15 Megatrends In Buying
You don’t need to be taken by surprise – that is because it is relatively easy to predict changes in how your customers buy.
The Rising Tide of Procurement Sophistication
The tide is rising in terms of the overall level of procurement sophistication. The trend of more sophisticated and more demanding buyers seems to be evident in most industries regardless of geography. As this happens among your customer base, 14 procurement related changes are fated to happen. This in turn will transform how you sell.
The procurement and supply chain trends already evident in the world’s leading organisations – companies whose products we are so familiar- Apple, Samsung, Microsoft, Dell and so on – are trickling their way down to the rest of industry. That makes predicting the future a whole lot easier.
More of what yesterday might have been considered the elusive best practice of the big global corporate is becoming common practice. So if these trends are not already adopted by your customers, they cannot be far off.
Before we list the 8 key changes, let’s identify the factors that if present in your customer’s industry, will accelerate the pace of change.
Those among your customers who exhibit the 4 characteristics listed overleaf are going to challenge you most in terms of how you sell. That is because they are set to radically change how they buy.
In the Good Old Days…
In an era of fast growth inefficiencies & waste could be tolerated. The shift to low cost economies was delivering savings
with little effort.
The benefits of best practice procurement & supply management remained a well kept secret. It did not feature on MBA programmes, or at executive conferences.
Procurement was seen as an administrative order processing function.Its potential contribution to the organization was little understood, or appreciated. It had little influence or power. The level of sophistication was limited and so to was its talent pool.
Procurement was a decentralized function at the margins of the organization. Buying decisions were made at a; site/plant, business unit, or national level, with little collaboration organization-wide. Managers were free to choose their own suppliers and spend their own budgets. It was all relatively plain sailing…
Then Came ‘The Crash’…
The Crash’ created the perfect storm. Profits liquidity & asset values were in tatters. Suddenly Procurement mattered.
The result was 4 fundamental shifts in it’s organization and structure:
1. Strategic procurement
Procurement matters to the organization and its financial performance, it has power and influence as a result. It is no longer a bureaucratic function, but rather a strategic business driver. More than that it becomes an ethos.
2. Centre-led procurement
Procurement has strong leadership and direction – it is coordinated organization-wide and led from the centre and is business driven. Rather than being siloed it is cross-functional. It balances compliance and control with coaching and collaboration.
3. Procurement by category
Category management involves grouping related products or services. These ‘pools of spend’ are managed in a more planned and integrated manner to cut spend and drive other objectives.
Category management marks a new sophistication, recognizing that the procurement approach must vary by category and is accompanied by the development of deeper category knowledge and expertise.
4. Supply Chain Strategy/Mind-set
Procurement is increasingly the focus of strategic, or joined up thinking that sees buying in the context of the total supply chain with its multiplicity of inputs and outputs, customers, suppliers and partners. That means procurement is looking for economies and efficiencies in new areas.
The focus has shifted to total supply chain efficiency and in particular to leveraging supplier partner innovation in getting their product/service into the hands of the customer. It has also shifted to the suppliers of your suppliers (e.g. raw materials) in terms of seeking cost reduction, or managing supply risk.
A Talisman for Change
If you hear strategic procurement, centre-led procurement or category management being discussed within a key account, ask yourself ‘what is next?’ You need to be prepared for a raft of other almost inevitable changes, as follows:
The question is how many of these trends have you witnessed in your key customer accounts and how ready are you to deal with them?