Top 7 Trends in Procurement for 2021
Here is the list of top 5 procurement trends we have
observed in the year 2021.
1. Supplier Management
This would perhaps go down as one of the most valuable lessons learned in the post-pandemic era. All companies irrespective of size, scale, and sector are equally vulnerable.
Ways and means to prevent disruptions in supply chains throw up this topic as the most important topic to focus on. Supplier Management as a topic provides the ability to identify and manage key relationships directly affecting a company’s value chain.
Particularly crucial when working in Directs Procurement to address important topics such as risk, sustainability, and assurance of supply. Sustainability management is crucial for Indirects as well but Supplier management in Indirects helps maintain advantageous relationships for e.g. suppliers with high savings potential.
For example, outsourcing “low impact” categories like Office supplies to a Managed Service Provider. Clearly, collaboration with suppliers is the key to fostering innovation and creating sustainable value.
2. Digital Strategy and Transformation
Companies that have implemented digital platforms to support the procurement function have all gained a significant advantage by way of better utilization of resources, superior price discovery, compliance, and transparency.
The favorable impact of digital application in procurement is beyond doubt. Global organizations are making use of Data Analytics, Machine Learning, Artificial Intelligence.
Procurement teams are designing and delivering intelligent bots to complete most run-of-the-mill procurement tasks with minimal human intervention
From managing large-volume orders to running repetitive sourcing events, from negotiating with suppliers for low-value items to updating inventory lists, AI will undertake all these activities, thus putting mundane tasks on auto-pilot mode.
Work is on in applying Robotic Process automation in Procurement and the day is not far when more and more companies will leverage these technologies for staying ahead of the curve, Digital transformation is changing the way organizations work and will work in the future.
It is important for all organizations, big and small to adopt digital tools and techniques in order to create sustainable value
3. Sourcing and Procurement as a Service
Organizations need to think deeply as to what they want to do themselves in Procurement. Do they need to do everything by themselves or can they just focus on what is critically important for them?
A point for reflection is to look at categories/areas of spending and segment them in order of their strategic importance, innovation potential, spend volume, risk/impact, etc., and identify areas that they need to have deep control.
This process will also throw up areas that could be ideally managed by third-party service providers.
4. Risk Management
It is a fact that risks exist everywhere and in every business decision, it is more so. While procuring goods and services Organizations must consider the risks attached at every stage.
Managing risks from the very start of the process is important. Disruption of operations, poor quality, the safety of employees and neighborhood, the reputation of the business can all be at stake if risks are not managed well. Risks can threaten the very existence of the organization.
To manage risks companies must put in place a process of identifying risks, measuring them, put mitigation measures in place to either eliminate them or reduce their impact.
Implementation of a good procurement automation solution can help in managing most of the risks systematically while creating transparency all the way.
5. Automation and Inbound Invoices:
Companies are seriously looking at automation of inbound invoices and complete hands-free processing which ensures an efficient Bills Payable system in the organization.
Vendors are required to upload the invoices in any format. This is then received at a designated cloud space which is read with the help of invoice data extraction software. The data is then moved on to the ERP system for the three-way matching, booking, passing, and payment.
Mismatched invoices are returned via the same electronic route with communication being triggered to the vendor notifying them of rejection and asking for the corrected invoice to be resubmitted.
The system also provides online updates on the status of vendor invoices, payments released, etc. The entire system brings in added efficiency, goodwill to the organization and strengthens relations with the suppliers.
6. Contract Management:
A digital platform for CONTRACT LIFECYCLE MANAGEMENT to help manage contracts end to end along with reminders and notifications for expiry/renewal. Such platforms enable the import of historical contracts into a single repository for quick reference and easy retrieval.
It is possible to create multiple contract templates as well as customized contracts. They have the added advantage of an inbuilt library for easy drafting and also possess the smart capability of suggesting clauses from previously generated contracts.
It is also possible to execute Digital signatures as well as customized workflow for approvals. Customizable dashboards and MIS reports create immense value.
7. Procurement Talent:
When we look at the topics trending at serial no. 1 to 6 above, it is clear that the role of a procurement person is clearly that of a highly skilled and competent business leader who is good at doing multiple things that not only help the organization to stay ahead of the competition but also creates lasting value.
The leader has to ensure that the team is staffed with people who have the right competencies in driving business challenges in a highly ambiguous and complex business environment and feel comfortable in leading through periods of massive change and deploying technology for optimum results.
Therefore identifying the right talent, hiring them, developing them, and retaining them will be the most important need for the present and foreseeable future
Procurement trends will change, but the requirement for an effective workflow and process will never go away. Automation, digitization, data analytics, effective risk management, and hiring smart talents is helping and will help businesses respond to the contemporary procurement challenges.
Businesses must look upon procurement automation to free up the procurement team to spend more time on strategic thinking and increase process efficiency.