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Home » Purchasing Resource Library » The Not-too-Distant Future of Procurement
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THE NOT-TOO-DISTANT FUTURE OF PROCUREMENT

May 24, 2022 Carolyn Mathas

Estimated reading time: 5 minutes, 30 seconds


PUBLISHED APRIL 29, 2022

Procurement is fast rising as a critical and increasingly professional function.
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, putting a team together
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. Many 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, the procurement teams of the future will require:

 * 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

Procurement teams will leverage automation, monitoring suppliers for early
indicators of threats before they are catastrophic. They will also need to
construct and maintain buyer-supplier relationships. How does this all take
place? It starts with strategic sourcing, establishing and nurturing
relationships, and tying everything together via intelligent software.


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:

 * Recognizing decisions based on total cost, including fees and logistics
 * A focus on partnerships vs. transactions
 * Identifying vendor capabilities

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
their 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 continuous 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. There is an increasing focus on partnerships with distributors
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, regardless of the conditions. When it
gets tough, picking up the phone to discuss requirements, delays, or any
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 who 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:

· AI/ML-based predictive analysis

· Digital RFPs and evaluation

· Tracking procurement savings

· Access distributor marketplace

· Monitoring vendor performance

· Risk Management

· Vendor negotiations

· Real-time status updates

· On-demand audit trails

· Real-time price and availability

· Monitoring inventory levels

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 price and availability, while
engineering focuses on technology. The solution lies in understanding,
collaboration and cooperation.

True collaboration involves creating an easy flow of information between these
teams. 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 cloud-based software that effectively manages BOMs 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.


> ABOUT THE AUTHOR
> 
> Carolyn Mathas is a freelance writer/site editor for United Business Media’s
> EDN and EE Times, IHS 360, and AspenCore, as well as individual companies.
> Mathas was Director of Marketing for Securealink and Micrium, Inc., and
> provided public relations, marketing and writing services to Philips, Altera,
> Boulder Creek Engineering and Lucent Technologies. She holds an MBA from New
> York Institute of Technology and a BS in Marketing from University of Phoenix.
> 
> More Content by Carolyn Mathas

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