The Future of Procurement

Journey So Far

With the development of business-to-business interaction from mere transactional relationships to ones enabling ever evolving competitive advantage, firms should no longer treat procurement as a back-office service but increasingly look to procurement as an embedded organisational capability.

The past few years have shown the impact of fully functioning, effective procurement teams distinctly impacting organisational resilience and survival. Procurement has been at the epicentre of managing major disruptions, including COVID, that organisations are still battling, from extremely volatile demand, constrained and unsecure supply, to managing unprecedented inflationary pressures. At the same time procurement has been taking on added organisational responsibilities by supporting third party risk, ESG, sustainability and strategic M&A agendas.

Leading procurement teams now cater to a broadening set of priorities shifting the dial from guardians of supply and cost to catalyst and stewards of organisational growth.

All this requires reshaping and developing procurement capabilities that are more resilient, more agile and more efficient to deliver sustained competitive advantage to their business.

View to the Horizon

Organisations need to look beyond their localised industrial and geographical challenges and chart a path to address the broader headwinds their organisations face. We’ve identified these as five major interconnected macro enviro-factors:

• Global Growth Slowdown is projected well into 2023. Current events, including soaring energy prices and inflation fears, increase the likelihood of recession which will trigger further supply chain disruptions and impact customer demand.
• Geopolitical tensions and the changing Face of Globalisation. Wars, geopolitical tensions, and changes in global trading blocs are having an outsized impact on the global supply chain fuelling cost increases and product shortages. A mix of onshoring, regionalisation and supplier diversification are driving a new form of globalisation to overcome disruptions and keep sustaining growth.
• Supply chain uncertainty. We have seen how the global pandemic has exposed both the value and difficulty of maintaining efficiencies, speed, and costs within the supply chain. Just as consumer habits have shifted, businesses also need to operate differently to meet increasing customer requirements whilst maintaining trust and loyalty.
• ESG & Sustainability. Companies are under greater pressure from consumers, shareholders and legislators to act responsibly in ensuring their end-to-end operations are sustainable and in line with ESG expectations.
• Expanding Risk Domains. In the age of disruptive technologies, regulatory change and the volatile macro environment there are new risk domains that organisations need to diligently review and address. Moving away from set and forget BCP and risk management frameworks to active monitoring and mitigating strategies of the multi-tier supply chain.

In addressing these challenges as critical business partners, organisations of the future need to incorporate and adapt to the macro trends impacting the future of work, which includes not only capabilities powered by technology, such as automation, cognitive decision making, deployment of AI and harnessing the power of data, but also the softer shift in the ways of working such as the power to attract and retain internal and external talent, human centred design, influencing relationships, social licence and hybrid work models.

Looking Beyond the Horizon

As the pace of change accelerates, high performing businesses need to evolve their procurement capability to be a source of organisational competitive advantage delivering greater value in an ever more complex environment. We see 7 key domains of focus for organisations as they seek to evolve the procurement function beyond cost reduction and supply assurance towards an orchestrater of broader value for the organisation:

• Collaboration & Innovation. Creating effective ecosystems with the business, suppliers and industry partners to lead the art of possible. Unlocking untapped potential across the value chain by being the ‘Essential Business Partner’ and Customer of Choice to critical suppliers.
• Procurement Resilience & Agility. Optimising for equilibrium across Resilience, Agility and Efficiency. Building operating models to maximise organisational effectiveness in responding to global and sectorial volatility whilst streamlining process and user experience.
• Risk & Governance. Recognising risk management as a core competence. Deploying regular scenario analysis and cognitive risk and demand sensing across the extended supply chain (tier 1-n) and broader supply-market environment to always be on the front foot.
• Sustainability & Social. Enable the organisational vision for sustainability and social impact by wiring procurement processes and decision making to prioritise ESG outcomes and driving positive action through robust supplier and market relationships.
• Dynamic Workforce. Create the power to pull the best of organisational and external talent. Leverage agile working to flex talent to work on highest priority outcomes and hybrid delivery models to access the finest talent for high complexity roles.
• Data & Technology. Leverage automation and cognitive tools to remove mundane work and streamline business processes to enhance user experience.  Leverage internal and external data sets and integrate data across multiple systems to bring real time insights to augment and enhance decision making.
• Value Mastery. Own and deliver across the Total Value Chain with commercial excellence incorporating a broad range of domains, including circular product/service lifecycle, decarbonisation and total cost of ownership mastery.

The Time for Action is Now

Businesses realise the impact of procurement & supply chain now more than ever. Investing in enhancing these critical capabilities will ensure that your business is not only future ready, but ahead of the curve driving truly holistic success for your organisation.

Deloitte’s Global Supply Chain and Procurement practice brings together experts across industries and from around the world that can help you shape the future for your organisation. To have further conversations please reach out to our team.

Authors:

John O’Connor
Partner, Supply Chain & Procurement
jococonnor@deloitte.com.au
+61 438 457 178

Jessica Evans
Senior Consultant, Supply Chain & Procurement
jesevans@deloitte.com.au
+61 3 9671 7233