Spend Matters Procurement Predictions: Five Scenarios For the Next Decade (Part 5-A)

See previous posts in this series here:
Part 1
Part 2
Part 3
Part 4-A
Part 4-B

The fourth scenario in our procurement predictions for the next decade focuses entirely on the central nervous system of procurement and the ability of organizations not only to sense what is going on around them ahead of others -- and the market -- but to also respond accordingly. Specifically, we have titled this scenario: Global Supply Chain Intelligence Dictates Winners and Losers. Supporting the assertion that supply chain intelligence will triumph über alles, our belief is that 2012 (and beyond) will mark a continuation of the volatility we've seen in the broader economic, commodity, geographic and political landscapes. For example, if we add up just some of the factors comprising supply chain risk that have increased dramatically in recent years (e.g., financial, labor, product/material compliance, CSR practices and natural disaster/weather) it becomes abundantly clear how important successfully sensing and responding to distributed intelligence across the globe will become for procurement organizations.

But supply chain risk represents only a select grouping of elements around future market volatility procurement and operations teams' ability to drive supply chain intelligence gathering efforts. Consider the need for better commodity insight today (let alone tomorrow). It's our belief that leading organizations in the manufacturing, food, CPG and utility industries (among others) are already well ahead of their peers in driving intelligence and forecasting efforts to better manage commodity volatility -- not only through developing a better understanding of underlying market trends but also through the analysis of specific drivers that most closely correlate to price commodity forecasts and trends (e.g., base material inputs, new housing starts, China GDP, consumer spending, etc.)

These more advanced organizations are directly tying commodity intelligence and forecasting efforts to better managing their P&Ls, which enables longer-term forward-price visibility, reducing risk and ensuring ongoing continuity of supply. Moreover, given the changing political landscape and the continued uncertainty around energy costs, global trade, stimulus programs, developing country infrastructure build out, the EU company and conflict minerals, let alone the related issues that will eventually take center stage, cost and commodity volatility is likely to remain a huge issue for the next decade. Shameless plug alert: if you're focused on managing commodity volatility on either a company or category basis, join us for a conference we've designed specifically to drive visibility around the topic on March 19-20 in Chicago: Commodity Edge.

Global supply chain intelligence will also play a critical role in general forecasting, budgeting and planning efforts that are becoming more and more important for procurement, operations and sales groups to get right. Tackling the successful forecasting and integrated management of both the supply and demand sides of the global buying and selling equation -- not to mention a continued focus on becoming more demand-driven in many industries -- will require a new level of visibility and coordination of efforts between procurement and supply chain groups. If we've learned anything from S&OP efforts to date as we extend this paradigm to other forecasting and planning efforts, it becomes abundantly clear that it will be absolutely essential for companies to focus as much on speed and quality of intelligence gathering as the actual analysis given how much time is often spent on simply collecting data to crunch today.

Perhaps the most important focus of all of these efforts will be the ability to enable enough lead-time to respond to issues. Metaphorically speaking, knowing the asteroid is days away from hitting our planet would provide enough warning for some last-minute provisional "goodbyes" and the stocking up of canned goods and bottled water, but it would not provide the necessary lead time to send a missile up to intercept it.

In the second part of this post, we'll consider a few specific examples around how global supply chain intelligence will dictate winners and losers as well as how and why such a focus on the topic will change the technology and talent equation for procurement, operations and finance teams.

- Jason Busch

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