Procurement In 2020 (As Predicted In 2011)

Here is another one of our summer “blasts from the past”, this one from May 2011, and we will have part 2 of this tomorrow. We think it's interesting to see how this “vision of procurement in 2020” report, written in 2011, looks as we’re now not that far away – just another 28 months!

The Ariba “Vision 2020” report looks at the future of procurement 10 years on.  Today we’ll look at what it has to say about procurement strategies and related issues. According to the contributors to the report, two key strategy strands  in terms of where procurement will be in 2020 are collaboration and innovation. In terms of collaboration,

“Technology will improve the flow of communications between buyers and sellers. I can see more information moving securely, in real time and in both directions between buyers and sellers. This has the potential to raise the level of trust between buyers and sellers, but it will depend on how it is crafted to guard against information leakage or loss.” (Barbara Whittaker, ex GM).

“My thought, (says Javier Urioste), is that by 2020, or perhaps a bit beyond, the world will evolve to be less about buyers and sellers and more about integrated supply networks serving marketplaces".

AstraZeneca’s Donald Ferguson says, “We are very interested in the kind of networking technology that enables us to push our ideas out to the global supply base and see who responds....  Rather than buyers saying, 'Here are the problems we are trying to solve,' it will be suppliers saying, 'Here are solutions we have.'

That last thought sounds very much like advanced sourcing / optimisation processes and technology (see our free White Paper here for more insight into that topic).  So we're in full agreement with that particular prediction - although interestingly, it's not an area of strength for Ariba themselves.

Then there’s an strong assumption that procurement will play a more pro-active role in capturing innovation from supply markets, or indeed take on a more strategic and innovative role within their own organisations.

Even our concept of innovation will expand beyond just the creation of new products with suppliers," adds Ferguson. "In pharmaceuticals, for example, which is very high margin, adding just 1% on the sales line can be worth a fortune, far exceeding anything we can do on the cost line. So, we will be looking for suppliers who can help us innovate the ways in which we go to market and sell our products, especially in emerging markets where traditional sales models don't scale.

Sodexo’s Ann Oka  ”suggests (procurement professionals) will step beyond the boundary of merely discovering and contracting with suppliers and into the realm of identifying merger or acquisition candidates for their companies”.

Are these key themes for future procurement strategies? Yes, I think so.  Procurement needs to get better at connecting the supply market with the organisation’s ultimate customer markets – in the way that retail buyers do as a matter of course. So that desire to look for innovation from suppliers, and collaborative supply relationships that can actually drive the top (sales) line will be increasingly important.

But the one note of caution I'd add is that every organisation, and indeed every spend category, must be considered specifically. I have no doubt that there will still be some pretty non-collaborative strategies around in 2020, where driving for the best value and often lowest prices for some commodities will still be a valid approach. I confidently predict it won't all be innovation and collaboration (wine and roses); there will still be some tough negotiation and value leverage (muck and bullets!)

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