Ideas for Procurement in 2020Procurement:The Next 20 years
Contents Procurement devolves 4-8 Spend management shrinks. Profits replace costs savings. Budget fuss fizzles out. So long sourcing geeks. SBUs absorb procurement. The new supply management emerges 10-13 Outsourcing explodes. Service providers excel. Strategy scope widens. Let’s get financial. Skill sets change 14-17 Supply pros get savvy. A new definition for ‘expert’. Talent competition heats up. Instantaneous intelligence arrives 18-24 Prices go transparent. Risk info catches up. Data predicts the future. Intelligence moves into context. Collaboration reigns 25-29 Innovation comes from without. Enter the extended enterprise. Bye products, hello solutions. Early is the new black. Buyer-seller lines blur. It takes a network. Suppliers gain power. Firms share risks and rewards. Contracts motivate. Risk management capacity and demands soar 30-38 Everything is automated. Work goes mobile. Communities collaborate. Offensive line takes the field. It’s complicated. Firms wake up to supply risk. Join the conversation!
Procurement DevolvesThe procurement function — as you know it — will no longer exist in 2020.
Spend management shrinks Companies will still care about managing their spending in 2020; they just won’t have large, discrete, enterprise-level organizations dedicated to doing it. “The spend management function will outsource (or insource), assure supply, think very carefully and thoroughly be very small by 2020,” says Larry innovate, and manage costs.” about how to embed the disciplines of Welch, former Vice President of Indirect procurement into business processes. Procurement with Hewlett-Packard. While the people staffing these new If you are going to eliminate the “ You will see a strong central core supplier-facing positions may have function of procurement, you need that does horizontal work — ensuring web-like linkages to core enterprise to have some very clear resolutions that all the right processes and tools, spend management organizations, their — perhaps coming from the Board of skills, relationships, templates, and interests, activities, and allegiances will Directors — to ensure that there is a performance metrics are in place across be heavily oriented to driving success at clearly articulated procurement policy business lines and functions.” the business line level. and strategy and that the disciplines of procurement become a routine part of But, while enterprise-level spend “The business line leader will no the way the business operates.” management functions shrink in the longer have the experience of someone coming decade, Welch and many other knocking on their door, saying ‘It’s project participants see more supplier- time to develop a spend or supplier facing positions being created at high management strategy.’ It will be more levels in the strategic lines of business organic than that,” Welch says. “They that comprise a corporate enterprise. will have people embedded in their organizations, working as dedicated “Professionals with supplier-facing members of their teams, who will be responsibilities will be in the business part of their businesses in every aspect.” lines, will know the business lines, and will participate in business lines’ “Functional procurement is something strategic planning processes,” Welch that should disappear by 2020,” agrees predicts. “They will be responsible for Javier Urioste, former CPO with several developing — with suppliers in mind — non-IT organizations. all the strategies that help the business organize, design and execute processes, “However, enterprises will need to
Profits replace cost savings Today’s focus on cost savings will give way to a broader, more balanced emphasis on profitability, leaving open the question of whether supply management concentrates on cost savings or revenue growth to get there. There are two general points of “Somebody will always be accountable Group (SIG), most procurement consensus around performance for controlling costs,” agrees Larry organizations will be working on top- management for supply and spend Welch. “But, I am hopeful we will see a line growth and product innovation as management in 2020: shift to supply management being more well as bottom-line impact and total accountable for costs as they relate to cost of ownership. “All of the forward- • Money — be it savings, revenue, or sales or revenue. It will become more of thinking CPOs I work with are talking profitability — will always be a piece a standard to see supply management about the top and bottom lines and that of the performance picture, and being held accountable for delivering is very different from what we have seen value and not just lower costs.” in the past.” • Metrics will direct supply and spend management professionals to focus “Supply management goals in the Tim Cummins, President and CEO their efforts on both the top and future,” adds Roy Anderson, Vice of the International Association for bottom lines. President of Procurement Services for Contract & Commercial Management Metasys Technologies, “are going to (IACCM), suggests that it will be Henrik Larsen, Vice President of look a lot more like the goals you see up to procurement to drive this Procurement for Maersk, sees it in marketing — where they are at risk desired change in performance this way: “There will still be some for growing the market — or the goals management approaches. “We must overall metric in place in 2020, but you see in operations — where they are take responsibility for changing the it will be less focused on savings. I geared toward profitability. I expect to circumstances under which we operate see metrics around things like spend see procurement goals starting to follow and there are steps procurement coverage — as an indicator the those types of solutions, where it is can take to demonstrate why the company is staying focused on the right not just about cost savings but, rather, narrowness of today’s measurements things — but also around things like about how supply management helps inhibit opportunities to create business innovation, collaboration, internal and marketing drive customer acceptance or value through trusting and collaborative external stakeholder satisfaction, and helps operations drive profitability.” relationships with suppliers. There is a competitive advantage, which includes growing body of evidence to document getting to new markets and bringing out By 2020, agrees Dawn Evans, President this problem and an urgency to finding new products. and CEO of the Sourcing Interests ways to solve it.”
