Dave Jones spoke to Procurement Heads about the future and key trends in procurement.
I think procurement is on the cusp of the biggest transformation we’ve seen in the history of our profession; you’ll see more change in procurement over the next five to 10 years than you have in the previous 20 and it’s a really great opportunity for everyone in the profession to take on board some of these new trends that are coming.
I’m really passionate about helping everyone in procurement see the opportunities that lie ahead.
There will be some people left behind and those are the people overly concerned about automation removing their jobs, but the more enlightened people will have a great opportunity to further themselves.
How is procurement going to change with regard the circular economy, social value and sustainability?
If we start with Generation Z, the consumers of the future are demanding a lot more from businesses than they’ve ever done before.
No longer is it going to be acceptable for a company to manufacture stuff cheaply.
People like Greta Thunberg have really championed that change and for the first time ever you see people spend a lot more money on electric cars than standard cars, because they really care about the environment and are passionate about it – despite the fact that electric cars aren’t as convenient.
Procurement is at the centre of the spider’s web of all of the relationships, outside of an organisation from the supply chain and inside an organisation with the various departments they interact with.
There’s no one better placed in my view to step up, show real leadership and join all of these various components together.
Sustainability is on a lot of people’s agenda and procurement is in a great place to take advantage of the change and be key drivers. Supplier innovations are a key part of procurement and using that skillset, could that be the future of how to drive beyond just an agenda for sustainability and actually making it a practice in defining and changing supply chains?
I completely agree.
I think the balance of power is shifting away from shareholders where it’s been historically towards a broader group of stakeholders, and companies that are able to look after all stakeholders, rather than just focusing on shareholder value, will be the winners of the future.
Those that can leverage the more diverse supply chain that is out there will really get benefit from that and that visibility.
Let’s face it, no one is going to succeed by staying the same, the winners are going to really jump on the difference in ideas.
Another big part of procurement’s job and role around strategy is information and data, how do predict information changing over the next decade?
There will be a vast amount of data available to procurement teams and some of the key trends that will come clear is utilising lots of new data sources to make decisions more effectively, for example, procurement decisions made not just on the price but also on the carbon footprint of the decision.
There will be a lot of new skills coming into procurement functions, data scientists will be coming in, so the procurement people who have relied on just running tender processes and allowing that to deliver the outcome will be less and less relevant, people who know how to ask the right questions and understand the data available to them will be really successful in the future.
It’s knowing how to access the data that will enable you to shape your business strategy that is crucial.
Do you have any advice for people deliberating the reliability of data?
Understanding how to ask the right questions is important and having access to the right skills to analyse the data and spot patterns.
The average procurement person won’t be skilled in deep dive analysis, but it’s likely they’ll be increasingly working with people who are, potentially in teams outside of procurement.
It’s how you interpret the business question into something that is more technically minded so people can understand and manipulate the data appropriately.
Another trend we are seeing is in global marketplaces such as Amazon, do you see this taking a big step in procurement?
Definitely – again, some people would view it as a threat to themselves and their jobs but I view it as a complementary element to procurement.
For example, some elements of procurement will be running tenders to select their stationery supplier, but that will increasingly not be needed because these marketplaces will have all of those items there with the right price points and quality assessed, so procurement’s role will be the composer of which marketplaces to access for those commodity items that aren’t differentiating from your own business perspective.
Stationery is a good example as it doesn’t give you a competitive advantage over other people what kind of biro you buy, so through the marketplaces you can avoid the need to run tendering processes because the marketplace has multiple suppliers competing for business.
It’s quite powerful.
Do you really need to run a tender process when there are 10 suppliers competing for business in the marketplace.
It will be a big change.
You mentioned tenders, there’s a lot of talk around automation of low-level tenders – is that something you predict we’ll see a lot more of?
Most definitely, it’s already out there. I met with a company that has developed software that automates the tender and selection process and enables you to run a tender for travel in a day that would normally take you six weeks.
We’ll be able to automate when we go out to market for tenders in a very easy and ready to use format.
What it means is that anyone in a procurement team who spends most of their time running tenders, shuffling spreadsheets between stakeholders and suppliers, they need to ask themselves if they still want to have a job in five to ten years’ time.
A lot of the more administrative tasks will be gone because a piece of software will be able to do that job. What will be needed is someone to ask questions to the machine and leveraging that stakeholder relationship and influencing suppliers to deliver more for your organisation.
On the flip side this represents a huge opportunity for procurement to be more strategic doesn’t it?
It has a massive benefit for procurement in freeing up the teams to drive innovation from suppliers, really understand the marketplace, what are competitors doing and get their heads out of the processes.
It will create more time for procurement to address some of the key challenges of the future like sustainability and social value.
Some of the things that have been nice to haves for organisations will become must haves because people will vote with their feet and not work for unethical organisations.
There hasn’t been a more challenging time than now – what it means is that procurement teams have been more valuable than ever before in managing risk at the supplier base.
We’ve also got Brexit, that’s a real concern and it damages consumer confidence.
We’ve got a glut of turkeys at the moment, because in February the farms all prepared for a normal Christmas, but obviously this year it’s not going to be the same. They can tweak it to a degree through feeding the turkeys less but it’s really tricky.
Procurement teams have really come into their own through monitoring their suppliers, putting in mitigation strategies, proactively identifying risks and procurement is stepping up to show great leadership in this really challenging environment.
It’s a great time for procurement to shine.
Do you have any advice on how to ensure your supply chain supplies are resilient enough?
Something as basic as going through your supplier base and seeing if your organistion could answer who are the 20 most important suppliers strategically, and, if one of them was to go bust for example, what would the impact be? What mitigation plans can we put in now to reduce the impact of that happening? If we have containers coming in that are held up due to Brexit technical issues, what can be done now to get some product into the UK pre-Brexit so it’s not stuck on the motorway?
Go through that discipline of working with your internal stakeholders and then make sure you’ve plans in place to address potential issues.
The longer this goes on, the more suppliers you will see go out of business.
One of our first to go was a stationery supplier, because obviously people stopped using as much stationery and can go to the shop to buy a biro.
However, if one of our shippers who ship our products from China was to go, it would have a massive impact.
What skills would you suggest people pick up to future proof themselves and take the opportunities that will present themselves in the next ten years?
Identify someone within the business who is really strong at relationship building and who is smashing what they do, and have a quiet word with them and ask if they would mentor or coach you.
If you’re at the start of your career, choose an area of spend that is achievable and go through the process of putting a strategic category plan in place on that area of spend; hopefully working with your mentor.
When you’re running a tender process, don’t just run the process, do the research, think about what kind of data can you get that will allow you to do the tender differently? What innovation is out there in the market? What are our competitors doing that I can apply to this process? If you do that, and understand the data and build the relationships on a stakeholder level, you’ll be in a really good place to be one of the people in the function who really understands how to leverage the technology when it arrives.
Now is the time to do it.
The people in procurement who understand big data, data analytics, forecasting, they will be the ones people will be crying out for in the future and in a really good place to do much bigger and better things. They will be the ones who understand the tricky balancing act of sustainability versus price versus quality versus social value.
My other advice is really take advantage of networking outside your own organisation. For example, the Sustainable Procurement Pledge, get involved, that is the leading edge of a lot of what procurement functions need to do.
Also, get involved in Proctopus, the network I founded with more than 500 members worldwide. Speaking to procurement people in Africa, North America, Europe and Asia can give you a really different perspective.
What drives improvement? Not doing the same thing over and over again, that’s the future.