With 2022 well underway, businesses the world round are facing continuing COVID-era challenges. Yet despite lasting uncertainty, there’s a silver lining. Manufacturers are being forced to build resilience and agility into their supply chains. They’re scrutinizing how internal processes are viewed and managed, resulting in significant progress in the world of procurement and supply chain technology.
Which market forces will disrupt enterprises with complex supply chains in 2022? Following are seven key predictions.
Sustainability will continue to take center stage. When analyzing opportunities, investors are increasingly scrutinizing how organizations approach sustainability, and their levels of maturity. As a result, environmental, social and governance (ESG) frameworks have gone beyond a simple box-ticking exercise, with ratings at the top of the sustainability agenda. Such focus is set to continue and grow this year. But to deliver on ESG promises, organizations will need to depend heavily on contributions from their end-to-end supply chains.
Supplier data, automation and digitization will increase. COVID-19 has accelerated the need for more digitization. Historically, in the procurement and supply chain world, supplier data hasn’t been a key focus. It’s been parked in accounts payable or purchase-to-pay systems as a new solution, with supplier data and information beginning to permeate through the organization’s supplier management systems.
Since 2017, however, Deloitte’s Chief Procurement Officer Survey has listed supplier data as the biggest barrier to digitization. Last year we saw large organizations prioritize their supplier data to enable connections between systems, and drive more automation through artificial intelligence and machine learning. As organizations continue to transform their supply chains this year to prepare for autonomous procurement, this trend will accelerate.
Best of breed will continue to flourish. Best of breed will remain the dominant direction for large enterprises. This is driven by an increasing shift to business-managed and owned software, which has been enabled by the software-as-a-service (SaaS) revolution of the last 10 years. We’re now seeing the software purchasing philosophy shift away from feature function to be more user- and process-centric.
For mid-market companies, the suite will still be the starting point. The promise of one solution doing everything is too enticing to resist. Businesses need to make their own mistakes. So mid-market companies will be the laggards and stick with a suite approach, but as procurement and supply chain functions mature, the requirements get more sophisticated, which will inevitably push them to look at best of breed.
More curated data communities and multiple networks will arise. While there are many payment and transacting networks out there, we’ve started to see an increase in what I refer to as “data networks.” While not a new concept, we’re seeing more of these communities in the governance, risk management and compliance (GRC) space in particular, where data is collected and validated, and suppliers are monitored to ensure adherence to standards.
Many might think about the single network, but this will not happen. The data is too vast and different across industries, necessitating a community or data domain approach. Curating good data takes time, effort, expertise and constant investment to stay current.
Interoperability, standardization and APIs will improve. All of the above market trends are going to drive a need for more interoperability and standardization. Supply chains being so tightly linked and interconnected will force the need for more transparency. Basic things like how we identify a supplier, or customer entities and their locations, is still a challenge so long as proprietary identifiers or home-grown versions are used.
Networks will need to be able to operate with one another, as there will be many catering to different aspects of B2B, such as payments, shipping, transactions, trading and compliance. As we define better standards, there will be a shift to more point-to-point integrations, rather than the typical middleware hub-and-spoke approach that many have found challenging to maintain and keep stable in large enterprises.
The focus will shift to the supplier experience. As the reliance on suppliers grows, and supply constraints continue, organizations are focusing more on being the customer of choice. All the positive aspects of best of breed have ended up making networks challenging for suppliers to navigate. Therefore, there’s a challenge for large organizations to support their suppliers through this complexity.
Procurement functions are realizing they can be more efficient by setting up suppliers for success. In the same way that we saw a transformation in employee experience as a lever of value creation, the next era will see supplier experience as a strong value-add.
Traditional software categories will fade. As part of this shift, we’ll see all-encompassing categories like GRC, multi-domain master data management (MDM) and middleware start to fade in their current form over the next five to ten years. GRC capabilities will begin moving to community models that pre-qualify suppliers. This is a necessity, because ongoing monitoring is expensive and inefficient for suppliers and customers. Over time GRC platforms will phase out as processes and standards become more productized.
Multi-domain MDM will also start to diminish. As part of the corporate IT era of on-site system landscapes, traditional MDM is too disconnected from front-end users and processes, and has failed to deliver on its promise. The next generation of tools connect data governance together with front-end business process, such as supplier onboarding. As standardization and application programming interfaces (APIs) grow, more solutions will be building out point-to-point integrations, which won’t require heavy maintenance and customization, and are also more reliable and stable.
As the new year starts to take shape, these trends will continue to accelerate progress in the procurement and supply chain tech space. Thanks to these disruptions, we hope to see enterprises, especially those with large complex supply chains, grow from strength to strength as they build resilience and manage change.
Costas Xyloyiannis is chief executive officer of HICX, a supplier experience-management platform.