By 2020, it is likely that top performing procurement organizations will increasingly align their activities directly to the top-line producing component of the business: sales. In the analysis Charting the course: Why procurement must transform itself by 2020, Deloitte argues that this is beginning to happen already. Consider the following examples today:
- “Procurement [is] brought in as part of the customer service and support equation, often from a cost and margin-driven perspective.”
- “Centers of excellence support regional (global) efforts on a research, category, commodity, regulatory, process and tools basis.”
- “Local content and offset agreements in global markets are both formally stated on the national level (e.g., aerospace and defense in India, requiring local suppliers) and more open to interpretation in other markets (e.g., local supply agreements in China impacting different provinces and political relationships).”
But by 2020, procurement will become an integral “part of core customer engagement with a focus on both top and bottom line value.” This will include “global cultural awareness [creating] top-line competitiveness (e.g., faster innovation in regulated markets/sectors) as well as insights into opportunities ahead of the competition (e.g., raw materials arbitrage, hedged regional off-take agreements, etc.)”
In addition, the “emphasis on contracting in regional markets [will expand] beyond tier-one suppliers as well as linking buy- and sell-side agreements to identify risk and opportunity.” The benefits of such activities will accrue on a global basis as these “actions can help guarantee continuity of supply in emerging regions where high logistical costs and delays are commonplace (e.g., Africa).”
At Spend Matters, we have spent quite a deal of time recently researching procurement’s role in provisioning an increasingly dizzying array of services to the business – from software to market intelligence to outsourcing to supplier innovation. There’s no doubt that getting many of these services closer to end customers (where appropriate) in a continuous two-way exchange of information and collaboration will be key to driving additional procurement value in 2020.
This post is based in part on content from Charting the course: Why procurement must transform itself by 2020. If you’re interested in learning more about how analysts see the future of procurement and supply chain, register for our upcoming conference, Commodity/PROcurement EDGE.