Daily Archives: December 20, 2014

After Two Series on the Future of Procurement – What Have We Learned II

In our first post we noted that, after two series, fifty (50) posts, and almost seventy five (75) pages on the “future” of Procurement, we learned that while the majority of trends being positioned as “future” trends weren’t future trends at all, they were trends that your organization will encounter as it matures and grows and the sooner your organization ploughs through them, the sooner it can get to the real future trends.

We then reviewed our series and noted that most of the requirements for dealing with these trends fall into a baker’s dozen plus one of high-level categories. Today we will break the first seven categories down into the most important sub-categories:

Cost Control

  • Life-cycle Costs need to be modelled and true TCO understood because all that is accomplished with T-CAP modelling is opportunity capping
  • Should Cost Models need to be developed for all custom manufactured products so that an organization can do a proper bid evaluation
  • Optimization needs to be done for any buy of any complexity as costs and opportunities often mix in unexpected ways
  • Supply Chain Finance with respect to DPO vs Discounts vs. Alternate Value for Money needs to be understood


  • recycling, design for since rare earth minerals are becoming expensive and hard to acquire and dangerous materials in some countries have to be safely recovered by your organization by law
  • renewable energy as energy costs are going through the roof and coal and oil generates too much pollution
  • renewable materials whenever possible to keep long-term costs down
  • responsible supply chain from a people and environmental perspective
  • waste reduction where natural resources and food are concerned (especially given recent all-time lows in global food reserves)
  • workers’ rights as no supply chain should contain slave-labour conditions

Home vs Near vs Out Sourcing

  • product development / production which has to consider the best decision given transportation and time-to-market options as well
  • procurement, back-office, and front-office functions which has to be balanced against cost-savings, expertise, knowledge, and reaction-time

Knowledge Management

  • Capture because knowledge can’t retire with your employees
  • Distribution because everyone needs to be able to tap into organizational knowledge
  • In/Near/Out Sourcing Management needs to be knowledge based
  • Master Data Maintenance as good decisions require good knowledge and good data
  • Value Generation as the IP is an asset that should be tapped into

Market Knowledge

  • New Emerging Markets because it’s not the BRIC anymore, it’s the MIKTS
  • Emerging -> Emerged Markets as every BRIC country is now a top 10 country with respect to total GDP
  • Hyper Competition in Developed Markets due to high jobless rates, slow GDP growth, and other factors that are making for intense competition in traditional / home markets
  • Opportunity Identification in different markets from a source/sell perspective as the markets arrive
  • The New Silk Road because the new China – Germany – Russian trade partnership is a game-changer and if the EU goes all-in, that’s over 40% of Global GDP participating in a new, non-North American trade partnership

Market Intelligence

  • commodity market data as this greatly influences should-cost models
  • consumer & public markets as this provides the baseline for off-the-shelf CPG and services spend
  • labour rates as this greatly influences should-cost models
  • energy rates as this greatly influences should-cost models
  • supply vs demand as this influences sourcing decisions
  • should cost models to understand what the organization should be paying
  • trends to understand if prices have been rising or falling
  • predictive analytics to take different factors into account and predict future prices and availability of labour, materials, and energy


  • Center Led / Control Tower / COE to make sure the organization is on the path to being Best-in-Class
  • Stakeholder/Shareholder Management to keep stakeholders happy and the shareholder monkeys off your back
  • Strategic Focus to make sure the organization is aligned on the right way of doing things
  • Transition Management to take last year’s processes and technology to next year’s processes and technology

Tomorrow we will break down the remaining seven.