Procurement is changing and evolving quickly. Propelled by technology, environmental shifts, and the recent global events that shook supply chains worldwide, procurement professionals are continuously navigating the currents of change. Let’s dive in and learn more about what’s in and out in procurement, and why your supplier data should be top of mind.
The evolution of procurement
Procurement is a linchpin between suppliers and the rest of the organization, but its role is morphing. Once considered a predominantly back-end support function, procurement is now squarely in the spotlight, steering the ship toward sustainability, resilience, and strategic impact. This evolution is driven by several factors:
The push for sustainability: The days when procurement’s sole focus was on cost-cutting are gone. Sustainability reigns supreme in the age of corporate responsibility, with organizations demanding environmentally friendly practices from their suppliers. Green procurement, which emphasizes the environmental impact of purchasing decisions, is not simply a trend—it’s a fundamental shift redefining the concept of value in the supply chain.
The tech takeover: In the past decade, technology has woven itself into the very fabric of procurement practices. From AI-driven supplier evaluations to blockchain for transparent transactions, tech innovations have unlocked unprecedented efficiency and insight. The digital transformation of procurement promises streamlined operations, better insights into suppliers, real-time data analytics, and reduced risk through enhanced compliance tools.
Resilience in the supply chain: The once-in-a-generation pandemic threw a harsh spotlight on supply chain vulnerabilities. Procurement’s new mandate is clear: build resilience. This means more than just stockpiling–it’s about harnessing data to forecast demand, cultivating relationships with a diverse array of suppliers, and implementing agile processes to adapt to rapid change.
What’s ‘out’ in modern procurement
Just as evolution ushers in new paradigms, it leaves behind certain conventional practices. These antiquated approaches have been outpaced by efficiency, ethical considerations, or both.
Siloed operations: Procurement used to operate in a silo, with little interaction with other business functions until the bidding process. Today, such isolation leads to inefficiencies and missed opportunities for synergy. In today’s world, procurement should connect with all parts of the business, encouraging teamwork and aligning strategies with business goals.
Inefficient manual efforts: Manual procurement processes are slow, error-prone, and ill-suited to keep pace with today’s business speed. Manual purchase orders, vendor negotiations, and inventory management are giving way to automated systems that offer greater accuracy, speed, and flexibility. This transition liberates procurement professionals to focus on strategic tasks while mundane activities are handled by technology.
A “cost-only” mindset: A historic focus on minimizing costs, while important, is no longer the sole metric of procurement success. The modern approach requires a balancing act, considering not only the bottom line but also supplier quality, innovation, and environmental impact. Organizations are realizing the long-term value of investing in robust supplier relationships and ethical sourcing.
What’s ‘in’ for modern procurement
With the shedding of outdated practices comes the adoption of new and innovative approaches that define the current and future state of procurement. These practices and philosophies are not ‘yearly trends’; they represent foundational shifts in how the procurement industry operates.
Strategic sourcing and category management: Modern procurement is becoming more strategic, leveraging data and analytics to make informed decisions. By grouping similar purchases into categories, procurement professionals can negotiate better deals, manage supplier relationships more effectively, and ensure that value maximization is consistent across the organization.
Agility and risk management: In a world where change is the only constant, an agile approach to procurement is indispensable. Agility allows organizations to move quickly, optimizing procurement strategies in response to market dynamics and unforeseen events. Complementing this agility is robust risk management, which involves continuous monitoring, preparing for and mitigating risks across the supply chain.
Digital procurement platforms: The rise of digital platforms has revolutionized how procurement is conducted. From e-sourcing to e-procurement, digital platforms offer visibility, control, and efficiency previously unimaginable. These platforms also support remote work, eliminating the constraints of location and time, and facilitating a global marketplace that transcends physical borders.
Use of GenAI: GenAI has started to make strides in procurement by automating tasks like creating contracts, purchase orders, and RFPs. It boosts efficiency, accuracy, and compliance monitoring. By automating data entry, analysis, and contract review, GenAI cuts time and resources in government procurement, streamlining operations. However, given how new the technology is, it’s imperative that organizations consider the risks.1
Automated enrichment of supplier data: Going hand in hand with digital procurement platforms is the automated enrichment of supplier data through a supplier data foundation. Leveraging artificial intelligence and machine learning techniques to dynamically update and enrich supplier profiles with current, comprehensive information, procurement professionals can make more informed decisions based on refreshed attributes and updated coverage. This not only enhances the accuracy of supplier evaluations, but also fuels your existing procurement systems and tools.
According to Gartner, “as organizations face talent shortages, budget constraints and cognitive overload, they are seeking ways to optimize and balance the procurement workload.” This can be achieved with supplier data that is automatically enriched as it reduces the time and effort required for manual data collection and analysis.
The path forward
Procurement isn’t just a task; it’s a key player that influences the whole organization’s path. By adapting to new trends and ditching the old ways, procurement professionals can prepare their strategies for the future, streamline operations, and keep their organizations competitive and responsible in a world that’s always changing. The future of procurement isn’t just about what you purchase, but how and why you do it. It’s about crafting sustainable, strong, and flexible supply chains that add value well beyond the numbers.
Sources
1Hype Cycle for Procurement and Sourcing Solutions, 2023. Gartner, July 2023.
Fahad Muhammad is the VP of Marketing at TealBook.
