The Future of Procurement Services

Major macro and technological disruptions are forcing CPOs to rediscover their fundamental purpose and act accordingly to survive by jettisoning the busy work and adopting higher-value supply-market initiatives.

FREMONT, CA: Strategic sourcing, supplier management, and orchestration of the procurement engine are the three pillars that support disruptive procurement. Utilizing supply and demand effectively allows for the determination of what to purchase and from where. Supplier management makes sure that what was promised in the contract is delivered before working with the supplier to add further supply-market experience. The ultimate objective is to influence the supplier behaviour required. To ensure a smooth, compliance-based purchasing process, procurement teams coordinate processes.

It is widely known that entry barriers are being lowered in various markets as the business world becomes more international. While this differs throughout industries, the trends and outcomes are often in the same general direction. Then there are political factors that affect the business climate, such as greater risk minimization, sustainability, and political change, like populism, tariffs, and trade agreements. In addition to increasing competitive threats from unexpected sources and disrupting existing sources of competitive advantage, these combined forces make many established businesses unstable. As a result, it is now more important than ever to achieve the primary goal of procurement, which is to effectively harness supplier-market capability. Organizations will disintermediate procurement functions that lose sight of the big picture and concentrate only on the methods.

Most of this technology is still attempting to address the same problems with expenditure transparency that was of the utmost importance two decades ago. The focus of procurement functions continues to be on historical data with a minimal forward-looking specification of routine purchases.

Future procurement will concentrate on its true purpose: how to convert the supply-market value into product value. It will take a new operating model and more sophisticated capabilities to accomplish this effectively.

Current comprehensive operating models for procurement differ across industries and within industries based on a variety of criteria. However, the majority are centre-led and category-focused, with considerations for local categories in particular geographies and encouraging user involvement. The management of procure-to-pay systems and straightforward tactical sourcing requirements are frequently handled by a back-office processing department.

With an emphasis on high-value commercial input and the orchestration of supplier behaviour, procurement in the future will align with product-customer offer teams to design categories that directly affect the product offer. Since clients want to buy solutions that may cross traditional categories, the focus will be on user enablement and automation for additional categories of spending. Depending on the business and industry, different categories will have a direct impact on the product offer. The product is affected by all direct categories and, depending on the circumstance, a percentage of the indirect ones.