Supply chains can be hugely disrupted by challenges that stem from the increasing legal issues, ethical and regulatory frameworks and sustainability concerns. Procurement is no more just about reducing costs and on-time delivery of goods and services. In fact, Chief Procurement Officers (CPOs) are expected to play expansive roles like innovators of new products and services as well as advocates of sustainable business practices.
The next 5-7 years will define new horizons for procurement and by 2025, there will be a complete transformation in the way supply chain and procurement functions operate. Here is what I believe procurement leaders should pay attention to:
As businesses continue to go global, by 2025, procurement leaders should start developing expertise in local markets of developing economies such as India, Brazil, China and Russia among others.
This involves a shift towards adopting a holistic approach towards risk management by taking a closer look at factors such as risk mitigation, exposure and transfer pricing. With the push from procurement leaders, next generation category managers should be able to factor new metrics into global sourcing and develop supplier risk management.
Social and economic value-add should be amongst the key priorities for supply chain leaders. This will enable millennial generation to gain more influence in the workforce which will help businesses to shift towards circular economy rather than linear economy of consumption.
To manage the global sourcing challenges, procurement leaders need to broaden their skillsets. The procurement leaders will need a dire need to coach their staff, helping them develop a sound understanding of the business as well as financial acumen.
Information savvy procurement teams will be the game changer. They will not only be adept in tracking information on costs but will also help track social responsibility commitments and sustainability of the business. Procurement will be powerful enough to operate across the business with cross-enterprise performance metrics that can help identify sub-optimal business processes and improving them suitably.
Either through outsourcing non-core functions or through streamlining new product developments, procurement businesses will serve as a channel to create value from global supply base. For this, such businesses should understand the role played by outside entities in leading innovation. Procurement teams need to be adept at designing, engineering and new product development.
As against the traditional buy and audit models, procurement businesses will deploy external collaboration models with multiple vendors or partners in the areas of service acquisition and collaborative models in order to replace adversarial constructs that focus on zero-sum outcomes.
Data mining and advanced analytics needs to gain ground with best-in class procurement businesses as big data is becoming increasingly intertwined with corporate decision-making processes in sectors such as automotive, high-tech and consumer sectors. This is in further addition to comprehensive real-time updates across wide spectrum of the business.
Along with real-time technologies and increased presence of social media, procurement function will become even more visible to the world and that will further another set of challenges and opportunities.
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Author – Aval Sethi, Founder