At the World Procurement Congress in London in May, Tom Linton, CPO Flextronics, gave a talk on his top ten trends influencing Procurement, which are summarized in this online Slideshare presentation.
While SI may not necessarily agree with the order of the trends, SI has to admit that the top nine were great insights, and are certainly influencing Procurement to various degrees. As a result, SI will list and discuss these trends for you.
9. Business Process Convergence
It’s more than just document convergence and the virtual vertical integration of multi-tier supply chain management capabilities, but NPD, Manufacturing, Sourcing, Procurement, and Payment are all merging as one continuous function through common application back-bones and plug-in best of breed applications.
8. Global Labour Costs Equalize
Mexico matches China in Direct Labour Costs, and costs in other markets continue to rise. And when you consider the cost of logistics, remote staff management, etc., the savings from labour arbitrage become less and less by the day.
7. Raw Material Scarcity
The demand for oil, metals, timber, food, etc. is increasing around the globe. Demand is meeting or exceeding supply in many commodity categories.
6. Skill Specialization
With the increasing need for sourcing / supply network optimization, analysis, risk management, and emerging market management capabilities, a new class of specialized skills are required by strategic supply managers.
5. Control Tower Models replace Traditional Procurement Functions
Technology enabled centres of excellence are becoming the dominant Procurement model in leading Procurement organizations.
4. The Growth of Regional Local Sourcing
It’s taken a while, but home-sourcing is finally starting to happen. “Made in the USA”, the EU focus on Eastern Europe (and Poland, Romania, and the Ukraine in particular), and the shift to India and Indonesia from China.
3. Unpredictability Becomes More Predictable
With the chance of a major supply chain disruption for your organization exceeding 98% over the next 24 months, risk, resiliency, and preparedness is the new modus operandi for supply chains that can always predict that sooner, not later, something is going to go wrong. Leading organizations are adopting multi-tier visibility applications and optimizing costs and risk across the supply chain.
2. Corporate, Social, and Environmental
It only takes one scandal to send your stock in a downward spiral. As a result, CSR is taking a front page, especially since laws designed to protect workers and the environment are catching up in emerging economies.
1. Non Zero
Supply Management organizations are moving away from commodity sourcing events to strategic category management, using risk management to lower insurance rates and drive (hedging) investments, applying new multi-tier visibility and collaboration tools to drive trust, transparency, and reliability throughout the supply chain, and looking for ways to generate non-zero sum value for all parties.
The only trend SI did not like was number ten, Cloud Computing. It may be low-cost, but its reliability is in question. For example, 38% of Amazon Web Services instances have poor security! (Source) You have no clue where your data is, if it’s backed up, or who has access to it. And, most importantly, The Cloud is Not a Crystal Ball Either. And just like a real cloud, it can evaporate after a good rain!