Markets are changing faster than ever, and companies are increasingly reinventing themselves, their products and their processes in order to keep up with these evolutions. For procurement teams, research firm Gartner says that this constant innovation is “redefining how they work with a self-sufficient business that demands speed.”
In “Procurement in 2020 and Beyond,” Gartner says procurement departments need to make these five important shifts in order to keep up with and adapt to this environment:
- Focus on execution speed and business insight. Procurement departments are using new technologies and an increased focus on analytics to generate and enable quick action on insight regarding the supply market, supplier performance, and business buying behavior. According to Gartner, 79% of procurement executives consider gaining visibility into stakeholder needs an urgent issue, and 75% consider displacing low-value activities to spend more time working with business partners an urgent issue. “Procurement will shift from relying on process hygiene to reduce costs and mitigate risk, to leveraging its knowledge about spend, suppliers and markets to eliminate overlooked inefficiencies and identify new sources of value,” Gartner writes. Other key changes include centralizing data gathering and storage and utilizing analytics to enhance procurement’s central role in supplier relationships and risk management.
- Act as sourcing advisor (when needed). While focusing on top-tier buys, procurement enables the business to independently source mid- and low-tier buys, acting as a sourcing advisor when needed, Gartner says. For 2020, it sees procurement shifting to more non-transactional work, taking on more high-value work, and focusing its efforts on top-tier business. “Valued skill sets for procurement staff will change to include process expertise and coaching others,” it adds.
- Bigger responsibility over sourcing decisions. Procurement will enhance its training and coaching capabilities to help ease the transition to business partners sourcing on their own. It must also develop new tools and processes that make it easier for business partners to execute sourcing events on their own, writes Gartner, “and implement new mechanisms for evaluating and monitoring sourcing across events executed by the business.”
- More focus on process excellence. For 2020, Gartner expect experienced category managers to conduct the most important buys, while procurement process experts provide purchasing guidance to business units. “The scope of procurement’s role and responsibilities will include less transactional work and more business partner management it says,” adding that the procurement team’s skill set will focus more on process excellence and less on specific category knowledge. “Procurement will understand the varying levels of business partner sourcing discipline; for areas where it is low, procurement will take back buy ownership.”
- Reallocation of budgets. Finally, Gartner expects procurement to reallocate budgets toward personnel and technology, and away from activities like outsourcing and corporate overhead. “Within personnel investments, distribution of resources will shift toward professional and analytics skillsets,” Gartner writes, noting that financial investment in personnel could increase because professional talent is more expensive, although head count may decline. “Technology investment will shift to include bolt-on or robotic process automation software and customer experience technology, such as virtual supply rooms integrated with e-catalogs.”
To CPOs that want to get out in front of some or all of these trends, Gartner says the best first step is to convene a subgroup of the procurement leadership team plus several midlevel, high-potential employees to examine the five shifts outlined above. “Ask them to think forward five years,” it says, “identify implications for your organization and develop scenarios for how your organization may change.”