Budget fuss fizzles out There is plenty of effort today around trying to drive sourcing cost savings into budgets. But that is also a function of having discrete enterprise spend management organizations and heavy emphasis on cost savings, which are both supposed to go. “We struggle with this today because and expected overhead savings. finance has been unwilling to shift from its traditional bucket-based method of “Because we are already so integrated budgeting,” observes Roy Anderson. in the budget process, it is hard to say we will be integrated more in 10 years, But, in 10 year’s time, project but I believe this will become the norm participants expect supply management for most companies by 2020.” to have become so embedded, so early in business strategic planning that no Adds Debbie Manos-McHenry, Chief one will ever think to ask a question Sourcing Officer for Huntington like: Does procurement have a seat in National Bank: “When you get to a the budgeting process? point where you are well respected within the business segment, and you As Ann Oka, Chief Procurement are conducting a series of projects that Officer for Sodexo, sees it, “Supply are expected to have significant impacts management will be heavily embedded for the business, not just in terms of in strategic planning for the business as expense take out, but on the revenue well as budget and financial planning.” line, then you will be working with the business through the course of each year Already, Oka says her organization is and helping them to make their plans.” deeply involved in flowing information to strategic business units for use in their planning cycles. “We have a process for mapping our activities and expected benefits and then articulating them to our strategic business units so they can incorporate them into their planning. We include both cost of goods
So long, sourcing geeks While valued highly in today’s marketplace, people who excel at sourcing processes or at being power users of procurement and sourcing automation technologies will find themselves working for third-party services firms — or not at all — in 2020. “We either have to train people or • Ordering based on minimum- waiting for the business segments to exchange them,” says Dr. Heinz maximum levels, and come looking for help with particular Schaeffer, Chief Procurement Officer, problems or ideas that have already Northern and Central Eastern Europe, • Invoice, reconciliation and payment. been formulated.” for AXA. “We will need people who are customer- and business-centric, not “People are not going to need to know Tim Cummins, President and Chief people who like procurement processes how to write purchase orders,” adds Executive Officer of IACCM, agrees: the most. Nor will procurement in 2020 John Campi, former CPO with DuPont, “It is clear that many of today’s require people who are experts at using Chrysler and The Home Depot. basic procurement activities can be procurement and sourcing software. “ They will need to be able to support automated. What we really need Rather, we will require people who are supplier relationships that provide their are skills associated with driving experts at using technology to move companies with continuous strategic economic contribution for the businesses in certain strategic directions. advantage in their niche markets.” business. That involves financial We need systems supporting our assessment, relationship skills, the businesses versus asking our businesses “A person who understands contract ability to coordinate teams and ensure to support our systems.” provisions or how to execute a seven- collaboration internally and externally. step process is not going to be very The harsh truth is that these skills are The implication is that procurement important in 2020,” agrees Debbie not particularly associated with the tools will become so intuitive by 2020 Manos-McHenry of Huntington function today. A very big challenge is that even untrained professionals National Bank. “Nor will we need to turn that perception around can be guided through the processes people who are great number crunchers for 2020.” of executing successful sourcing and and analysts. We will be automated procurement activities. In many cases, to an extent that the information we systems will execute, without any need is always at our fingertips. What human intervention, such tasks as: we will need in 2020 is people who can take information and proactively • Sourcing based on market dynamics develop strategies that advance our and predefined negotiation strategies, business segments’ priorities instead of
SBUs absorb procurement The vision for 2020 sees a loose network — vs. tight function — of supplier-facing professionals embedded into strategic business lines, communities, and processes wherever needed, constantly moving and reinventing their roles as needs shift. One outcome of the emerging 2020. It will be about thinking outside more in a ‘design-to-value’ concept, 2020 vision is that the functional of the box to do things much differently participating as one part of a much ‘procurement’ label fades from the as the business itself transforms. Tools, bigger thing the business is trying to corporate lexicon over the coming strategies, and information sources that achieve, which is innovation. Critical decade. “My personal point of view,” make sourcing organizations incredibly spend categories will gravitate much says AXA’s Dr. Heinz Schaeffer, “is that nimble are going to be important in closer to and become much more procurement will no longer be called 2020,” she adds. integrated into the business lines. procurement in 2020.” They will be driven much less by “As companies go forward in 2020, as cost management and much more by ‘Embedded’ in this