It’s hard to believe that another year has come and gone. As 2019 comes to a close and procurement professionals reflect on the past year, the amount of disruption and innovation that have taken place may shock them. Global trade disputes, Brexit, volatile exchange rates, political uncertainty and wild fluctuations in commodity prices, among other surprises, have not made it easy on procurement professionals. Procurement teams have been both reactive and proactive in the face of these headwinds, reinforcing old trends and shedding light on new opportunities in the industry. Heading into 2020, ProcurementIQ has identified the following five strategies that professionals should focus on to ensure they remain competitive and successful:
1. Fortifying Relationships with Suppliers
Across the procurement industry, professionals are changing the way they approach relationships with suppliers in a manner that emphasizes return on investment (ROI) over cutting costs as they enter 2020. This strategy considers the big picture perspective, acknowledging that a primary objective to cut costs is short-sighted and inevitably irrelevant should the buyer-supplier relationship sour or end with insolvency. This concern has grown stronger in the face of strong supplier-driven and market-related risk heading into 2020. Supply assurance and reliability remains one of the biggest threats across the procurement industry and professionals are alleviating some of this risk by fortifying relationships with their suppliers. Consistent lines of communication and an emphasis on soft skills are proven to lift customer satisfaction rates and improve supplier delivery times. Moreover, procurement professionals are doubling down on supplier relationship management (SRM) by increasing purchasing transparency through the application of technology. Supply chain management software and procurement software are just two of the solutions available to help procurement teams streamline the purchasing processes and convey information in real time.
Key Takeaway: As we enter the new year, procurement professionals are bracing for market-related risks by forging stronger and deeper relationships with their suppliers and using software systems to improve efficiency.
2. Automating Supply Chains
The proliferation and application of digital technologies across supply chains will continue to radically transform the procurement industry through 2020. Technologies that will have the most transformative effect on supply chains in the next year include sensors and wearables, artificial intelligence (AI), blockchain, robotic process automation (RPA), virtual machines and special analytics. These technologies will continue to fundamentally change the way professionals carry out business from day to day. For example, AI is increasingly being used to automate time consuming tasks such as the verification of purchase requests while still utilizing machine learning technology for analysis and source plan management. Analytics has also had a profound impact on procurement, with businesses now achieving as much as 15-25% savings on addressable spending due to advancements in analytics tools.
Key Takeaway: Through 2020, procurement professionals should expect the adoption of new technologies to automate menial tasks and provide greater insight into purchasing decisions.
3. Strengthening Cybersecurity
ProcurementIQ forecasts that cybercrime will cost the world an estimated $5.4 trillion in 2020 and will remain one of the biggest risks in the procurement industry. As procurement professionals continue to adopt digital solutions, professionals are also increasing their exposure to cyberattacks. Cyberattacks on major companies in 2019, including social media and banking platforms, have only reinforced cybersecurity as a top priority for procurement professionals heading into 2020. Professionals have and will continue to deter threat actors by enhancing the vetting process for third-party software providers, implementing cybersecurity training measures, deploying preventative firewalls and security software, developing security protocols directly with suppliers and limiting supplier access to internal IT systems.
Key Takeaway: Procurement professionals must be proactive when developing internal cybersecurity policies and should strongly consider cybersecurity capabilities of potential suppliers and vendors. Over 50% of all cyberattacks on publicly traded companies in 2019 were a result of weakness in suppliers’ and third-party service providers’ cybersecurity protocols.
4. Leveraging Data
In 2020, data fragmentation across the market will pose considerable challenges to procurement professionals as they increasingly rely on digital technologies to guide procurement decisions. Procurement professionals have historically collected and analyzed transactional data and struggled to gather valid data that provides insight into purchasing strategies and decisions. However, the proliferation of big data analytics across the procurement industry has opened new opportunities to guide purchasing strategies and decisions by solving sourcing challenges, increasing operational efficiencies, strengthening predictive modeling systems and efficiently measuring cost savings. Therefore, professionals are focused on carefully leveraging combined technologies in 2020, including sensors, natural language processing (NLP) software and the Internet of Things (IoT), to create integrated data ecosystems. These data collection systems will enhance the transparency of patterns across procurement departments and strengthen overall data integrity in 2020.
Key Takeaway: Professionals that strategically adopt digital solutions will find themselves with a competitive advantage as they can better utilize data and analytics in decision-making processes.
5. Closing the Talent Gap
Labor shortages across the procurement industry will have a significant impact in 2020. There is a growing talent gap as retiring baby boomers are replaced by younger Gen-Xers and millennials entering the industry. Other factors contributing to a shortage of qualified candidates across the industry include perceptions that careers in procurement are unexciting, the increasing complexity of supply chains and the lack of educators and educational opportunities for budding procurement professionals. Furthermore, historically low unemployment and an extremely tight labor market in the United States only make the hiring process harder and slow progress toward closing the talent gap. The war for talent across the procurement industry will have several implications in 2020. As procurement departments onboard less qualified personnel, project costs are expected to rise and scheduling for employees will become more aggressive, with some staff working more than 40 hours per week. Although IT solutions will leverage AI, robotics and other automated software systems to help control labor costs, the growing talent gap and shortage of qualified candidates will present a significant challenge for procurement teams in 2020.
Key Takeaway: To properly address the growing skills gap across the procurement industry in 2020, organizations need to start investing in internal development programs. Approximately 75% of organizations spent less than 2% on training programs in 2019.
By: Riley Mallon