Wednesday 27 May 2015

Transform Global Sourcing

Authored by Usama Shahid

Over the next decade, procurement officers will need to take on more expansive roles within their organization. They will need to become guardians of the corporate brand, advocates for sustainable business practices and innovators who help develop new products and services. Companies that embrace this broader perspective for their procurement teams will find themselves in a better position to tackle the 10 change dimensions—from managing and anticipating risks to embracing the need for greater transparency across the supply chain—that will transform procurement by 2025.

Many of these challenges, described in detail below, have the potential to disrupt the dynamics of current supply chains. Procurement officers who proactively address these issues will be taking a major step toward helping their organization prepare for the future.

Risk: By 2025, procurement risk management will undergo a major shift, moving away from emphasizing compliance to adopting a more holistic strategy that includes total risk exposure, risk mitigation investments and risk transfer pricing. To enable this transition, procurement leaders need to develop category managers who can develop next generation approaches to supplier risk management and factor new metrics into major sourcing and supplier management decisions.

Globalization: As emerging markets assume a greater role in the global economy, the traditional demand and supply poles that have shaped global commerce over the last 50 years will change dramatically. By 2025, global companies will have procurement managers based in China to source materials and services not only for their operations in that country, but for the entire organization. In the Americas, Brazil will become a major source of both demand and supply for global companies. To handle this task capably, procurement teams need to start developing expertise in local emerging market sourcing in China, Brazil, Russia and India, as well as other developing economies.

Finance: In the future, procurement managers will need to broaden their skill sets to help their organizations adapt to the complex challenges of managing the global supply base. Many will need to develop financial acumen that rivals those of their finance counterparts. Leading companies should start taking steps to tighten the relationship between finance and procurement and to enhance the financial skills of their procurement teams.

Innovation: By 2025, the leading procurement organizations will serve as a primary channel for finding new ways to create value from the global supply base, whether by streamlining new product development or outsourcing non-core functions. As a way to move this evolution forward, procurement organizations need to gain a better understanding of the role outside entities play in driving innovation in their industries. To support this, many procurement teams will need to expand their expertise in engineering, design and new product development.  

Transparency: Social media and the increasing acceptance of information transparency will amplify the degree of scrutiny on procurement organizations. This disruptive change, coupled with the adoption of real-time social technologies, will make procurement one of the most visible corporate functions to the outside world. To that end, procurement leaders need to encourage their teams to adopt a social mindset and operating model that will sustain the corporate brand in this more transparent era. By 2025, the best procurement officers will be as comfortable speaking to consumers, regulators and the press as they are with suppliers.