It’s officially almost the end of another year.
2016 has seen some big changes for businesses and the way they operate. We’re sure that we’ll be seeing plenty more changes over the next 12 months. That’s why we’ve had a look back over recent trends and the shifts occurring in the world of procurement to see if we can predict what 2017 has in store for purchasing professionals.
Here are 6 procurement trends we expect to see in 2017:
1 Procurement will become more collaborative
The Future of Procurement, a series of reports from Oxford Economics surveyed 1,000 procurement executives and practitioners globally. They found that:
- 68% of executives and 70% of practitioners felt that procurement is becoming more collaborative with other parts of the business.
- 56% of executives and 65% of practitioners felt that procurement is becoming more collaborative with suppliers
This increase in collaboration shows that procurement is no longer just about cutting costs. With every passing day, it becomes more of a strategic resource and a key driver of business value. That’s why more money is being invested into the function and it is predicted that collaboration across companies will become more widespread.
2 Suppliers will become innovation partners
Over the next few years, we can expect to see a push to drive more value out of the supply base. To achieve this, more procurement professionals will be working together with suppliers to develop new innovations. Supply chains are growing increasingly complex and risky in the current economic climate, which means that suppliers will have more influence on brand reputation, product quality and profits than ever before.
For this reason, procurement professionals will need to use supplier value management (SVM) to drive mutual success through transparency and teamwork. Instead of pushing for short-term benefits of lower costs on a single purchase, there will be a shift towards a long-term relationship with suppliers. The focus will be increasingly on ongoing value returns from next year onwards.
3 Focus will shift to sustainability
It is likely that procurement will feel the pressure to become more sustainable on two fronts – both governmental and consumer-led. People are increasingly aware of the need for more sustainable practices. They want to buy from businesses that respect the planet’s natural resources, animal welfare and human rights. In fact, research from Mintel shows that 56% of consumers stop buying from companies that they think are unethical.
“Companies that are really forward-looking can brand and market what they’re doing in their supplier base around sustainability, whether that’s rooting out child labour, reducing CO2 emissions or engaging with second and third-tier suppliers.”
The importance of looking after the planet, coupled with the positive brand reputation associated with sustainable companies, will push procurement to be more sustainable in the coming years.
4 Uncertainty will surround globalisation
The increasingly uncertain economic and political climates around the world, coupled with the desire to achieve sustainability, may push more businesses to localise.
One prominent issue that will affect procurement trends within the UK is the devaluation of the sterling. Following the decision to leave the European Union, the economic situation has become quite uncertain and is likely to stay that way for some time. Although many supply chains have enjoyed tariff-free trade for a long time, this is likely to change. Taking chances on overseas suppliers may become too risky for some procurement managers, and this could cause supply chains to avoid them.
On the other hand, however, emerging markets are starting to assume a greater role in the global economy. Countries like China, Brazil, Singapore and India are becoming more popular. As procurement professionals, you could have a big task on your hands when it comes to adapting to this situation. Teams would need to focus on developing their knowledge and expertise in emerging market sourcing.
5 Risk management will become more important
Risk management has always been important for businesses. Avoiding supply disruptions helps to keep businesses running smoothly and promptly. That’s why procurement managers try to prepare for as many potential setbacks they might occur as they can.
Supply disruptions can be defined as any unforeseen events that disturb the normal flow of goods and materials in a supply chain. These disruptions can have major negative consequences for the management of operations.
Unfortunately, you can’t always account for every scenario. Certain events over the last few years have prompted the need for businesses to take risk management more seriously. The horsemeat scandal of 2013, for example, contributed to the increase in scrutiny and safety regulations in the food industry. Purchasing managers bear the responsibility of responsible sourcing. For that reason, they are increasingly expected to complete meticulous risk assessments and thoroughly research their potential suppliers.
With the political and economic uncertainty we’re seeing across the world, this trend is likely to continue.
6 The use of analytics will increase
Big data on its own is fairly irrelevant. However, once you analyse the information and draw thoughtful conclusions from the advice, the benefits can be great.
Procurement professionals haven’t always taken advantage of the benefits of data. Most business departments make use of technology to improve their performance. However, procurement hasn’t been taking advantage of the analytics data available to them. We’ll be seeing more purchasing departments dedicating more time to gathering and analysing relevant data, both internally and from suppliers and other external sources. As they start to make more informed sourcing decisions, procurement leaders will gain more strategic advantages.
The best part is that most companies will have staff that are familiar with analytics, often in their sales or marketing departments. As procurement start to make use of it too, they’re likely to already have the skills and technology ready to help them adapt and acquire the necessary skills.
Are there any other trends that you expect to see in 2017? Let us know in the comments below!