Ardent Partners: Procurement’s Big Trends in 2018

Posted by Andrew Bartolini on February 14th, 2018
Stored in Articles, General, Lists, Strategy

Happy Valentine’s Day everybody! If you’re in the giving or sharing mood today, please consider giving some time and sharing your ideas in our annual CPO Rising 2018 survey. It will take you less time than most of you will spend surfing and sending personal emails before lunch (i.e., 15-20 minutes) and it will be a great way to benchmark your organization against the industry and against the Best-in-Class. Also, you’ll earn my deepest thanks.

Anyway, in our weekly meetings, we realized that we have overlooked posting any articles that highlighted our annual Procurement: Big Trends and Predictions webinar that we host each January and which was sponsored by Beeline and Ivalua. The webinar was jam-packed with ideas and content (or, in this case, six Big Trends and 12 Bold Predictions) as well as a great 20 minute Executive Roundtable with several highly-regarded industry leaders. Today, I will start by looking at the “Big Trends” that are impacting Procurement today and as we head deeper into 2018.

Big Trend #1: Cultural Friction

When I first started working in this industry almost 20 years ago, low-cost country (LCC) sourcing was just emerging as a new strategy. Early movers had already begin moving supply to China and in general companies were starting to aggressively invest in making China a valuable and strong source of supply. Since then, we’ve witnessed a global revolution driven by advances in technology and communication and the development of global manufacturing capabilities – we entered a new world order. And, it was great for Procurement – the connection to new markets, new global markets made procurement a more important piece in the overall business puzzle.

But now there is a backlash against the preceding 25+ years of unlimited globalization and resulting economic shift. Global relationships are not nearly as sturdy as they once were. Immigration policies are tightening. In a truly global world, people seek community as a way to avoid getting lost in the shuffle. That frequently means trying to find people with shared ideals and views. Sometimes this is a unifying aspect for society; other times? Not so much. Today we see heightened nationalism and identity politics. Today many are using our differences to define us as opposed to our commonalities. Both the political and social rhetoric in the U.S. and many other countries is calling into question the idea of free and open global trade policies. If this rhetoric turns more directly into actual trade policies, procurement will be on point to assess the impact of changing trade policy and develop the strategy forward.

Big Trend #2: Global Sourcing Increases in Complexity

Global Sourcing continues to increase in complexity. Twenty years ago, companies were racing to “low-cost countries” like a mad gold rush. Back then, there was so much opportunity that the research and decisions behind low-cost country sourcing really didn’t matter. Most companies that began LCC or China sourcing programs saved big. Today, it’s a different story — supplier selection decisions have, by necessity, become more complex. Selecting the right country or region has greater importance. And, contract quantities and durations need to be considered, too. But for a generation, procurement has become adept at global sourcing, with many groups developing a mastery. In 2018 and beyond, those skills will be more highly-prized by companies and by employers in the market.

Big Trend #3: Business Risk on the Rise

Despite better visibility and enhanced risk management strategies, broad-based volatility pervades many markets. We believe that geopolitical risk is approaching a generational high with potential fallout starting this year. Economic risk is tied, in part to the business cycle and to how any geopolitical risks are addressed. Ironically, as global volatility increases (even if it is caused by the U.S.), the U.S. dollar typically strengthens. This means that international supply effectively becomes cheaper and savings, depending, of course, on the contract currencies and net of any hedging, will increase.

Big Trend #4: A Procurement Technology Innovation Boom

Procurement Technology is operating in an “Age of Innovation.” Over the last few years, there have been impressive levels of innovation across the entire procurement (or supply management) technology sector. Think about it: cloud, enhanced usability, powerful analytics, robust reporting capabilities, and better or pre-built integrations have all become table stakes. This sets the stage for even more innovation in 2018.

Big Trend #5: Companies are Laser-Focused on AGILITY

We’ve started talking about procurement agility in 2012. Six years later, the drive for agility extends across people, systems, and operations. Perhaps only innovation ranks as high on the list of executive goals in 2018 as agility. Have you taken Ardent’s procurement agility assessment? If not, send me a note by completing the contact form and we’ll get it to you.

Big Trend #6: “How Will Work Get Done?”

The Future of Work and contingent or the non-FTE workforce are a key part of Ardent’s overall research focus. The shift towards non-FTE labor will continue through 2018 and for a long time to come. This has driven enterprises to:

  • Leverage the entire talent pool (FTEs and non-employee talent)
  • Utilize online staffing and digital channels of talent
  • Revolutionize the way skillsets align to projects and initiatives
  • Tap into the power of Future of Work technology to optimize work

Big Trend #6A: Intelligence & Personal Networks Remain The Key to CPO Success

With the shift in employment strategies as enacted by another company has caused average job tenures to continue to shrink. One benefit of the new world of work is that the location of talent becomes less important. Another important trend is that experience matters but, “what you know” and “who you know” are competitive advantages in the job market. Now more than ever, it is professionally valuable and important for CPOs to build and enhance their professional networks. Accordingly, please save the date for our CPO Rising 2018 Summit, where attendees will have ample opportunities to make contacts, learn, share, and develop new ideas, and build out your professional network. See you there!

Whether you’re tracking supply risk, trade policies, technology innovation, or overall employment trends, 2018 is going to be an interesting year for our readers.

RELATED RESEARCH

Procurement 2017: When Trends Collide

Procurement 2017: When Trends Accelerate

Uncertainty Looms for 2017 – Part I

Contingent Workforce Management in 2017: The Year Ahead

The Future of Supply Risk Management

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