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• Beyond flying cars and hoverboards, we’ll see a lot in the future. Machine learning, analytics, big data, cloud, and artificial intelligence are some of the few forces that are revolutionizing and defining the tech landscape.
• New technologies impact functional business areas, including operations, sales, marketing, and strategic positioning. One of the most hit functional business areas is procurement.
New technologies have impacted procurement processes like sourcing, requisition, purchasing, invoicing, and contract management. So, there’s no doubt that the future of procurement depends on emerging developments in machine learning, automation, cloud, and analytics.
Below we look at seven trends in procurement and supply chain management.
7 Emerging Trends in Procurement and Supply Chain
1. Procurement will take learnings from the pandemic
The pandemic has affected enterprises due to the collapse of the global economy. Because of the stifling performance of the global economy, local and national economies have been greatly affected, leading to business collapse and lower consumer spending.
In addition to individuals and businesses, new technologies have affected critical business functions like procurement. The pandemic has proved unbearable with unprecedented demands and a shortage of crucial resource inputs.
The pandemic has affected procurement, leading to the just-in-case model in purchasing to mitigate the unprecedented risk of shortage of critical resource parts. So, the pandemic has severely impacted the procuring of goods and services worldwide.
Thankfully, most procurement teams have altered their working model and adapted to these shifts. Some changes will last for a few years while others for a lifetime.
Here are some of the changes that have taken place during the pandemic and which continue to affect procurement in discrete ways include:
- Speed, flexibility, and responsiveness. The Covid-19 pandemic has created the need for faster and more responsive procurement processes. Covid-19 led to the demand for PPE in hospitals, forcing healthcare procurement teams to be more agile in their procurement. Organizations couldn’t wait to undertake long RFx processes to procure personal protective equipment. Instead, sourcing experts proved that during a crisis, they should be faster, streamlined, and decisive in their decision-making processes.
- Risk focus. Risk focus is critical when making purchasing and sourcing decisions. In 2022, we expect the focus on risk to grow, due to emerging supply chain shocks and unprecedented changes in demand and supply. With the pandemic, organizations will likely be willing to pay more for services (or products) with low-risk profiles than simply paying cheaper for products with inherent risk elements.
- Shifting from just-in-time to just-in-case purchasing. The just-in-time purchasing model is efficient because it procures what is needed at the desired time. Unfortunately, the just-in-time model was greatly affected by the Covid-19 pandemic following unprecedented supply chain shocks.
In 2022, we’ll likely see a shift towards just-in-case supplies. This is where products are procured in large volumes, and warehouses are usually kept full. If the next crisis hits, it will give procurement time to plan without their teams running out of crucial material supplies.
2. Adoption of Artificial Intelligence AI
There’s a massive revolution in artificial intelligence worldwide with new capabilities being embedded to improve intelligence and analytics in machine tools, systems, software, and devices. In 2019, AI would be as clever as a 4-year-old, but in 2021, it can be as brilliant as a 10-year-old depending on embedded capabilities.
Procurement AI capabilities making waves in 2022 include:
- AI supplier risk management
- AI contract management
- AI supplier risk management
- AI spend analytics
- AI automated payments
- AI supplier information management
Artificial intelligence will revolutionize procurement by streamlining procuring and sourcing across the supply chain.
3. Shifting from end-to-end systems to tech stacks
In 2022, we’ll likely see procurement shifting from end-to-end systems to tech stacks. Already, enterprises are gradually phasing out enterprise resource platforms in favor of technology stacks. Technology stacks involve building an ecosystem of integrated software designed, tuned, and synced based on your existing and emerging business needs.
You may partner with one service provider for supplier discovery, for instance, or team with another for spend analytics. But the key to success is integration or interoperability because data should flow seamlessly within the stack.
Sustainability has shifted organizational mindset, powering talks surrounding responsible resource consumption and responsible production. Amid these talks are conversations about how procurement can help meet sustainability efforts, including improving sustainable sourcing practices.
Based on a study by Accenture, most customers prioritize quality and prices when purchasing products and services. However, more than 80% of the respondents believe that it’s critical for companies to design products and services that can be recycled and reused.
The following are the highlights of Accenture’s study:
- More than 60% of customers are willing to pay more for environmentally-friendly products
- 80% of consumers expect they will purchase more environmentally-friendly products in future
- 72% are buying more sustainable products today than they were buying five years ago
Just-in-time purchasing improves resource utilization, leading to sustainable and improved business outcomes through responsible resource usage.
Collaboration is utilized as an element of procurement efficiency and performance. Collaboration in procurement occurs when strategic suppliers fulfill complex and diverse supply demands. Organizations that use strategic partnerships work with suppliers to meet short-term and long-term supply chain needs.
In 2022, procurement is increasingly becoming an integrated and complex idea. And to solve procurement’s most underpinning challenge, organizations are looking at strategic collaborations. Among these collaborations are partnerships between enterprises and procurement service providers.
The goal is to create partnerships that help create meaningful and lasting solutions to procurement’s most recurring functions – requisitions, invoice processing, contract management, risk management, and many more.
Digitization has been a characterizing factor of the 21st century, defining crucial landscapes across diverse sectors – healthcare, retail, finance, insurance, legal, and education.
Digitization is critical for continued business performance and productivity. Organizations must look at ways to differentiate themselves with new, emerging forms of digitization – automation, on-demand model, free model, e-commerce, m-commerce, and many more.
Equipping your organization with digital technologies will help meet your customers’ needs. For instance, installing purchase requisition software will prepare, send, and review requisitions faster and more accurately, leading to less processing time and more satisfied suppliers.
Blockchain is a crucial piece of digitization in 2022 – and beyond. And although Gartner predicts that 80% of supply chain blockchain programs will remain at the trial stages in 2022– it’s not early to invest in this frontier.
Blockchain impacts different operations in banking, insurance, and legal services. For instance, developments in blockchain have improved transparency, protected sensitive consumer and financial information, and provided reliable services. In addition, blockchain has increased operational efficiency and reduced service disruptions.
Blockchain proves to be futuristic and up-to-the-minute, especially when you consider that businesses will need protection now and in the coming years.
7. Reduced consumer spending
The Covid-19 pandemic has severely impacted consumer spending due to dwindling disposable incomes globally. The pandemic has impacted the global economy due to the availability of only a limited number of essential services.
The Covid-19 pandemic affected the circular economy and strongly affected global demand. And due to massive shocks in global demand, companies stifled their production and manufacturing outputs, laying down workers amid the adoption of cost-containment measures.
Declines in the global economy affected consumer purchasing power. And with less disposable income and an uncertain future, customers have been forced to curtail discretionary spending and spend only on what is crucial.
As companies prepare for agility and resiliency following the pandemic, procurement as a business function will become increasingly critical to their strategy. And to tide the pandemic and stay afloat, companies must embrace value-adding capabilities to improve their odds to supply chain success.
Contact ProcurePort for procurement automation and supply chain repositioning.