5 minute read 29 Oct 2018
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Ten trends shaping the future of procurement

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EY Global

Multidisciplinary professional services organization

5 minute read 29 Oct 2018

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Digital technologies will enable a stronger procurement capability in years to come.

The word “future” is a term with endless potential. When you picture the future of work in supply chains, concepts such as robotics, Internet of Things (IoT), machine learning, 3D printing and blockchain probably come to mind. As we continue to transition toward a faster-paced and connected working world, the question about what the future holds can create a level of uncertainty for the procurement function.

Embracing the future introduces a new way of working for our clients. While EY people don’t have a crystal ball, we do have access to trends and leading-edge projects from around the world, thanks to the global EY network. This article identifies 10 trends that could shape the world of procurement for years to come.

1. Procurement’s contribution to the overall organization strategy will be a major driver for competitive advantage

Leading procurement functions will become part of an organization’s value stream and will be more influential in contributing to the overall business strategy, growth agenda and competitive advantage. Procurement leaders will be expanding their remit from a focus on cost leadership to enabling innovation, agility and supply certainty.

2. Procurement will be a smaller, more agile function that partners directly with business units

Procurement will be a smaller, centralized function, with more happening in a virtual center and with people geographically embedded within business units, meeting the need for increased collaboration. Category managers will also become business partners focusing on all procurement and category needs of a business unit. Specialist knowledge and expertise will be obtained by leveraging the “gig economy” on an as-needed basis.

3. Machines will mostly clean and curate their own data

In the future, data will be continually cleansed and improved using machine learning techniques that leverage process outcomes to automatically identify and remedy data anomalies within systems. For example, the vendor master will be continually maintained using data from contracts as well as those used in pay runs. Similarly, maintenance work orders, which drive purchase orders, will be informed by the actual usage of materials in completed jobs. This will create a “virtual cycle of digital,” where data will continually improve, and organizations will mostly use machines for periodic data cleansing.

4. Integrated data ecosystems will enhance visibility of patterns across the organization

The data captured from the Internet of Things (IoT) will enable real-time tracking and monitoring of outcomes through continuous feedback loops across assets. Asset-intensive industries will effectively link this data across the enterprise and connect to suppliers, enabling touchless procurement in the next 24 months. This process will ultimately create an enhanced data platform to inform decision-making around spend and purchasing patterns, catalog content, supplier portfolios and contract fulfillment.

5. Organizations will leverage internal and external data sources to better assess supplier risk

In the near future, most organizations will have a 360-degree view of suppliers through internal data, data from suppliers, market data and external data on suppliers’ performance (e.g., performance of suppliers with other organizations). This will not only provide historical data about supplier performance but will also enable organizations to accurately and holistically establish supplier risk profiles and to predict risk events.

6. Robotic process automation will be ubiquitous and will become an integral part of any COTS deployment

Robotic process automation (RPA) will become an integral part of any commercial off-the-shelf (COTS) solution deployment, reducing the impact of ongoing wholesale software upgrades. By 2020, leading procurement functions will have fully enabled end-to-end procurement, where manual intervention for high-volume repeatable tasks is removed (e.g., purchase requisition to purchase order conversion and invoice processing). Manual reporting will be a thing of the past, and employees will get the opportunity to focus on business-critical work instead of shuffling paperwork.

7. Commercial off-the-shelf solution providers will open up their architecture so that third parties can develop and sell apps and software that enhance functionality

The mobile phone app store experience will be available to the business world with COTS providers, allowing access to third-party apps and software. We are already starting to see this happen, but this trend will become more widespread. Existing COTS providers will focus on the development of core product functionality, while specialized capabilities will be left to third-party providers — e.g., order collaboration, payments, digital signing and supplier surveys.

8. Voice-activated and bot-purchasing experiences will be the norm

Buyers of the future will be supported by seamless and intuitive purchasing experiences, regardless of underlying technology systems already in place. What could this look like? Think voice-activated purchasing experiences for goods and services, supported by natural-language search and virtual assistants.

9. Blockchain will be selectively used in procurement

While blockchain is a hot buzzword, it will be selectively used by procurement functions. There will be some hesitation on implementing private blockchain networks due to the costs of development and deployment. Blockchain use will most likely be limited to scenarios where there is a regulatory track-and-trace requirement, high levels of counterfeiting or a clear business case for operational integrity.

10. Existing decisions on make vs. buy will be challenged

With the emergence of new technologies, such as 3D printers, and the need to drive competitive advantage, the current status quo around make vs. buy will be challenged. Organizations will need to understand the tradeoffs in reducing production downtime and costs and improving sustainable practices by making products vs. buying. Procurement will need to become more strategic when analyzing new technologies and supplier portfolios to help with this decision.

These are just some of the waves in a sea change that will help shape a more integrated and value-add procurement function. It is clear that procurement leaders of the future must adapt to make sense of the new capabilities and technologies that are coming soon. With the future just around the corner, now is the time for an organization to define a clear procurement strategy and road map to embrace, and use disruptive technologies instead of being consumed by them.

Summary

To thrive in the digital age, organizations must put disruptive technologies to use and follow a clear procurement strategy. 

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By

EY Global

Multidisciplinary professional services organization