How to Future-Proof Your Procurement Function

The quickening pace of evolution in procurement and supply chain departments has been occurring at most companies for some time now. Sam Jermy asks how you can adapt and keep apace…

The quickening pace of evolution in procurement and supply chain departments has been occurring at most companies for some time now, as has been highlighted amongst sector stakeholders. In particular, the marine trade industry and firms involved in the movement of sea freight have seen vessel-sharing and further consolidation in order to protect shrinking profit margins – meaning procurement becomes even more central to not just future prosperity, but viability of the business strategy. This rapid nature of upsetting the status quo is only going to continue moving forward, so category managers and procurement directors need to know exactly what needs implementing to “future-proof” procurement. 

When asked where they see the procurement function in ten years by Oxford Economics, 63 percent of executives said procurement will maintain its current structure entirely or maintain its current structure while becoming more strategic and absorbing other functions. Greater integration of new technology is one of the widely accepted features of a procurement team embracing necessary modernisation, thus acting as a driver for innovation. But what else should CPOs and decision makers consider as the profession continues to change? 

“Procurement needs to move from its traditional focus on ‘savings as a service’ to one that brings deeper value and sustained top-line growth to the organisation as a whole”

Sarika Garg, Chief Strategy Officer at Tradeshift, was asked what additional skills and knowledge procurement departments will need to solve challenges they will face in the next five to 10 years. 

She said: “Almost every organisation in the world is going through a period of disruption right now, with new companies emerging that challenge the way things have been done in the past. Ultimately, the ability to react to these changes comes down to agility. Procurement sits at the heart of this, but the role needs to move from its traditional focus on ‘savings as a service’ to one that brings deeper value and sustained top-line growth to the organisation as a whole. 

“The traditional role of the Chief Procurement Officer, acquiring the right products at the best price, quality, location and time, simply won’t exist in the next five years. 

“Forward thinking organisations are increasingly measuring procurement’s value on its overall contribution to the company’s strategy, whether that is product innovation, cash flow improvement, cost savings, or anything else that helps the company get to where it needs to go. Procurement professionals will need to prove they can take on a more strategic role, or they will be heading for the exit door.” 

Training and recruitment 

With this in mind, the make up of the profession will subsequently mutate and develop to meet these changing requirements. The skills needed will no longer be as static because creation of deeper value with strategic partners will begin to trump short-term cost savings on a regular basis, and this will need closer consideration to facets such as relationship and contract management rather than agreeing terms with the most financially attractive partner no matter the consequences. 

On one hand, new talented individuals who are adept at varying different emerging technological platforms will be sought to lead on the digital front; but training will also need to be given in order for the practitioners to learn these new digitals skills and drill down on them. For example, updated ERP systems with enhanced compatibility and functionality across multiple departments will necessitate new talent, or at least a skill refresh on how to utilise the technology. 

Garg agrees. She said: “Technology is driving ever greater opportunities for insight, connectivity throughout the procure-to-pay cycle. This is going to require a shift in attitude towards talent acquisition across the procurement function. 

“By far the most exciting things happen when you start to mix human thinking and AI together to perform more complex tasks”

“Tomorrow’s procurement professional must be willing to embrace and master new and emerging platforms for spend analysis, procure-to-pay (P2P), supplier relationship management, e-sourcing and more. Procurement leaders will be counted on not only to apply this constantly evolving tech, but also to convince others of its value and then teach them how to use it. 

“Transformation is going to require people who can bring creativity to the table and are willing to voice controversial issues and suggest alternatives. As procurement professionals move away from tactical responsibilities to assume a more strategic role, they will need to excel in soft areas such as perception and leadership. Logic and reason, so long the pre-requisite characteristics for any procurement professional, will need to make room for greater emotional intelligence.” 

Artificial Intelligence 

The disruptive fallout from digitisation is having an incredibly polarising impact across almost every industry. But according to Accenture, procurement itself has never been more efficient- with the typical procurement organisation’s operating cost approximately just 0.8 percent of a firm’s overall spending. Logically speaking, an employee working in procurement should not fear potential job losses due to technology. In fact, when discussing how to future-proof the function, Garg points out tech such as AI (Artificial Intelligence) can complement human performance and improve existing practices. 

She said: “We are seeing a yawning gap emerge between the top performing companies who are moving to the cloud and those who rely on traditional, often paper-based processes. Any business today that is not already 100 percent digital is failing. And even if you are at that point, don’t consider it the end game. 

“AI is often characterised as a job-stealer, but the reality is far more nuanced. AI is great at low value, laborious tasks, but it’s far less good at more complex, strategic tasks where humans outperform computers. By far the most exciting things happen when you start to mix human thinking and AI together to perform more complex tasks, from analysing buying patterns to spotting efficiencies, through to selecting new suppliers. 

“Artificial intelligence will make many of the manual administrative tasks involved in procurement obsolete. Depending on where you sit, this is either an existential threat, or something far more empowering. AI will help procurement professionals dig deeper and make more strategic decisions faster, but individuals have to be willing to take that leap. AI is one of those ‘once in a decade,’ disruptive technologies in the same vein as mobile technology. We’ve been talking about its potential for a long time, but the underlying power has really begun to accelerate.” 

The reality is that digitisation is just the foundation for a whole host of new and emerging technologies CPOs and practitioners need to embrace to stay ahead. Although new talent will rightly be recruited towards procurement in the coming years, further collaboration and versatility is just as important when future-proofing a procurement team. 

Sam Jermy
Specialist Supply Chain and Procurement Writer

Sam Jermy is an experienced multimedia journalist who closely follows industry trends and has extensive knowledge of procurement and the supply chain.