanding to be initiated by leadership.
Procurement and finance are both about data analysis and data sharing in order to come up with the best and most cost-effective path forward. In addition, understanding the vendor relationships and contract management are key functions of the two departments. By building a solid foundation, the future of procurement will bring about a smoother operation for companies however, companies must constantly stay on top of the markets to adjust as new challenges develop.
The best example for such new challenges will be the COVID-19 pandemic that has brought humanity unforeseen challenges and at the same time highlighted lack of preparation. In the face of mandated lockdowns for businesses and cities, school closings, adapting to working remote from home, supply chain breakdowns, low inventories, obsolete or lack of necessary equipment in our Strategic National Stockpile, transportation demands, backlogs in our national ports, development of testing kits, vaccine research and development (R&D), FDA new drug/vaccine approval process, and many more will be studied for years to come. Furthermore, we also learned to adapt and change over time thus, showing humanities resilience.
To fully understand where the focus and consensus are by the various bloggers, consulting companies, and industry trends, RREVENU looked at several sources such as ZYCUS, KPMG, SourceToday, Basware, Institute for Supply Management (ISM), The Economist Intelligence Unit, BusinessWire, Raconteur, EPS News, Ernst & Young (EY), Deloitte, Gartner, Oxford Economics, Sievo, McKinsey & Company, Price Waterhouse Coopers (PwC), Accenture, and many more.
At the end of our industry analysis, a great deal of technical terms, countless presentations, lost count on downloadable PDFs, and so forth and finally they all came to look alike and sound alike. Some of the key technical jargon used can be summed up as follow:
- “Digital strategy and procurement platforms” [Key will be how to manage legacy systems and processes; our philosophy is in decentralized procurement functions.]
- “Procurement Risk Management” [How to manage risk is and will always be key for any procurement department.]
- “Effective Change Management” [change starts from the top in any organization.]
- “Artificial Intelligence (AI) systems” [OK, how do we go about utilizing AI?]
- Machine learning: “Machines will mostly clean and curate their own data” [what?]
- “Robotic process automation will be ubiquitous and will become an integral part of any commercial off-the-shelf (COTS) deployment.” [what?]
- “Supplier Relationship Management” [this is key]
- “Agile Operating Models” [What does agile even mean and how can we incorporate this into the procurement functions?]
- “Extreme Analytics” [Why not just say analytics or data analytics?]
- “Category Innovation” [How about current process innovation?]
- Workforce of the Future” [Why not concentrate on the current workforce that runs daily operations by providing them the tools, training, and most important pay? YES, PAY!!!]
- “Advanced Automation” [For a small business, is this even an option?]
- Reduce need of staff but also intensify competition for staff [This one is an oxymoron.]
- Investment in upskilling or training procurement talent remains low [We could not emphasize this more.]
- Human rights, legal and ethical procurement practices [Use of child labor around the world, how can we protect children and abuse in your supply chain?]
- Global wake-up call for business leaders related to the coronavirus pandemic [This is key to bring closer to home manufacturing and supply channels, reliance on “Made in China” severely flopped during the pandemic which will continue.]
- Big-budget systems [Perfect example is SAP, cost of integration, training, and maintenance.]
- “Transition from transactional procurement in a linear environment to procurement in a circular economy where procurement organizations have to balance the creation of economic and social value in equal measure.” [What does this mean?]
- Increasing the financial expertise and sophistication of the procurement function. [Couldn’t agree more.]
- Advanced data mining and statistical analysis technologies and techniques
- “Blockchain will be selectively used in procurement.” [Couldn’t disagree more with this statement.]
- Hiring consultants [Why RREVENU was created!!!]
- Number of suppliers with automated collaboration [Another key component, especially in relation to inventory turnover/inventory activity and order cycle time with vendors.]
- Procurement Return on Investment (ROI) [How to establish key relationships with vendors and institute better discount structures or loyalty programs for ROI.]
- “Internet of Things (IoT) Big Data” [How to capture this data timely and to utilize appropriately?]
- “Intelligent spend engines” [What?]
- “Category-specific. Automated solutions hard-coded into analytics identify, apply, and monitor standard and advanced levers unique to a category.” [A mouthful!]
- “Functional advanced analytics tools. To improve category functionality, buyers can apply a variety of tools, including: network optimization tools; automated, real-time KPI dashboards and executive scorecards; parametric clean-sheets, and eSourcing tools powered by artificial intelligence and advanced analytics.” [Another mouthful!]
- “Transform to a future-ready operating model.” [What?]
- “Push smart centralization balancing all improvement drivers.” [What?]
- “The Virtual Company Mall” [What?]
- “Motivated Alliance Manager” [Yes, let’s hire an unmotivated “alliance manager” and what is an “alliance manager?”]
- “From Augmentation to Automation Cognitive Help Desk Agents Are Only the Beginning. Intelligent and self-learning computers will become trusted “expert advisors” to procurement professionals, augmenting complex decisions and, in some cases, operating autonomously under human supervision.” [what?]
Reading through the various theories, recommendations, and the visions in relation to the future of procurement, we can see a clear pattern of agreement among the various sources. With the COVID-19 challenges and a new administration in the White House and a political party that controls the House, Senate, and the Presidency, new challenges will face all businesses.
The dreaded term “inflation” is upon us with no solutions in sight, clearly apparent by the diminishing tools available by Chairman Jerome Powell of the Federal Reserve. A supply chain mess entrenched in massive delays, self-serving mandates on trucking owner-operators by local governments that support union bosses, unnecessary and overreaching vaccination mandates that have caused havoc in our economy and around the world.
As far as RREVENU is concerned, our focus will be based on what is the goal now and how can RREVENU assist companies with the day-to-day operations and needs now by answering such questions as what is the process currently and how can we do it better?
Why is the project that was promised to take one year is taking longer thus, what happened to the SOW/RFP/contract initially agreed upon? What companies are our Tier One vendors and what level of discounts are we receiving based on spend targets? When was the last time we negotiated service level agreements (SLAs) and pricing with our vendors? Why are we buying the same items from different vendors at different cost structure and delivery timeframes? What are our SOPs? Are we dedicating enough time to training and what are we training? Why are we having such a hard time in recruiting skilled talent and why are we having high burn rates in turnovers, and what is the cost?
These are only a sample of questions that RREVENU can assist businesses now as we assist our clients in preparation for the future thus, the future for us is TODAY!!!
Now the future in simple terms: BLOCKCHAIN!!!
Team RREVENU Can Help You
We are a dedicated team that is ready to assist our clients with outstanding customer service.