[Editor’s Note: Today’s article is a guest post from Market Dojo, a technology company offering Software as a Service built by procurement professionals, for procurement professionals. Its solutions enable procurement to overcome the challenges they face through managing data, mitigating risk, and minimizing costs. If you or someone you know would like to make a guest contribution, please contact us at editor at cporising dot com. Thanks!]
How to Navigate 2024 with Confidence — Procurement’s “Words of the Year”
2023 was Procurement’s time to shine, step up, be more visible (and vocal), and become the valued business partner it’s long strived to be.
Sounds good, right?
But in reality, although the procurement world was full of innovation and good intentions, progress fell short as dealing with the fallout from the last few years of turmoil took priority.
Pressure and opportunity persist, and with the advancement of best-of-breed technology and AI, procurement’s seat at the table of influence is still within grasp.
As we look further into 2024, some key themes remain constant — namely managing cost pressures, ensuring resilience, and driving ESG initiatives. Market Dojo’s Procurement Pathfinder 2024 covers these critical themes in more detail (plus, new for 2024, a section on AI).
Further to these key priorities, and the purpose of this blog, we feel there are four Words of the Year* that procurement teams can use to successfully navigate 2024.
* For those of you who don’t spend “waayyy” too much time on social media, a Word of the Year (or WOTY), is a word or phrase that people use to provide a goal or focus for the year. Also, at the end of each year, The Oxford University Press (and others), choose the most important word or expression in the public sphere during a specific year. Do you know the WOTY for 2023?
1) Agility
If anything, 2023 taught us to expect the unexpected. Whether you call it the “new normal” (groan) or “permacrisis” (much better), companies need to be able to adapt to constant economic changes and be able to pivot strategies — at speed — not only within procurement but throughout the whole business.
Here are specific areas where the importance of agility plays out.
- Lengthy implementation timelines of digital projects and processes just won’t cut it. Similarly, extraction of data insights needs to be instant, not three weeks from the initial request.The latest best-of-breed and Source-to-Pay suites are surpassing legacy ERP systems in terms of speed and flexibility, making them an attractive alternative for many Procurement and Finance teams.
- To build on this, there’s the question of how quickly you can send out new tenders. Inefficient processes result in unnecessarily protracted RFx times. Often, the result is a static supply base that reduces competitiveness and only favors incumbent suppliers.
Managing tenders through spreadsheets and emails is often the cause of prolonged RFx times and there are numerous benefits in using specialized sourcing software.
As you’d expect, we have written many blogs on this very topic, see here and here, or watch the short video below.
Combat Supplier Cost Increases by Automating Your RFQ Process
Market Dojo Sourcing’s intuitive interface and on-demand pricing option make it one of the most accessible sourcing solutions on the market. Find out how CommerceHub ran its first-ever RFP in 24 hours.
2) Competition
Our second Word of the Year is competition. Weirdly, for such ardent dealmakers known for their shrewd negotiation skills, Procurement often seems to shy away from competition.
Whether it’s a fear of upsetting existing suppliers or exposing savings that could have been realized a lot sooner, or a fear of losing control over relationships and targets — we often hear strong objections to using e-auctions, for example, because they are seen as too aggressive (but, in a business context, surely aggressive is another word for competitive?!).
Well, ask yourself, isn’t it time to trade in the kiddie pool for the swim lanes? To stop splashing about and start swimming with the grown-ups?
In the deadweight economy* that we find ourselves in, it’s imperative that companies leverage competition in their existing supply base, as well as with new suppliers, to manage costs and maximise value.
(*A deadweight economy is defined as tepid demand growth, stubbornly high costs, and constrained access to capital.)
Here are five ways that procurement teams can leverage competition.
- Extend the existing supplier network to include new vendors for existing goods/services, or new suppliers based on geography.
- Increase scope of tenders to include more items in existing categories or entirely new categories.
- Renegotiate existing contracts by submitting RFQs to existing suppliers.
- Adopt a market-driven tendering process with e-auctions.
- Foster partnerships with suppliers to co-innovate new solutions that provide a competitive advantage.
3) Accountable
The last few years have proved to the world that supply chain resilience is paramount and no organization, or procurement team, can afford to get complacent.
To ensure resilience, procurement needs to build a supply network that is robust, diverse, supports ESG and sustainability credentials, and that mitigates risk. And this is nothing new!
This has been one of procurement’s key objectives for many years.
But it’s time for procurement to truly hold itself accountable for this resilience — to be accountable for a resilient supply chain that enables a company to deliver on its vision and brand promise, irrespective of the crisis.
To be accountable for a resilient supply chain that delivers business value and competitive advantage.
To be accountable for a resilient supply chain of suppliers that are sustainable, ethical, and diverse.
It’s time for procurement to have accountability for:
- Aligning itself properly with the wider company goals — for example, the cheapest supplier might not be the best option if it hinders the company’s ESG strategy
- Building supply ecosystems built on partnerships that allow you to engage rapidly and confidently beyond tier-one suppliers, to tier two and tier three
- Having the right system in place to manage and audit suppliers, and your suppliers’ suppliers, especially as supplier diversity is becoming increasingly important.
By being accountable and extending its reach of influence, procurement will take a big step towards its goal of being a valued business partner.
4) AI (OK, that’s technically two words)
Our fourth and final Word of the Year is AI or autonomous sourcing or sourcing automation (again, two words, this one is less of a word and more of a topic).
Unless you spent 2023 completely off grid, you cannot have failed to read, watch, or hear about how AI is going to transform procurement. There has been so much hype and as with any new technology, ridiculously high expectations.
What’s important to remember is that it’s a tool, like any other software, that will help you do things quicker, make you more productive, and strengthen your access to data-driven decisions.
This year will see an explosion of e-sourcing solutions incorporating AI and autonomous sourcing features (Market Dojo is one of them, see below). On the positive side, this could really fast-track procurement’s digital transformation journey.
But there is a negative side to AI in procurement.
The first is that the gap will continue to widen, at an ever-increasing pace, between those with e-sourcing technology and those relying on traditional methods such as spreadsheets and emails.
The other negative, or limitation, is that procurement teams don’t have the skillset to manage and properly leverage this advanced technology … and how will procurement attract the right talent over other more, dare we say, glamorous departments?
The solution is to implement e-sourcing software and, once and for all, move away from manual processes. Without this in place, you’ll never be able to attract people with AI competence and experience. You should also look for a solution provider that will partner with you on your digital transformation project.
For more guides and resources to help you plan for the year, download Procurement Pathfinder 2024.
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Tagged in: Agility, AI, Artificial Intelligence, automation, Chief Procurement Officer, CPO, ESG, eSourcing, Guest Contributor, Procurement, Source-to-Settle, Sourcing Optimization, Supplier Performance Management, Supplier Relationship Management
