The Not-too-Distant Future of Procurement

by Carolyn Mathas

Procurement is fast rising as a critical guardian and first line of risk defense. Based on the challenges of the past few years, procurement is set to play an even more significant role in tackling and solving critical business problems rather than just managing and optimizing processes. What does that mean to your organization? You will need a highly skilled team in place capable of getting you there.

Building a Technical/Strategic Procurement Team

According to the U.S. Bureau of Labor Statistics, logistician (those that manage how a product is acquired, allocated, and delivered) employment rates are projected to grow 30 percent from 2020 to 2030. However well-paid the industry is becoming, putting together a team in the current environment is not an easy feat.

While figuring out how to react to the pandemic and supply chain chaos, it became clear that implementing better ways of doing things and making sense of data in real-time was critical. Most existing procurement teams were just not up to the task. The power of technology would drive skills that rose in importance across every segment of the procurement ecosystem.

So, what are these skills?

• Technology-based procurement experience
• The ability to grasp and understand risk and risk mitigation
• Predictive analysis, based on the use of big data and artificial intelligence
• The ability to communicate and collaborate

Simplification, supplier relations, collecting and processing data, and innovation are challenges where digital technologies’ impact is exceptionally high. Procurement teams will need to leverage automation, monitoring suppliers for early indicators of threats before they are catastrophic. They will also need to construct and maintain buyer-supplier relationships.

Strategic Sourcing—Smart and Fast

Strategic sourcing is transforming the way businesses view buyer-supplier relationships. It involves spending analysis, data-driven supplier selection, ongoing engagement with vendor partners, and weighing the value delivered through a vendor relationship, not just the cost. Building buyer-vendor partnerships based on collaboration, accountability, and innovation reduces costs and improves supply chain efficiency and reliability. It involves:

• Identifying and making decisions based on the big-picture value
• A focus on partnerships vs. transactions
• The total cost of ownership vs. saving pennies now
• Identifies vendor capabilities
• Elevates procurement activity value

Through strategic sourcing, all parties work at building a long-term ongoing and collaborative relationship, which ultimately results in cost savings. It enables continuous feedback and a platform to share data and collaborate on innovation. Strategic sourcing considers return on investment (ROI) at every step to understand the potential benefits of engaging with a new vendor.

Relational Currency

Once vendors are in place, maintaining vendor relationships can be a challenge in the best of times, but the lack thereof is glaring in the worst of times.
It’s important to step back and realistically evaluate each vendor. What do they provide? What role do they play in your business? For example, are they a sole supplier? How do they comply with established terms historically? Where are there flexibilities? What are the expectations and goals of both parties? Where can both sides improve?
Without this level of understanding, effective communication doesn’t exist—opening the relationship up to misunderstandings. It’s the ongoing communication and a hands-on approach that enables you to address problems and deliver feedback that results in ongoing improvement. If the vendor interacts with multiple departments and users, stay on top of their experiences. And, if they aren’t interacting with various departments, are you sufficiently using their expertise? Ideally, vendors in your supply chain should be a trusted part of your organization. The relationship works best when perspectives are shared regarding trends, market fluctuations, and creating ways to improve. There is an increasing focus on partnerships with a distribution supporting sales efforts. Using the distributors that offer the best solution to each issue faced is the best approach. In all cases, don’t step over dollars to save pennies. Price will always be necessary, but the future is increasingly based on understanding the total cost of ownership.
There will always be tough times and global circumstances. Having these relationships in good and challenging times might be the one thing that enables you not just to survive but to thrive no matter the conditions. When it gets tough, picking up the phone to discuss requirements, delays, virtually any kind of challenge is mandatory.
Your professional staff should have the skill to lead with carrots instead of sticks. Pulling business is so stone age. Instead, negotiate well with future opportunities as a “carrot” to perform, rewarding suppliers that function well! Those that have relational currency have the best chance of getting things done.

Intelligent Software–Tying It All Together

Manual pen-to-paper days are long gone. If you are not relying on smart software to help define the best sourcing options, manage inventory, schedule, find alternatives, and create self-serve on open orders, you’re not considered competitive. All players within the supply chain should be operating in real-time to identify problems and react to changes rapidly.

Smart software includes, but is not limited to:
• Internal and external collaboration
• Vendor relationship management
• AI/ML-based predictive analysis
• Digital RFPs and evaluation
• Tracking procurement savings
• Access distributor marketplace
• Monitoring vendor performance
• Risk Management
• Vendor negotiations
• Effective collaboration
• Real-time status updates
• On-demand audit trails
Building a team of the future is virtually impossible without arming them with smart software. Team members must understand and embrace technology instead of shunning it. Everything a “Future Pro” does is entangled with “how can I make this happen?”
There’s one more relationship to manage, though.

Bridging the Engineering and Procurement Collaboration Gap

A gap has long existed between engineering and procurement departments—each has different goals. Procurement teams focus on cost, while engineering focuses on staying true to the original design. The solution lies in understanding, collaboration, and cooperation.
True collaboration involves the ability of teams to understand other departments’ perspectives and approaches. The engineering team must be able to present their point of view to the procurement department to grasp the logic behind the design and material choices. This boils down to the BOM for ordering components and supplies.
Advancements in software technology across cloud computing, analytics, and platform architectures expose the possibilities for error. True collaboration comes from a cloud-based software that effectively manages BOM so that the gap between procurement and engineering teams can begin to dissolve. This software can reflect the latest changes by the team and changes in the market. Complex analytics and real-time pricing/availability empower your teams to make rational and informed decisions that benefit both cost and quality.
Procurement is rapidly moving into a more significant professional role. The procurement team’s importance to the entire enterprise and vendors is burgeoning. The time is now to train, hire, automate and arm them with the ability to future-proof your efforts.

By Carolyn Mathas for

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