Procurement’s Best Year Yet
We are confidently predicting that 2013 will be a great year for those on the opposite side of the table – the procurement team. Indeed it may be their best year yet. That is clearly good news for buyers, but it presents opportunities for sellers too.
It is important that sellers understand what the new year has in store for procurement. Even if you are not dealing directly with procurement the forecast for the new year will in one way or another impact on how your products and services are bought. So, looking ahead to future trends means you won’t be taken by surprise.
Trends for 2013
Key trends that will make procurement happy in 2013, include
More savings – with as much as 2 out of every 5 dollars still outside of procurement’s reach there is lots of further room for savings. In particular indirect categories, such as professional services and capital goods, offer scope of up to 35%.
More power – with increased access to the CEO and CFO, procurement will have more clout to get things done.
More collaboration – procurement will continue to reposition itself as a value adding partner to internal customers. It will increasingly balance the role of coaching and controlling,
More bonus – with procurement pay, closely linked to results more money saved means more bonuses earned.
More strategic – procurement will be continue to shape corporate strategy not only impacting on the bottom one, but also on the balance sheet.
More best practice – with less than one in five organizations falling into the procurement excellence category there is the need to drive adoption of key pillars of best practice such as category management, spend analysis and supplier / SKU consolidation.
More policies and procedures – the center led standardization of buying will result in more ‘by the rules buying’. There are likely to be more penalties for maverick buying.
More systems and technology – procurement executives will continue to move out of the paperwork and administration elements of procurement, through a creative blend of; systems, outsourcing, e auctions, and aggregation of purchases.
Challenges for 2013
But 2013 won’t be without its challenges for procurement. These include
Re-thinking procurement. Making real progress requires that procurement’s role cannot just be seen as finding the cheapest supplier. The easiest savings may already be taken, so procurement needs to adopt a more creative approach. This is particularly the case as it moves into more complex indirect categories where non price variables are more important. For deeper savings procurement will need to turn to strategies such as value re-engineering, demand management and supplier partnerships and innovation.
Balancing compliance and collaboration – procurement cannot ‘do it all’ so it has to balance ‘the carrot and the stick’ in its dealing with other departments.
Putting technology to work and transforming data into meaningful spend information that provides organisation-wide insight into and control of spending.
Risk management. From volatile markets to natural disasters risk is top of the procurement agenda. The challenge for 2013 is to put formal risk management plans and processes in place for all key categories and suppliers.
Supply chain management, the strength and agility of the supply chain is increasingly a driver of competitive advantage. Procurement is morphing into supply chain management. The focus is not just on building strategic supplier partnerships, but also on orchestrating the entire supply chain – tier two, tier three and raw material suppliers.
Implications for sellers
What the future holds for organizational buying makes interesting reading, but the challenge for sellers is to find ways in which the trends in procurement can help them sell. In particular to find ways that they can help their customers and prospects to embrace the opportunities and challenges listed above.