Each year IBM presents its “Next 5 in 5”, a list of innovations with the potential to change the way people work, live and play over the next five years. Traditionally the turn of the year is a period of “lists”, a retrospective of the developments of the last year or trends for the year ahead. Let me have a shot at it too: The Next 5 in Procurement.
Supply Chain Risk Management
The most outstanding topic in supply chain management in 2011 was, without doubt, risk management. Earthquakes, tsunamis, hurricanes, flooding, social unrest, war and economic misery made it painfully clear how much globalization makes even the smallest company vulnerable to disruptions in the logistical chain. Particularly companies in high tech or consumer products were hit and had to either sell “no” or find alternatives for components that were missing as a result of a hitch in the supply chain. This has resulted in a lot of attention on effective strategies and technologies to better mitigate this type of risk.
P2P – Wave 2
In the last decade, many organizations have invested to improve the operational procurement process. These initiatives were often triggered by a company-wide ERP implementation or by frustrations in the financial department about the cumbersome settlement of incoming invoices. Now it appears that these initiatives mainly amounted to implementing a tool without much attention to embedding it into the organization and aligning it with the procurement strategy (closed loop). A well-configured Purchase-to-Pay process (P2P) is fundamental to a functioning procurement operation. The economic tide does its little bit: improvement of P2P is supported by a strong business case that may put such an initiative high on the wish-list, even in times of shrinking budgets.
Innovation Driven Procurement
For organizations existing by the grace of innovation it remains a challenge to involve supply chain partners in innovation initiatives. Even though procurement is regarded as the interface with suppliers, it traditionally has little role in advancing business processes. This is going to change due to procurement playing a different, more assertive role. This goes beyond involving procurement at an earlier stage. The Voice of The Customer is highlighted and that signal is no longer exclusively picked up by Sales and R&D, but by all parties that have a role to play in launching successful innovative products. Procurement should seize the opportunity to play a central role in this process.
Perhaps the most definitive theme on the wish list of procurement managers is contract management. Too often invoices deviate from agreements recorded in contracts. This is particularly true for service contracts. In this way, a lot of money is leaking away. In the coming period we will see an increase in initiatives to setup contract management or to professionalize and secure it.
The final breakthrough of SaaS
It is hard to imagine now, but in the early days of electricity most companies had their own power station. Eventually, a few innovative people realized that it is far more efficient to bundle the efforts and establish a power station to meet the demand of multiple parties; this idea was met with a lot of skepticism. Too much risk! We see the same mechanism at work in the receipt of SaaS solutions (Software-as-a-Service). Instead of each organization setting up its own servers and systems, the required functionality is readily available via “plug and play” solutions. Due to an increase of successful examples of this concept, the initial restraint hurries off and organizations make their first serious forays into this domain. Not in the least because of the substantial savings that this model can bring to the table.