Estimated reading time: 5 minutes
• The latest trends in the procurement sector for the last two years have been informed by the disruptions that came about in 2020 during the height of the COVID-19 pandemic.
• The events of 2020 exposed weakness in supply chains, especially the lack of visibility and agility. Companies that couldn’t adjust fast enough ended up having to close operations or suffered sharp declines in revenue.
• The effects of the disruptions are still being felt today in high food prices and labor shortages in some countries. Trends in procurement, therefore, in 2022 and beyond will be addressing the concerns over supply chain vulnerabilities.
The first major trend in procurement is the move toward making supply chains more resilient. Strong and resilient supply chains mean that companies are able to handle shocks such as delayed deliveries and increased costs well. For instance, by having contingent suppliers on standby, a company can continue production even when the primary supplier comes up short. Such things as locking in prices of volatile prices help to create predictability and give customers more certainty on the prices of final products.
Procurement managers face the unique challenge of coming up with innovative ways to make their supply chains more resilient in a rapidly changing operating environment.
Procurement Playing a More Strategic Role
Another trend in procurement shows that companies are moving away from the view that the procurement department is an auxiliary one whose performance should only be engaged through the price metric. Instead, they appreciate that a strong procurement department can be a source of competitive advantage. For instance, a company that handles disruptions well is able to avail products to customers throughout the year and at predictable prices. Procurement managers will have a seat at the table, playing an advisory role in the strategic plans of companies.
Greater Reliance on Automation
It is expected that as procurement teams become more strategic, they will rely on automation solutions to avoid spending too much time on repetitive tasks. Robotic process automation, in particular, can help speed up tasks while eliminating human error. Companies will build templates for documents that they are always creating to avoid creating them again from scratch. Standardization of contract language also goes a long way in reducing ambiguity or potentially risky clauses in big contracts.
The procurement sector has also been leading the way in building AI models for predictive analytics. The availability of data in the procurement sector is a major reason for this. More companies will rely on data-driven decisions to handle the sheer complexity of their supply chains.
Low Code Applications
Low code solutions help small businesses, especially build automation solutions that would otherwise require thousands of dollars to build from scratch. Low-code and no-code SaaS platforms allow businesses to build test and deploy applications quickly and the pricing is often based on the volume of usage, which makes it easier for small businesses to scale. Procurement departments can use low-code applications to automate purchasing and sourcing functions.
How businesses view their suppliers is important when such suppliers are charged with delivering important inputs for manufacturing. Vendor management should be about finding ways to build strategic relationships with vendors and improving their capacity, where possible. Finding these opportunities also reduces the chances of friction between companies and their vendors because of having common goals. For instance, suppliers will invest in quality improvement and standardization when they know that it will assure them of more business and longevity.
Discussions on ESG
Despite the pandemic, the push towards more ethical sourcing and governance reporting has not slowed down. The latest trends show that companies with big procurement budgets will still be expected by their customers to use their influence to make suppliers operate more sustainably. Some key areas of concern are the economic empowerment of communities where businesses operate, environmental preservation, and the social welfare of employees, regardless of jurisdiction. The level of scrutiny on companies means that ESG cannot be ignored.
Risk Management will Be Even More Important
A reactionary approach to contingencies in the supply chain will always be more expensive than proper planning. The pandemic revealed the need for companies to carry out comprehensive risk assessments and make the necessary adjustments to mitigate risk. A detailed assessment is likely to reveal risks the company may not have been paying attention to including unstable logistics and overreliance on a few suppliers.
Companies now realize that risk assessment ought to be an ongoing thing owing to the dynamic nature of the business environment today.
Companies today have an opportunity to create visibility into their procurement spending using e-procurement software that is superior to spreadsheets. This way, they can monitor trends in spending across different categories. Visibility into spending patterns and decisions will also curtail maverick spending, which is a problem in situations where people are not specifically responsible for decisions. By adopting software that has clear workflows, companies will end up making major savings in their procurement budget.
As companies strain to make their internal processes more resilient, they will use contingent workforces to smooth out their labor needs. Hiring a temporary workforce helps companies to gain flexibility without adding too many costs. This will be the case when hiring unskilled workers, but the same can be said of skilled workers who come on board as freelancers to offer very specific skills.
ProcurePort’s e-Procurement Solutions
Visit our website to see the range of customizable e-procurement solutions on offer to help you streamline your procurement processes. Agility is inarguably one of the most important qualities of companies seeking to navigate the next decade. Integrating these solutions will aid that journey for your company.