Six trends that will impact Procurement in the Digital Age

Introduction

Digital supply chains are the future and will present many opportunities for all businesses to tap efficiencies and add value to their products and customer experience. Procurement is an important as well as a strategic component of all supply chains and with digital supply chains, its role is increasingly strategic and critical to the business.

Key Trends

In the next few years, more companies will start to implement procurement digitalization strategies based on the following principles/ technologies (in alphabetical order):

1. 3D printing: Procurement strategies which usually requires supplier selection, contract management, etc. will become dated once 3D printing is widely adopted by manufacturing companies. With 3D printing, components can be easily produced in a shorter duration of time in existing facilities without heavy dependence on suppliers or labor for production and then sourcing. Procurement strategies within the gambit of 3D printing will help companies with material cost savings as well as shorter production lead times.

2. Blockchain: Implementation of blockchain technology in procurement processes will result in an increased transparency and visibility of buyer-supplier transactions in the supply chains. For instance, DHL is currently collaborating with Accenture to prevent counterfeiting drugs in the pharmaceutical supply chain using trace-and-track technology, which has its backbone in the blockchain technology. Procurement strategies in future will make use of blockchain technology to secure the supply and maintain transparency in the entire process.

3. Cyber Security: Procurement professionals work with sensitive business information that may include customer and supplier financials, contracts, and pricing information. Traditional procurement operations such as invoicing, purchasing, tenders, etc. may result in a data breach resulting in the loss of sensitive information. Digitalization, if not implemented securely, makes it easier for breach and can result in heavy losses to the business including a loss of their competitive advantage.

4. Nearshoring: Nearshoring is the latest supply chain trend in which developed countries such as the United States (US) and countries in Western Europe are increasingly sourcing from nearby countries as the labor costs in developing countries such as China are increasing. According to a survey study, more than two-thirds of respondent companies were considering nearshoring as a possible alternative to meet the demands of the US and western Europe.

This enables businesses to be more responsive due to shorter lead times. Nearshoring can also be driven by businesses looking to protect their intellectual property, reduce their shipping costs and is also beneficial for businesses looking for equitable labor regulations such as laws regarding the use of child labor in manufacturing.

5. Corporate Social Responsibility (CSR) and Sustainability: Another trend in digital procurement is the increasing need for businesses to invest their resources in CSR and other sustainability practices such as the use of renewable and recyclable resources in their operations. Sustainability based procurement is driven by two important factors – evolving consumer preferences for brands that emphasize sustainability and increasing government regulations to protect the environment such as reduction in carbon footprints and carbon trading laws.

6. Talent Management: Increasing digitalization in procurement has led to a decrease in traditional jobs such as logistics and purchasing. Procurement processes have become tactical and strategic, resulting in a different skill-set required for current and future employment in procurement based jobs. Finding the right talent and managing it will be critical as we observe increasing digitalization and use of newer technologies in procurement.

A 2015 report emphasizes the importance of talent hunting and management in procurement and provides a roadmap for top management to do this effectively. For instance, the report highlights that leading procurement functional units are aggressively recruiting strong leadership candidates from the best universities, often offering highly attractive compensation. For example, in the consumer packaged goods industry, sell-side category managers are often future business leaders and CEOs.

Summary

To summarize, the overall trends in procurement strategies for digital supply chains, in the coming years, more and more companies will focus on technologies such as 3D printing and blockchain, business practices such as sustainability and nearshoring. None of this is possible without talented individuals, who know how to use these tools and best practices to effectively leveraging their business. On one hand, digitalization will lead to a reduction in traditional employment areas such as invoicing, logistics, and purchasing. On the other hand, there will be an increase in employment of talented individuals, who fully understand the digitalized supply chains and are able to harness them effectively.

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