Continuing our series of procurement and supply predictions, today let’s look at what global procurement management solutions and systems consultancy firm State of Flux has to say.
With thanks to Alan Day, Chairman.
Looking back on last year’s predictions we looked at three points:
1) Supply chain as a competitive advantage
2) The importance of SRM technology will grow
3) Procurement must focus on supplier innovation
Interestingly we saw all three of these predictions hold true, although not for the reasons we were originally thinking! Clearly the COVID-19 virus has been a major disruption and placed more emphasis on supply chain and most specifically supplier management. Never before have we had so much executive focus on suppliers, supplier management supply chain, identifying and implementing innovation and continuity of supply.
We think for 2021 in addition to the three points above the focus will be re-imaging what procurement does and stands for with specific focus on the following:
1. Supplier management at speed
Our 2020 research with the same title has shown that those who are good at supplier management weathered the COVID-19 disruptions better than others. However the same research also showed that only 17% of organizations are what we would describe as “SRM Leaders,” highlighting a huge need for organizations to get better at supplier management. The research also showed that most organizations in general were still poor at supplier contract, risk and performance management.
COVID-19 has seen an unprecedented change within our supply chains, often disrupting continuity of supply. Never before have we in procurement had so much focus and attention from executives and even mainstream press. We believe for 2021 this will see more willingness and better investment in procurement and supply chain from organizations. Most specifically investment in supplier management, including supplier management technology and people development (the two areas which have been the worst performing over our 12 years of annual research). However we need to get better at “selling” the value of investing in these areas and get better at engaging and educating the board on what good supplier management and procurement looks like.
With this increased investment, we will see organizations implementing supplier management at speed to try and catch up to those organizations that are already “leaders.” Organizations will use the disruption of Covid to rapidly change behavior and culture towards collaboration and supplier management.
2. Collaborative cost savings
Gone are the days of beating up suppliers! 2021 will see procurement organizations move away from the “us and them” approach and move to a more collaborative way of taking cost out. At State of Flux, we are firm believers of using a joint account planning process to collaboratively drive “value release” projects with strategic suppliers and this will become a key tool in the procurement repertoire.
The “20%” letter will be confined to the waste basket. Rather buyers and suppliers will sit down and work out where the inefficiencies are in the supply chain and develop initiatives to improve this within their value release plans.
We will see more supplier consolidation and organizations combining this with their supplier management in order to focus their efforts in fewer more strategic partners.
The RFP will take a back seat, with recognition that 1) it can raise the market cost to respond, and 2) it takes too much to execute. We will see more use of more collaborative buying techniques, however it will remain the way most organizations will find and take advantage of new supplier entrants. The RFP will now be used more selectively but they will need to be better designed, faster and more concise.
3. Sustainable supply chains and supplier management
The climate crises will drive more focus on sustainability which will be a top-level strategic objective for more organizations and likely be owned by the CEO or a board member. What better opportunity to emphasize the impact the suppliers have on achieving those objectives and if organizations pro-actively collaborate with suppliers to the improve sustainability down the supply chain it enhances their reputation and credentials.
There will be more focus on the circular supply chain and organizations will be more willing to embrace sustainability. Buying decisions will reflect this and the buying process will place a large emphasis on sustainability, environment and human rights.
Increasing legislation will drive further investment and attention on specific areas, for example modern slavery requiring organizations to be aware of what is happening with suppliers and supplier management within their supply chain. This will be supported by more obligations being placed on directors to ensure they are personally invested in supply chain management and supplier management.
Organizations like the UN will play an increasingly important role in setting standards that procurement must meet or aspire to with their supply chains and supplier management. For example, what is the standard a supplier should obtain to show that it is COVID-19 ready or okay to operate in a Covid environment.
Exciting times lie ahead as 2021 sees the re-imagining of procurement and the procurement personnel skills required to drive the changes mentioned above.
And Amol Bhosle, Product Marketer from enterprise IT and business operations software provider Digitate had this to say:
Supply chain visibility and supplier collaboration
Supplier discovery activity will get additional traction, organizations will focus on “China+1” and localization of supplies. There will be more and more focus on overall supply chain visibility not just at tier 1 supplier level, it will extend to tier 2, 3 and upstream suppliers. Organizations will be working closely and collaborating digitally with suppliers with emphasis on transparency and information sharing.
Organizations will focus prominently on data analytics as the predicative tool for better risk management. Data analytics will also help with supply chain visibility and evaluation of supplier capabilities not only in terms of quality, cost, delivery, service but also from the perspective of sustainability, inventory management and ensuring supply chain resilience.
Re-definition of roles in Sourcing and Procurement
Considering the new normal and dynamics of the supply chain, procurement organizations will figure out new ways of getting the work done which will give rise to new roles and re-defining of responsibilities.
Thanks to State of Flux and Digitate, and look out for more solution provider predictions over the next few days and an overall take on the series from our analysts at the end. See all of the 2021 vendor predictions here.
*Please note that the order of vendor predictions in this series is based entirely on the order in which they dropped onto our digital doorstep, nothing more.