There is no denying that procurement must change. We can sense it in what our executive team asks of us, what our supply partners are suggesting, and the increasing role of technology in everyday procurement workflows. In addition, the business has recognized what we are capable of, which has opened the door to increased insight and influence.
Suppose procurement leaders and teams are going to be ready to make the journey ahead. In that case, we must carefully design our desired future state, leverage the resources currently available to us, including automation and broader access to talent, by tapping a virtual workforce.
ProcureAbility's vision for the future of procurement is an organization that is viewed as a partner to the business, generates value beyond traditional measurements, and leverages technology and process optimization to increase strategic focus. In the following, we will answer two of the most pressing questions: What precise mix of talent will be required? What processes and technology are needed to enable this future-state organization?
Talent: What precise mix of talent will be required?
With the rise of workforce virtualization, the sky's the limit for building out the future team. Before defining the combination of talent needed for in-house resources, it is essential to identify their responsibilities. A standard pillar of high-performing organizations, even today, is the separation of strategic and tactical activities.
Low-value categories and tactical activities have a low ROI and should be automated, outsourced, and supported by a pool of shared resources. Focusing on strategic activities creates the headspace for your procurement teams to remain focused on strategic opportunities with the business.
Procurement teams of the future will continue to get leaner and more agile, and it will become increasingly important to focus on activities with a high ROI. Also, knowing when to leverage the specialization and flexibility of consultants or contingent workers to address complex categories with a low strategic value (e.g., HR Services) will be critical.
Enabled by automation, fewer highly-skilled resources will manage more categories, overseeing integrated processes including P2P, supplier selection, contract management, etc. In this future model, procurement will be expected to move further upstream to impact costs before they happen, requiring us to upskill or replace resources that do not demonstrate the following capabilities:
- Creativity – Out-of-the-box thinkers will identify innovative solutions to reduce demand, rationalize specifications, leverage supplier innovation, etc.
- Flexibility / Agility – As cross-category solution developers, we will need to do a lot of complex things at once
- Analytics – With more information available, we will move away from generating data (e.g., processing requirements, excel analysis, etc.) to interpreting and generate proactive insights
- Technologically Savvy – Familiarity with technology design and how systems connect (e.g., API integrations) will be necessary to understand the data being generated and troubleshoot issues early
- High EQ – Procurement will spend less time collecting and analyzing data and more time managing supplier and stakeholder relationships to understand opportunities, motives, personalities, and risks at a deeper level, requiring improved soft skills like persuasion and storytelling.
Enablers: What processes and technology are needed to enable this future-state organization?
Investments in the right technology will drive improved efficiency of procurement organizations to automate tactical processes and improve access to insights.
Before investing in technology, identify expected outcomes and how the technology will address your pain points. Tech is not a panacea; it can make things easier for the user or help increase visibility, but it is not a substitute for well-defined processes. For example, AI solutions have expanded into areas we once thought could never be automated – sourcing intake, contract negotiations, etc.; however, automating a broken or unclear process would likely be a wasted investment and could worsen matters.
What can I start doing today?
- Assess Talent – assess the current skills of your organization to identify the gaps and inform the development of a training or hiring plan.
- Develop Talent Pipeline – cultivate the talent pipeline by identifying, developing, and retaining high-potential employees and candidates, including current employees within and outside of the procurement organization. Shed the reluctance to replace resources that do not have the right skills for the future.
- Utilize / Optimize Current Tools – Utilize your current suite of systems to generate clean, structured data. Clean data will not only give you better insight now, but it could exponentially increase the value of AI tools you plan to implement in the future. For example, clean up your category taxonomy. Limit free text on purchase orders by expanding the use of catalogs and item masters.
- Monitor Advancements in Procurement Technology – Staying up-to-date on the procurement technology landscape and emerging trends will help you more easily identify the right solution when it is time for you to invest.
- Start Automating – Identify opportunities to leverage automation now. Make it an objective to continuously reduce low-value manual activity.
Making the Business Case: Companies underestimate the complexity of planning for change – the impact, the time, and the investment. Because of this, procurement usually must settle for far less than we need. Procurement must get on the CEO's agenda by looking beyond savings & cost and leveraging market innovations to improve top-line growth (e.g., joint ventures, supplier-enabled product innovations, etc.), sustainability, etc. Delivering value beyond cost creates the "burning platform" for the next-generation investment in procurement capabilities.
The only way for procurement to avoid having our future role dictated to us is to define our future ourselves.
Eddie is a Senior Manager in ProcureAbility’s Advisory practice with over 10 years of industry and consulting experience focused on indirect procurement and procurement transformation. Prior to ProcureAbility, Eddie worked as a Manager at Kearney, where he led multiple large-scale sourcing and transformation initiatives in North America and Africa. He holds an MBA in Supply Chain from the W.P. Carey School of Business at Arizona State University and a bachelors in Operations Management from the University of Alabama (Roll Tide).