Procurement in 2020: Scenarios for Finance and Procurement Linkage

Here at Spend Matters, we’re big fans of qualitative scenario planning (see our recent series on how to carry out a scenario planning process here, here, and here). In the forward looking paper, Charting the course: Why procurement must transform itself by 2020, Deloitte’s strategy and operations practice offers one glimpse on what true finance and procurement linkage might look like:

Imagine an environment where sourcing and finance are inseparable. In 2015, a leading global manufacturing company implements a new type of complex sourcing decision model that enables finance and procurement with operational cost and risk metrics for procurement. As part of this effort, the organization weighs the cost/ benefit trade-off of paying more for an alternative specification up-front that can deliver out-year savings and benefits. By 2016, these analyses are forming the basis of M&A strategy for this company as well, even taking shape during the due diligence phases of potential transactions.

At this organization, finance leadership and procurement linkage is not only about driving better sourcing savings to the bottom line. It’s about rethinking and reprioritizing opportunities for savings and greater value- based outcomes for the broader organization. In 2016, the company sets up two centralized finance and procurement hubs in Singapore and Luxemburg to create new “buying companies” to provide tax advantages for the entire organization. These continue to operate as the company evaluates opening a similar center in Africa as business on that continent grows.

This manufacturer simultaneously investigates a flexible payment program that combines elements of third-party and on-balance sheet financing to not only enable tens of millions of dollars in savings (with the flexibility to use its own capital or a third party’s) but potentially even recognize the savings as income.

A widely adopted source-to-pay (S2P) tool enables this ability — a system that eventually grows to incorporate a new type of touch-less procurement approach that takes P2P and vendor management system activities to the next level. It uses built-in intelligence for approvals and workflow, thereby freeing procurement resources to shift their effort to strategic issues versus tactical reviews and routing.

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.

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