In Part I, we described the 4 major trends affecting Procurement today that were identified by Deloitte in its research and consulting initiatives (and which have been addressed in publications that include Supply Chain Strategy, Winning With Your Supply Chain, and Charting the Course: Why Procurement Must Transform Itself by 2020) that were summarized nicely by John Mavriyannakis, a Senior Manager at Deloitte Canada (and the Practice Leader in Sourcing, Procurement, and Settlement), in his recent presentation on Empowering Modern Procurement that was given as part of the Coupa One Vision Roadshow in Toronto
Specifically, John Mavriyannakis identified the following four trends:
- Margin Pressure
- Supply Chain Risk
- Government Regulations
As a result of these trends, it is clear that today’s supply managers need to:
- control margin pressure,
- mitigate supply chain risk,
- stay ahead of changing regulations, and
- win the war for talent.
But that’s not going to be enough for a Procurement organization to succeed in the long term in the dynamically changing global marketplace. If they wish to survive, Procurement and Supply Management organizations need to rethink mission and capabilities. Specifically, they need to:
- get strategic
and establish a formal organizational presence that ties metrics to company performance,
to re-aligned processes and responsibilities that focus on business outcomes,
- task talent cross-functionally
to enhance the procurement capability of the organization as a whole, and
- tie it all to technology
that blends service and management tools that are easy to use and that allow for the right level of control.
While keeping in mind that they need to get to the 2020 Procurement and Supply Management organization in just 6 short years (which is no easy feat given that the average transformation time that is required for a Global 3000 organization to become a world class Procurement organization, according to The Hackett Group, is at least 5 years). In 2020, Procurement, according to Deloitte, is going to (need to) be:
- the keepers of the global supply and demand perspective,
- the nexus of finance, operations, and supply chain,
- risk forecasters,
- the arbiter of risk vs. reward,
- the value-generation unit that is the treasure trove of ideas, and
- talent rich.
And SI fully agrees with all but the last of these predictions. In addition, it partially agrees with the last prediction that Procurement is going to need to be talent rich to achieve the goals that are set before it, but given the lack of investment in talent to date in the average Procurement organization, SI isn’t sure that the talent is going to be where it needs to be in 2020. Even though talent has been in the top three Procurement issues for at least the last three years, it’s still in the top three budget items that are cut every year in these tough economic times, even though a small investment in talent can lead to a (very) large return in savings in a Procurement organization. (For example, one of the first companies to certify their entire department with the SPSM designation offered by Next Level Purchasing, a 1 Billion furniture manufacturer, doubled their annual savings only one year after completing the certification on the department level. That’s a double digit ROI multiple in one year! Compare that to the 2X or 3X you might get from automating manual processes.) Basically, the most successful Procurement organizations in 2020 will be talent rich, but the average Procurement organization will be struggling at the current rate of training and talent induction into our space.