2021 Procurement Shifts & Trends
The exceptional times of the past two years have changed the world of procurement immeasurably. Across the globe, companies have adapted in ways we would never would have expected. The impact of recent events has served collectively as a true test to supply chain resilience. COVID-19 has proved that resilient supply chains outperform. The acceleration of these disruptive trends has however been somewhat positive amidst all the uncertainty.
As a Procurement & Supply Chain Consulting Firm, Santé are here to deliver agile sourcing & supply chains across multiple sectors worldwide. You can find out more about our services here. Procurement events we’ve hosted, insights we’ve gathered & research we’ve conducted over the past 12 months has helped us collaborate on the changing priorities and focuses on procurement, and we’ve decided to look more closely at some key themes driving this change.
Considering Value over Cost
Budget management is and will always be a significant aspect of the procurement division. However, while procurement functions must make informed & cost-analysed decisions, procurement is facing a new challenge – a shifting priority from price to value. There’s a whole host of factors that are forcing us to think smarter, not cheaper. COVID-19 and widespread disruption to supply chains has encouraged a realisation that a valuable, sustainable product is better than a cheaper product in the longer-term. Understanding how cost and value interact in procurement to deliver maximum business benefits is crucial – our mission at Santé is to help your business unlock your procurement potential & increase value across your entire supply chain. Savings will always be important, but we expect value quantification to rise in priority as organisations grapple with articulating how their activity matters to the bottom line.
Factors such as a requirement for increased supply chain visibility, stronger partnerships with suppliers, risk mitigation strategies and the ever-increasing importance of corporate social responsibility are encouraging companies to prioritise those suppliers who demonstrate a solution with higher value, over against a price driven choice.
Diversification in Supply Chain
The Coronavirus pandemic exposed the world to significant supply chain disruption. Using the healthcare sector as a prime example, the dangers of single sourcing were highlighted as many hospitals and other facilities found themselves unable to access the required personal protection and healthcare consumables required to keep them fully operational. An immediate response was necessary, and many companies with demand for products globally looked for new supply chain methods.
Diversification of the supply chain is an effective risk management strategy, and companies with a broad supplier network have been able to respond with flexibility and agility in the face of the different disruptions over the past twelve months. Adding suppliers introduces more complexity into the supply chain, but has been proved to be a great line of defence amongst the recent uncertainty and challenges surrounding procurement.
Embracing Sustainability in the Supply Chain
Transparent, sustainable supply chains are essential for businesses committed to ethical working practices. 2021 has seen a huge percentage of companies place increased emphasis on their CSR strategy. Most importantly a commitment to sustainability is no longer just what a business needs; it’s what consumers are expecting. The average consumer expects the businesses they work with to be transparent and responsible – taking ownership across all levels of the supply chain.
The procurement function has a leading role in meeting any organization’s corporate social responsibility objectives. Through sustainable supply chains and active engagement with partners and suppliers to take steps relating to aspects such as; the environment, human and labour rights and energy efficiency, it is possible to take steps towards a more sustainable future – in line with Santé’s approach to next-generation sourcing. The Gartner Research report showed that 75% of organisations have formalised responsible sourcing programmes intending to drive supply chain sustainability. Sustainable sourcing and procurement require investment and closer monitoring of suppliers. However, with the right tools, it is more than achievable and positions the business positively in the eyes of the sustainability-conscious consumer.
Digital Acceleration driving Innovation
2021 has seen huge advancements and improvements to new technologies, enhancing the procurement function every day. The advent of artificial intelligence and machine learning means businesses can get more from their data than ever before. As a result, valuable new insights are available to make more effective business decisions and generate real-term profits. Most importantly, technology and digital advancements are empowering businesses to improve productivity through constant optimization of their business operations. It has brought new capabilities to the procurement function by making strategic sourcing more predictive, vendor management more proactive, and procurement transactions more optimized. Procurement market intelligence is the core of all processing decisions. Understanding the product/material sourced, pricing and availability of suppliers are vital to ensure the best possible deals and volumes required. This information also fluctuates regularly, so constant monitoring and updates are necessary. Technology is allowing us to handle more data than ever before, and using this effectively can ensure better negotiations, better pricing, and more favourable terms.
The End of Outdated Silos
The Coronavirus pandemic and the past 12 months have also highlighted the very real danger of inflexibility and a siloed approach to operations. Inflexibility doesn’t allow for the reactive responses needed in times of difficulty. Procurement teams who collaborated closely with their suppliers and kept in regular communication were able to react quickly. It also positions you well to detect early warning signs of any problem. Working closely with other departments helps to ensure all teams can utilise their skills in times of crisis. Collaborative workplaces are becoming more popular for good reason. In procurement, working together with suppliers and internal teams allows for more effective solutions and quicker resolution when problems occur.
Analyse, Assess and Review for 2022
Throughout 2021, procurement has changed. It hasn’t got easier, but the challenges have shifted, and new opportunities have arisen. Whilst procurement and supply chain are far from one size fits all, the above recognises some of the key trends and challenges that have enabled change throughout 2021. Whilst many procurement divisions remain in survival mode, strategic divisions will be working towards recovery and determining how they can use these lessons learnt to introduce permanent changes at the benefit of the business.
With a new norm and as we move into a new future, there’s a requirement to have continuous collaboration across all functions of the business to help in building a fool-proof plan and strategy in view of working towards a more resilient supply chain. Teams that utilised internal resources, brainstormed and collaborated found the benefit of working together to future-proof their approach to a stronger, more secure supply chain. The pandemic has brought the benefits of strong supplier relationships acutely into the spotlight. Getting the balance between how to operate an efficient supply chain, but also preparing for the unknown was a key challenge. Procurement departments who collaborated closely with suppliers and regularly communicated with them were able to identify early warning signs of problems. Covid-19 bought home the importance of human relationships, and the procurement teams with close and agile supplier relationships were able to leverage them to find solutions to supply issues quickly and effectively. Introducing a faster and more agile procurement process has highlighted the importance of monitoring and mitigating current and emerging fraud risks or potential for poor quality. Looking at the broader picture, it’s critical to analyse the full picture prior to making purchases.
No process should be static. Regularly analysing and reviewing all aspects of the supply chain is essential for business growth. Taking note of changing industry trends and your own business forecasts can inform future decisions and ensure the next year is primed for success. Maximising your data and recognising its value as a huge tool for growth and strategy will help futureproof the supply chain as we go into 2022. Data and technology continue to drive change in procurement. 2022 can be a year to look forward to, with the opportunity to expand and develop.