Three areas where procurement will need to greatly expand its focus, charter, and capabilities by 2020 are trade/operating models, M&A, and regulatory compliance. In the Deloitte paper Charting the course: Why procurement must transform itself by 2020, the authors suggest that procurement will be at the nexus of broader trading and total cost efforts in a range of areas, evolving from having “variable connections with finance to mitigate commodity risk” and “often ad-hoc efforts” to realizing “commodity expertise and management as integral to the business as treasury, AP, etc.” In this environment, procurement will enable “currency and foreign exchange [to be] tied to broader risk and commodity management to manage exposure and trade risk/reward.”
M&A will undergo a similar transformation. Today, M&A is viewed as a “cost reduction synergy, a criteria for deal evaluation, and a focus of post-merger integration.” But by 2020, “procurement [will be seen as a reason to do M&A, not just to realize synergies.” Moreover, “acquired supply chains [will be] seen as a strategic asset (or liability),” and procurement will have “deep involvement in all aspects of transactions, from M&A due-diligence to divestitures and carve-outs.”
Regulatory approaches will change as well. Contrast the world today, where “compliance efforts are reactive, managed in silos and without leverage (teams, systems)” with 2020, when “core, global information management and analytics systems centrally support global compliance for such areas as anti-money laundering and the Foreign Corrupt Practices Act, Sunshine Act, Anti-Bribery Act and Conflict Minerals-type areas. “
A theme which goes understated in all three of these areas is the importance of underlying systems and tools to provide data and intelligence to the business, whether it’s total cost data and visibility around commodity and currency exposure on buy/sell arrangements or managing supplier information in a common manner. Clearly, technology has a big role to play here, a topic which we’ll come back to as we continue to share some of the highlights that stand out from Charting the course: Why procurement must transform itself by 2020.