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Procurement’s role in the modern organization is a far different one than it was a decade ago. Over the years, these teams have begun a shift towards more strategic functions. This exact evolution looks different from one organization to another, but in many cases the core goals are the same.
A recent webinar hosted by Supply Chain Brain and presented by Ryan Polk, Director, Procurement Research and Advisory at Gartner, dives into the way that procurement leader priorities are shifting in response to heightened risk and volatility, specifically in the last several years. Join us as we explore some of the major highlights from the event.
How Procurement Leader Priorities are Shifting
Regardless of the organization, procurement’s transformation often focuses on three goals: becoming more agile, responding faster to emerging trends or risk, and taking a proactive approach to risk.
Procurement leaders know this is far easier said than done, especially in today’s climate. It’s important for these teams to better understand how trends are evolving, and what challenges they bring with them. An excellent starting point is to focus on three priorities by asking yourself these questions:
- What are the major trends affecting sourcing and procurement?
- How are these trends impacting both short and long-term sourcing and procurement efforts?
- What actions can I take right now to prepare and get ahead of emerging risk?
4 Ways to Accelerate Procurement’s Transformation Today
The Supply Chain Brain webinar provided valuable insights to procurement leaders, while also illustrating the landscape of the modern world for supply chain professionals. One thing is certain: transformation is happening fast and if your organization doesn’t adapt, it will get left behind.
Among the various takeaways, we have identified five actions that will help move the needle for both procurement teams, and the organization as a whole.
1) Rethink Category Management’s Role
Companies are rethinking procurement and strategic sourcing processes in order to “elevate category management’s role.” This involves opening lines of communication between business partners and rethinking how category managers prioritize their responsibilities.
This shift requires two elements: strategy and intelligence. Beginning with strategy, business partners should inform managers of category decisions, and support the introduction of new projects. They should also have an enterprise-wide view of how their contributions contribute to the overall category strategy.
On the flip side, category managers should offer a high level view of the organization’s needs, while examining procurement across all available value streams. It is this role that will define and set the overall strategy moving forward.
It’s important that throughout this, we consider breaking down additional silos in the organization. The category manager, business partner, procurement department, sourcing, and supplier management roles should all be present during these discussions and aware of shifts in priorities. Not only does this encourage fruitful collaboration, but it allows for visibility into potential risks from multiple perspectives.
If the strategy itself is the foundation, then intelligence will form the structure that sits upon it. What does intelligence look like in today’s day and age? In essence, teams should have access to the following information:
- Real-time analysis across categories
- Access to forecasted changes in price, lead times, and availability
- Awareness of potential EOL status for any parts on the product BOM
- A high-level view of where risks exist, and a way to prioritize them
These capabilities exist today, but require organizations to shift their focus towards a digital transformation. An immediate action procurement leaders can take is to identify a commodity intelligence platform that will empower their teams with many or all of the capabilities listed above.
2) Tap into Supplier Collaboration With a New Approach
Procurement has a unique position in the organization that sits between suppliers and the larger supply chain. This allows for strategic approaches to how that business relationship develops. The proper mindset here can unlock additional value for both parties as well.
Consider these examples mentioned during the webinar:
- Leverage your base of suppliers to make connections between them, ultimately encouraging innovation across your supply chains.
- Establish connections between your suppliers and other industry groups. This will unlock opportunities for aligned efforts around things like sustainability and other significant efforts.
- Finally, procurement leaders can connect suppliers with other internal stakeholders to develop mature approaches to supply chain management, finance, and intelligence to inform better decision making.
Suppliers are no longer just transactional entities. Instead, many procurement organizations have come to view suppliers as business partners that bring real value to the organization.
In addition to the strategic approaches above, supplier management also needs a standardized approach to ensure the best outcome. Suppliers should be segmented, their performance measured in consistent ways, and driven towards continuous improvement through collaborative efforts.
Another recommendation is for companies to elevate supplier management to the same level as sourcing. A major shift indeed.
3) Understand Risk Better and Take a Proactive Approach
Risk is a word that all procurement leaders are familiar with, but truly understanding the nuances of it requires a better approach. Today’s efforts surrounding risk are too often focused on prevention, which is logical until we consider that many risks are impossible to predict.
In recent years, risk has come in four different forms:
- Sudden – This type of risk has a short period of time between awareness and impact.
- Unpredictable – These risks change in severity based on a number of factors, making it hard to pinpoint or predict.
- Hidden – Risk like this comes from shifts that exist beyond the typical purview of procurement and do not have a clear cause.
- Universal – These risks are not bound by location or supplier
A case study between Gartner and Fourth Wire was featured during the webinar that described a new approach to risk identification that provided measurable progress and results. Once again, this approach requires collaboration between business partners, procurement, and relevant subject matter experts (SMEs) within the organization.
These three parties must collaborate and leverage the knowledge of the SME to identify risk exposure, which leads to better control and response to elevated risk. Procurement’s role here is focused on setting the stage as well, not only identifying the proper SMEs, but also assisting with mitigation strategies.
In the webinar, this is described as a “business-led detection” approach to risk. It also requires better real-time insights, which again points to a benefit of a digital transformation for procurement.
4) Manage Workplace Stress With Consistent and Stable Transformation
While technology is an important aspect of the vision for a transformed procurement role, we cannot lose sight of people, many of whom are experiencing heightened states of burnout in the wake of the last several years.
However, companies shouldn’t look to technology as a panacea to solve all of their transformation goals. Leaders need to focus on making the investments in the right technology at the right time, seeking solutions that help the company differentiate itself or bring new insights. Ask questions about how it’s different, whether it will disrupt common processes or call for excessive change management. Change is important, but the way that it’s implemented is just as crucial to avoid fatigue, mistrust, or emerging trends like “quiet quitting.”
Keep in mind that rapid transformation introduces new levels of complexity in the form of training, redefined workflows, and other elements. Procurement must absolutely transform in the wake of emerging trends, but it should be done in a calculated manner.
One way to do this is to reduce the scope of individual roles in the organization. Utilize digital solutions to take work off of teams, instead of adding more. Efficiency and ease-of-use define today’s top solutions, both of which reduce mental overload on your teams.
Procurement is a critical role in today’s modern organization, but the definition of it is changing and transforming faster than ever. Some of the most successful sourcing and procurement teams recognize that the journey toward a more digitally connected future takes more than just people, process, and technology.
It also requires greater intelligence, communication, and collaboration across teams. This ensures that the decisions made by product managers and designers are fully aligned with procurement and supply chain needs for availability, lead time, cost, and resilience. Gaining these insights requires an outside-in perspective on supplier and commodity data and analysis that can’t be found in any traditional ERP or sourcing software alone.
To hear the full conversation, click here to watch the full webinar.