Business has had its fair share of procurement which provides organizations with the goods and services it requires to conduct business successfully. But the world markets are changing and technology is taking the place and sustainability is the primary agenda and as such, procurement is going through a seismic shift. The manner in which businesses source, negotiate and how they manage suppliers is completely different compared to the way it was just 10 years ago. The procurement will equally be included in the expansion of cost savings in the future projection and will equally be strategic in terms of innovation, sustainability and resilience.
We will discuss the future of procurement and the key trends that are influencing its development and how companies can be equipped to be at the vanguard in the article.
The Digital Procurement.
The procurement shift is technology based. The companies are quickly embracing digital technologies, such as artificial intelligence (AI), machine learning (ML), and robotic process automation (RPA) to automate procurement.
- Artificial Intelligence and Machine Learning: AI can help with the danger forecasting of the suppliers and forecasting of the demand and suggest cost-cutting opportunities. The decision-making process and procurement strategies might be upgraded using machine learning, grounded on the analysis of the past and trends on the market.
- Automation: RPA is eliminating human resources like issuing invoices, writing purchase orders and supplier on-boarding. This enhances productivity as well as minimizing human error.
- Cloud-Based Procurement Solutions: Cloud services provide real time co-operation between the procurement teams and the suppliers with the objective of fostering transparency and speed.
Digital procurement is no longer an exception by the year 2025. The companies that do not embrace these technologies will lag behind in terms of costs, speed and supplier relationships.
Ethical Sourcing/Sustainability.
The environmental, social and governance (ESG) are aspects that have been in the limelight of procurement practices. Increasingly, businesses are being held accountable by consumers, regulating bodies and procurement and supply chains are being made sustainable and ethical by the business.
- Green Procurement: Companies have rapidly started directing their suppliers who are utilizing renewable energy who are minimizing carbon footprint and waste reduction.
- Circular Supply Chains: Corporate organizations are moving to circular supply chains that focus on reuse, recycling and regeneration of materials instead of the linear approach.
- Fair labor Practices: Under fair sourcing, the suppliers must comply with fair labor practices, and not with exploitation or poor working conditions.
The procurement departments of 2025 will not only be evaluated based on the assumption of cost-saving, but also based on the ability of the companies to integrate sourcing plans with sustainability.
Data-Driven Decision Making
Procurement is becoming increasingly more analytic. The procurement professionals have access to vast amounts of data which enables them to make more effective decisions.
- Predictive Analytics: It assists in forecasting the change of demand, risks of suppliers, and price fluctuations.
- Supplier Performance Dashboards: Supplier performance is a monitoring system where the procurement teams would check the compliance and quality in real time.
- Spend Analysis: It entails establishing the existence of inefficiencies and the existence of cost saving in categories.
The procurement currency will be data in the future. Any firm that imparts modern analytics will be at an advantaged position since they will streamline sourcing activities and reduce risk.
The Strategy Procurement Change.
Traditionally, procurement was considered the work of a back office that was concerned with transactions and low costs. The position is however transforming to a business development partner.
- Identification with Stakeholders: Procurement practitioners are collaborating with the finance, operations and sustainability departments to ensure that the sourcing is in line with organizational objectives.
- Value Creation: Procurement is now able to help in innovation, supplier and customer satisfaction diversification as opposed to savings alone.
- Supplier Partnerships: Long-term resilience, co-creation, and innovation are being driven using strategic partnership with suppliers.
By 2025, procurement will be seen as an activity that will create business value and will not always be a cost containment tool.
Risk Management and Risk Resilience.
The COVID-19 had demonstrated the vulnerability of the global supply chains. The procurement process that is resilience oriented will be more outspoken in future.
- Supplier Diversification: It is a risk to have one supplier or region/ area. The sourcing has been dispersed in other geographies by the companies.
- Supply Chain Visibility: supply chain best technologies like blockchain and IoT are supplying real-time information on what transpires in the chain.
- Scenario Planning: Procurement units are implementing the contingency strategies in case of unrest, natural disaster and volatility in geopolitical issues.
One of the top priorities of the procurement leaders of the future will be the performance measure used in resilience.
Supplier Diversity and Inclusion.
Diversity is no longer a social strategy, but a strategic one. Companies are also transacting business with the small and minority owned, female owned and local businesses.
- Competitive Advantage: competition can be provided through a range of suppliers which can provide innovation, agility and idiosyncratic perceptions.
- Reputation Enhancement: Each time different suppliers are brought together, an increase in brand image and goodwill are created.
- Regulatory Compliance: In certain places, it is a work supply regulation to work with various suppliers.
Supplier diversity will become a non-negotiable part of the world procurement strategies by the year 2025.
Artificially intelligent negotiation.
One of the most interesting tendencies is the use of AI in negotiations. The negotiations process can be recreated with the help of complex algorithms that can predict reactions of suppliers and propose the most appropriate strategies.
- AI Negotiation Assistants: AI in procurement gives a professional a chance to negotiate contracts with references to the information accessible about suppliers and the market and make a more effective one.
- Dynamic Pricing Models: AI has the capability of dynamically changing price models, and that is also efficient and effective.
- Speed of operation: Automated negotiating will be used to help in time saving to close deals.
The application of AI-based negotiations will become a common practice during the decade, and it will save time and yield more positive results.
Globalization or localization.
Global supply chains are also changing whereby corporations consider both the strengths and weaknesses of globalization and over-reliance on suppliers that are far away.
- Nearshoring and Reshoring: Due to the level of risks, various companies are shifting the manufacturing to a more local form of place in order to enhance flexibility.
- Localization of Suppliers: by collaboration with local suppliers, the company can achieve both fast delivery time and hyper local economies.
- Balancing Act: This will force the firms to balance between the cost advantage of global sourcing and reliability of local sourcing.
The procurement strategies embraced in 2025 will be anchored on a hybrid approach with the capacity of delivering global and local resilience.
Better Co-operation with Suppliers.
The suppliers are no longer considered as subsellers, but as strategic partners.
Co-Innovation: Co- InnoVation refers to a partnership between business and suppliers to create new products, technologies and services.
- Long-Term Contracts: It is the mutual trust and stability that will be gained by establishing the relation with the suppliers with the help of the long-term contracts.
- Transparency & Communication: Open communication can be useful in this to make the working together and goal congruency better.
The business association of suppliers will become the cornerstone of business success in the future of procurement.
Procurement Procurement Talent Transformation.
The skill sets needed to succeed in this area are also changing as the procurement keeps changing.
- Digital Skills: It will require knowledge of AI, analytics and procurement software.
- Soft Skills: The negotiation, teamwork and managing stakeholders will also be of much importance.
- Thinking: Procurement leaders will be required to align the sourcing strategy to that of the business overall.
The digital skills will have a high market demand in the future, and the labor market will be eager to obtain them, which implies that procurement can be a highly strategic career choice.
Conclusion, Future of Procurement.
Procurement is no longer just about reducing costs and making transactions. As a strategic source of value, sustainability, innovation, and resiliency, procurement will become a reality in the upcoming decades (2025 and beyond).
The digital transformation business which is deemed to be successful in the evolving world environment will be the one which is actually transformed digitally, sustainable in its operations and clears and maintains a successful relationship with suppliers.
The organisations that regard procurement as a strategic enabling process and no longer as a back office activity will generate new opportunities not simply because there are new ways to grow, generate efficiency, and competitive advantage.
