In the next couple of weeks, I'll be delivering keynote presentations at four cities in the Zycus Experience Tour: New York (today), Chicago (Friday, May 7th), Houston and Los Angeles (both later in the month). For the entire tour schedule, click here. The topic of my presentation is Spend Management: 2010-2015 -- Preparing for the Road Ahead. In it, I've come up with ten different scenarios that companies should be preparing for when it comes to economic, political, trade, technology, social, governmental and other global factors I believe will play an increasingly large role in procurement going forward. I also outline how to look for sign posts along the way, to better understand how quickly scenarios are unfolding and how to map them towards overall procurement strategy.
Scenario planning and procurement is a topic I've been fascinated by for some time. Ever since my first job out of graduate school as a wet-behind-the-ears consultant at a management consultancy, I've delved into scenario planning as a tool to strategize more effectively in uncertain times. A few months back, I wrote an article in Efficient Purchasing that outlines some of my views on the topic. I begin by suggesting that "All too often, when it comes to strategic planning within procurement, we rely far too heavily on traditional planning techniques that take a completely numbers-driven finance and accounting (F&A) approach to forecasting and planning. Now, don't get me wrong -- there's a place for number crunching and our beloved Microsoft Excel as we plan for the future. But in today's rapidly changing and uncertain economy, we must supplement old approaches with new if we're to succeed in analyzing and preparing for the future."
The challenge we face when it comes to forecasting where commodity prices, government regulations, supply risk concerns and customer demands may take us is the degree of uncertainty in the current market environment. "After all," I suggest, "no traditional planning technique would assume 50 percent volatility in the price of key commodity inputs over a 12-month period. And certainly no F&A-based financial model would think to include a similar 50 percent demand variability for our own new customer orders, even as an outlier forecast, based on the behavior of the market in the past fifty years. But these are precisely the types of examples that did occur in many industries in the past 18-months."
If you're curious about the ten procurement scenarios that I believe may be in store between 2010 and 2015, do join me at the Zycus Experience tour. And if you can't make it to any of the cities, don't despair. I'll plan to cover these scenarios in more detail on Spend Matters throughout the summer months.
- Jason Busch