If it’s been said once, it’s been said a thousand times: the COVID-19 pandemic has sent shock waves through almost every avenue of the business world. Yet for some industries and professions it’s been a boon versus a burden. Specifically, the disruptions have put a giant spotlight on the procurement department due to scarcity of raw materials, supplier delays, etc. So, the time is ripe for procurement to really shine.
For many procurement professionals, that means making some New Year’s resolutions that will help them fully embrace three impactful trends of 2022. The caveat is that these resolutions will be extremely difficult – almost impossible – without digitally driven procurement practices. And many fall into that bucket. For example, a recent McKinsey article cited one of its surveys in which 86 percent of chief procurement officers (CPOs) said they lacked the platforms to access good quality data—both internal and external — and as little as 10 or 20 percent of available procurement data is currently leveraged to inform decision-making and action.
Now let’s unpack the trends and the corresponding “shine bright” resolutions.
The global financial compliance landscape will take the blinders off
There’s been a notable shift towards public entities driving the adoption of e-Invoicing over the past years. With e-Invoicing surging across the globe, including China, Germany, India and Latin America, just to name a few, that means laws, mandates, and new compliance requirements. While the onus may fall on the finance and/or accounts payable department to ensure compliance, the mandates give procurement the opportunity to unlock tremendous value. How? The mandates push an organization to gain higher spend and supplier visibility. With those clear insights at your fingertips, you can analyze your spend data to see where you can extract more value and improve the procurement process.
So, the resolution here is to analyze the data that becomes available to you via these mandates. And don’t fall into the trap of only analyzing and selecting based on price. Analyze with the full picture in mind to understand the total cost of ownership. That approach is how you can generate true savings and real value. (Tip: to do so most effectively, implement digitally driven procurement practices.)
The “Great Resignation” means more virtual and digital won’t go away
Employees in recent surveys stated they want to work from home 2.5 days a week on average and nearly 80% of at least one day each week, meaning many companies will be forced to offer workers more flexibility and autonomy. What does that mean for procurement? Whether it’s your own procurement department or your contacts at your suppliers, virtual/remote working is here to stay … at least for the duration of 2022!
To shine with regards to this trend, imagine your suppliers in a triangle with strategic suppliers at the top (the fewest), preferred in the middle and transactional (the bulk of your supplier base) at the bottom. The further you move down the triangle, the more you must digitalize and automate those suppliers and related purchases. (Again, embrace automation!) The strategic supplier decisions require more human interaction but the preferred and transactional can be easily automated. If you continue to rely on manual, frequent in-person procurement processes within your organization, you won’t be able to keep up with the times from an employee or business perspective. Likewise, and most importantly, manual processes hinder your ability to leverage prescriptive analytics to scenario plan and forecast, which is how you will truly shine by offering strategic suggestions when the market is changing quickly. And if the past two years taught us anything, it’s that the world will continue to change quickly.
ESG will continue to be less of a choice and more of an everyday business practice
The pressure is growing with regards to Environmental, Social and Governance, or ESG, and while many companies are proactively doing their part, the time is coming where taking action will be much less of a choice. “A growing number of countries are pushing companies and financial institutions to report their climate-related risk on a mandatory rather than voluntary basis. The new rules, based on the Taskforce on Climate-related Financial Disclosure (TCFD) framework, represent a complex accounting-style challenge,” as summarized by S&P Global.
From a procurement perspective, your New Year’s resolution with regards to this trend should be to gain visibility. Currently, there isn’t a one-size-fits-all definition for ESG criteria, rather each company has their own definition. With digitalized procurement practices, you can access the data for your organization’s criteria quite easily – from both an improvement and risk mitigation standpoint. For example, based on data you could choose a local supplier to minimize the carbon gas emissions produced by a long transit distance or eliminate a supplier that might not potentially comply with anti-slavery or child labor laws. Another way to avoid risk is to be sure you utilize a decision tree when selecting suppliers versus the older method of signing on a supplier without due diligence simply because it’s a company someone on your team is familiar with.
Embrace digital transformation or be left in years past
With the world changing at lightning speed, you can’t afford to perform your job with static, manual processes. The above point underscores the importance of the one-two punch of human-digital interactions in the world of procurement. Digitalizing, like through a procure-to-pay tool, doesn’t replace you. World-class procurement teams require savvy, talented, analytical procurement professionals to sit at the helm and set the stage; the automation removes the manual, tactical tasks and tees up data that empowers you to deliver strategic recommendations. “By fully embracing digital transformation, procurement organizations can achieve superior levels of efficiency, effectiveness, and customer experience, including 25% lower cost, 2.5x greater procurement ROI, and more,” according to Digital World Class™ procurement research from The Hackett Group, Inc.
Embrace the “new year, new you” mantra and make these three (or four if you haven’t digitalized at all yet) resolutions. It will be well worth it.