What do international professionals think are the top 5 procurement challenges in 2017? We shared our top 5 challenges for this year. Here are our readers’ responses: the people speak!
1. Agility, Value, Product, Innovation
Ed R., Global Sourcing Manager, from New Jersey, USA: Success in business requires speed to market (agility); a product worth purchasing (value); an ability to provide the product (understanding and mitigating risk points, sustainability) and innovation. A Procurement organization needs to deliver all of these.
2. Open Dialogue With Potential Suppliers
Des M., Director of Business Development, from London, UK: I'd add the need for procurement to be smart in maintaining open dialogue with potential suppliers throughout the term of contract and not just at contract review time. Regular trust based conversations can drive remarkable results.
3. Political Risk
Simon I., Procurement Specialist, from Bedfordshire, UK: Risk and due diligence are more and more being ignored in search of initial cost savings. I'm finding change is not welcome by many departments and senior stakeholders. I therefore fear we will see more Nokia's in 2017 and that there is a denial by many regarding the impact of Brexit and the poor political communication and the currency impact for us all which is going to drive significant increases in prices regardless of commodity.
4. Good Strategy
Jean A., Procurement Manager, Brazil: Preparation should already be started when the company has a supplier strategy management. Everything implies a good strategy with suppliers: Identification of risks, agility (double sourcing / back up), study of costs (cost breakdown) and innovation. When companies take over Purchasing as a strategy area, with all these aspects, they could encourage young people to join Purchasing.
Adam Shayevitz, President, Strategic Sourcing Dynamics, MA, USA: Effective global strategic sourcing will increasingly become an act of cherry picking suppliers based on Total Cost of Ownership, instead of a limited focus on specific low labor cost regions. “Competitive advantage" is shifting towards regional and local manufacturing, importing components as needed from countries offering a "Comparative Advantage". Rapid advances in automation are reducing the impact of labor cost differentials among nations.
Rightshoring will replace Offshoring. The cheapest labor does not automatically equal the true lowest cost source. When measured against the Total Cost of Ownership (TCO) standard Low Cost Countries (LCC) may not live up to their reputation. Add up costs such as IP protection, lead times, lack of real time technical support, and you might be surprised at the result. This is the age of JIT, short product life-cycles, and the necessity to respond quickly to customer trends. Tasks made more challenging by cultural, language, and physical distance.