Each January, the research team at Ardent Partners gathers and performs a comprehensive review of the primary research that we have conducted over the past 24 months. We then gaze into our crystal ball to identify the big trends that have impacted procurement in recent times and will impact them in the year ahead. We also make a series of predictions about procurement in 2017. The process is a culmination of the years of research conducted by our team and the result is an annual webinar focused on the Big Trends and Predictions that will impact Procurement in the year ahead.
The webinar ran yesterday afternoon and covered many topics that we think are important for Chief Procurement Officers and other procurement pros to consider as they advance into 2017. Because of that, we decided to make the recording available to our readers for 1 week. You can access the webinar and get more information about it by clicking here.
Today, I’m going to talk about the collision of two major procurement (and business) trends and make some recommendations on what procurement teams can do in response.
Big Trend #1: Globalization and Global Trade
When I first started in this industry almost twenty years ago, low-cost country sourcing (remember the abbreviation “LCCS”?) was just emerging as a new business strategy. Early movers (manufacturers mostly) were moving to and investing in China, which was the first and, for some time, essentially the only country targeted in these programs. What happened over the next 20 years spawned a revolution. Driven by advances in technology and communication and the development of global manufacturing capabilities, we essentially entered a new world order. At the same time, new supply management technologies emerged that enabled connectivity, communications, negotiations, and transactions with these global suppliers. All of this was great for procurement.
Markets were opening up (not just in Asia – NAFTA) and the level of understanding and sophistication needed to capitalize on these new supply markets rose exponentially. It became very well understood that high supplier performance and in time, even supplier innovation could be sourced from many new regions. Business, as we knew it, changed dramatically and procurement played a pivotal in enabling these shifts.
Big Trend #2: Isolationism and Protectionism
In business, there are winners and there are losers. Sometimes the players are companies, sometimes they are countries and/or global regions, and sometimes they are the different stakeholder classes (investors and workers). Globalization is certainly a trend that anointed (and continues to anoint) winners and losers.
Our second “Big Trend” counters the first and is, in many ways, a manifestation of the long arc of globalization. 2016 happened… and with a vengeance. The pent-up anger and resentment over jobs lost to workers in offshore locations or to undocumented workers in country generated a strident political movement that ran counter to the longstanding themes of open trade and globalization.
This was seen in the middle of the year with the United Kingdom’s referendum to exit the European Union (also known as Brexit) and continued through the fall with the campaign and subsequent election of President Trump. And, as we conclude a very active first week of the new presidency, it continues today and shows no signs of slowing down. There is no question that Trump is the lead figure in the movement, but the phenomenon is not strictly an American or British one. Political campaigns in other countries, including Germany, France, and Italy, have placed this topic front and center.
Actions for 2017
US and global trade policies are suddenly front page news. And while, the intentions and goals of the president’s new policies have been clearly stated, at this point the scope, timing, and overall impact of them is hard to predict. What we do know is that procurement teams will need to better understand and prepare for a changing trade landscape. Much in the way that procurement played a central role in establishing global relationships and building global supply chains over the past 20 years, now it must take a leadership position in helping business executives understand the costs, benefits, and opportunities created by the new policies. Changes to trade policies in 2017 will, at minimum, require a reevaluation of current sourcing strategies and supplier relationships. Are you ready for 2017? Catch our Webinar Procurement 2017: Big Trends and Predictions available for 1 week only here.