The four trends that will position procurement as the driver of organisational change

By Alex Saric, Smart Procurement Expert, Ivalua. 

We are heading into an uncertain year. Whether it’s the increasing complexity of the supply chain in the face of globalisation, the race to discover and deploy the latest emerging technologies or the impact of Brexit on the supply and movement of goods – organisations need to be able to overcome the challenges ahead and keep everything running smoothly.

Procurement, far from its beginnings as a cost-cutting function, now provides organisations with the means to adapt to and thrive in today’s highly uncertain and dynamic market. 2019 will provide further proof of the value procurement can deliver to organisations, helping to meet business objectives and drive organisational change.

AI will begin to deliver real value to organisations

In the next 12 months, Artificial Intelligence (AI) will finally break through as a mainstream value-driver for organisations, with expanding use cases for procurement and supply chain departments progressing from pilot to production. AI will help to automate tasks like ordering and invoice processing, predict supply chain disruptions and create quick access to information for stakeholders via chatbots and digital assistants. Procurement leaders have recognised this, with research from Forrester finding that 55 per cent of organisations are set to make a major investment in AI before the end of next year. 

Successful organisations will deploy AI as part of a holistic smart procurement strategy. Past initiatives have generally delivered limited value, partly due to immaturity of AI technology but also due to a focus simply on the AI algorithms. In 2019 organisations will increasingly realise true value from AI both from the significant progress in technology but also because of a smarter approach that involves deployment of the latest technology in parallel with systems that ensure a solid data foundation. This will address the ‘garbage in, garbage out’ reality of AI, as well as overall analysis. By integrating AI with smart procurement platforms, organisations can access better insights in real or near-real time. This will give procurement leaders better insights into opportunities and allow them to evaluate supplier risk. Expect a steady stream of new AI-driven applications and use cases in the coming 12 months.

Risk continues its upward trajectory

Uncertainty is on the rise, and not just because of political turbulence. In addition to factors such as Brexit, recent events in the security world such as the alleged SuperMicro hack have highlighted the importance of mitigating supply chain risk – where the reputational and financial damages can be extensive. This risk threatens to cause mass changes to everything from tariffs to the movement of goods and even the regulations that become applicable to suppliers in the UK. The government’s advice on a no-deal Brexit leaves plenty of questions for organisations and their supply chains, so it’s up to businesses themselves to come up with a plan of attack. 

Procurement and supply chain leaders are well positioned to help companies navigate this uncertain environment and will be expected to do so, raising the functions’ strategic importance. To mitigate these political and cyber risks, leaders must ensure agility, ensuring that organisations are ready to assess and modify supply chains based on ever-shifting changing criteria. This means frequently assessing if existing suppliers meet requirements, as they change with the times. If not, organisations must have the power to act accordingly. By leveraging smart procurement systems that enable the efficient capture of new information and management of improvement plans, organisations will be able to make informed decisions and adjust as needed based on regularly shifting issues such as Brexit and sudden supplier breaches. These decisions mean organisations can continually review risk and ensure the critical supply of goods can continue uninterrupted during times of change.

Firms will need to weigh their options

As supply chains become more global, major worldwide manufacturers in fast growing economies like China continue to have more influence on everyday organisations. As such, companies need to ensure that they are evaluating all the options available to them. In 2019, organisations will need to be assessing if they can innovate, save or source new components from these global manufacturing powers. 

However, going global isn’t always the best option for firms, and they will need to be able to compare the potential cost savings with factors such as tariffs, import costs and added risk in the supply chain.

In order to decide what’s best, organisations need to have visibility across their entire supplier base, including international prospects. By pulling information from suppliers, internal stakeholders and 3rd parties, procurement can provide 360-degree supplier visibility to ensure that procurement leaders can weigh up their options effectively and make the decision that’s right for the business.

The technological hype cycle steams ahead

New technologies will continue to emerge and attract great attention. It’s vital that organisations innovate to stay ahead, but identifying which technologies are worth investing in and when can be a serious challenge and wrong choices can be at best a distraction and at worst derail future efforts to implement critical innovations. Many emergent technologies will remain more hype than reality.

Blockchain is the perfect example. It was pitched as a tool that was set to solve many of 2018’s problems, but in practice many applications have not come to fruition, such as Maersk and IBM’s blockchain-based trade platform. Despite great interest in the technology, the companies have struggled to garner business from the venture, with just one container carrier signing up for the platform amid concerns about the involvement of Maersk.

In order to better understand the benefits of new technologies as they appear, organisations need to build constructive dialogues with their suppliers, treating them as partners on the road to innovation so both parties can benefit. In order to encourage suppliers, organisations can excel in 2019 by offering ‘innovation initiatives’, encouraging them to make recommendations on how a supplier’s intellectual property can be included in a new product to enhance its value proposition. The organisations that manage to unlock the greatest value from their supply chains will not just engage suppliers but ensure a scalable approach to collaboration with more suppliers, leveraging technology to provide greater transparency, sharing of information and progress against iniatives.

Take a smart approach to 2019

It’s clear that in 2019, procurement will take a much larger role within organisations, as it continues to prove its value to companies navigating the rocky road ahead. With so many factors to consider, organisations need to be able to spot issues ahead of time and act accordingly. However, this cannot be done without the support of leaders empowered by smart procurement platforms. Placing trust in the procurement team will allow organisations to thrive in the New Year as they tackle this increasingly unpredictable world.

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