Nov 29, 2016

What procurement challenges will you face in 2017? And are you ready? Here are PROCUREMENT.WORLD's top 5 to watch out for. 

procurement challenges

1) The Rise Of Risk

Supply chains and markets are more complex and globalized than ever. So it is surprising that Risk Management is still an afterthought for some organizations. In other cases, some think that compliance is enough to cover Risk Management. In complex supply chain, this could be a big mistake. A minimalist approach to Risk Management is also one of the things holding Procurement back from a strategic role.

The challenge is to start building holistic Risk Management and put it into the DNA of sourcing and SRM. To start, risk includes:

  • Financial risk
  • Supply chain risk
  • Sustainability
  • Ethics violations and labor abuses
  • Beyond tier-1 suppliers.
2) The Need for Agility

If 2016 taught us anything, it was that life is full of nasty surprises. We have entered the Age of the Black Swan. A black swan is an event that is a surprise and has a major effect. People try to rationalize it in hindsight and believe they should have seen it coming. The obvious example is the outcome of the US election. The highly respected statistician Nate Silver predicted Hillary Clinton’s chances of winning at 71.4%. And we saw how that went.

So Agile Procurement might sound like a buzzword, but it an urgent need. Agility is the ability to respond to change to maximize opportunities and minimize risk. An agile organization can respond to changes in supply chain. It does this by rapidly changing sources, suppliers, materials and logistics. This is Procurement’s best weapon against one of the top procurement challenges in 2017.

3) Selling Value Above Savings To Management

The meaning of cost is changing dynamically. Cost is not just purchase price - it is about value from the right sourcing decision. As long as the old “post office” stereotype exists, the C-suite will focus on purchase price savings. In some famous examples like Tesco, the aggressive pursuit of savings has squeezed suppliers. And of course, there are consequences, including supplier backlash and a build-up of poor quality. Positioning Procurement is not about improving the reputation of the function. It is about rescuing savings from C-suite myopia that costs more later down the road.

4) New Product Innovations

"Innovate or die." This saying is truer than ever. Companies have to beat the competition and keep up with the accelerating pace of technological advances. Many markets have been disrupted by new entrants. So complacency puts older players at risk of losing ground. For example, the automotive market is going through various transformations:

  • Electrical vehicles
  • Self-driving cars
  • Rental economy

Therefore, companies must excel at developing new products and at launching them. For Procurement this means stronger relationships. Internally: with R&D, manufacturing sales and marketing. And externally, as suppliers can play a vital role in bringing innovation and anticipating trends. Supplier-led innovation has to be at the top of the agenda of organizations for 2017!

5) Developing The Right Talent For Procurement Challenges

Recruiting the next generation is a challenge for Procurement, which already has problems shaking off its old image. Procurement will have to sell an exciting vision of the its future to young talent. Online communities like Procurious are already bringing the fresh energy needed to attract young professionals. Young people today are equipped with two things: dynamism and a highly-tuned bull detector. So Procurement will need to sell passion for the profession with honesty and respect.

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