context can mean consolidation occurs, there will be a innovation and contribution in terms of either physically or virtually with the need to engage end customers more and selling the products we are trying central idea being that the new spend more and that will require a relook at to create.” management professionals get involved the centralized or center-led structure only where they are needed and move [for procurement],” adds Sodexo’s CPO on once the right supplier relationships, Ann Oka. processes, information flows, KPIs and performance metrics, technology tools, “We will leverage and centralize where and so forth are in place and running we create value — that’s the sourcing both smoothly and predictably. side — and we will constantly reinvent our customer response group to get “Great companies transform themselves as close to and as intimate with our continuously to evolve with their internal and external customers markets,” observes Huntington as possible.” National Bank’s Debbie Manos- McHenry. “Sourcing organizations Donald Ferguson, Head of Procurement absolutely have to do the same. It won’t Operational Excellence at AstraZeneca, be about sticking to that seven- or shares a similar vision for 2020: “I see eight-step strategic sourcing process in procurement professionals working
The New SupplyManagement EmergesAfter a big wave of procurement outsourcing, a different animal will be left standing.
Outsourcing explodes Many current procurement and sourcing activities — the ones that do not get redistributed to internal end users of goods and services — will be outsourced by the year 2020. John Campi, former CPO with DuPont, company and be sourced by people in which their partnerships can drive Chrysler and The Home Depot, puts who specialize in sourcing them. The competitive performance improvements it quite simply: “If it’s not critical, it skills that go outside will be around and business success. will go to third parties.” Traditional creation of standards, specifications, procurement activities that the performance management, and cost As Dawn Evans, President and CEO of executives envision outsourcing by reduction. The skills we retain will be the Sourcing Interests Group (SIG), sees 2020 include: more focused around strategic influence it, “If we can outsource transactional and business acumen.” procurement and bring in more strategic • Virtually all transactions processing thinkers — people who are not afraid to including POs, invoices, and payments “We are spending a great deal of time drive innovation — then we can build today looking at what is core and not a mindset that is dramatically different • All noncritical/nonstrategic spend core for us,” agrees the procurement than the one we have now.” category management, including executive for a major U.S. insurance supplier catalog, contract management company. “We have seen this happening Nonetheless, Evans thinks, “we still and sourcing event execution in the last five years, but I think the need a huge amount of education trend is going to get much bigger in the for corporate leaders to understand • Most data gathering, structuring, coming five years.” the best uses of supply management storing, analysis and reporting and why a majority of the tactical activities, be they for spend analysis, The first stage, this procurement procurement and sourcing work should external market intelligence, risk leader says, will be companies figuring be outsourced.” intelligence, supplier performance out what they can move outside and management, and so forth finding partners on whom they can rely completely for service support. Donald Ferguson, Head of Procurement But, as procurement outsourcing Operational Excellence at AstraZeneca, matures, he expects to see a second suggests that, “By 2020, procurement stage of development where companies of the more traditional commodity, begin to innovate within outsourcing leverage-type categories will exit the relationships, exploring creative ways
Service providers excel With fast-growing demand for procurement outsourcing, both the quantity and quality of third-party procurement services will increase dramatically by 2020. Their performance in many spend categories will surpass what can be done in house. “Procurement is core in that we need extract more and more value from industry segments that are closely to have the right strategies,” says the outsourcing relationships as the related to ours, for example, lodging, procurement executive for a major decade progresses.” leisure, camps, and some multi-unit U.S. insurance company. “But it is not restaurant chains.” core to the extent that we can leverage Another factor in play is that high- service providers who have developed performance enterprise procurement exponentially better capabilities than we organizations — those that began have in particular commodities or spend their strategic transformations 10 or categories because they source them on 15 years ago and have attained high Today, we are a more regular and broader basis than levels of spend management maturity we will ever do internally. — will continue to spin out discrete seeing service business units that offer procurement “We have seen this developing for a and sourcing services often geared to providers getting number of years but, if you look back, specialized segments of industry. you see the service providers really fighting with their offerings, building This is already happening in sectors to the point where their business models, tying in the like healthcare, hospitality, and food technology, and so forth. services. For example, Ann Oka, Chief they do things Procurement Officer with Sodexo, says: “Today, we are seeing service providers “Procurement services account for half better than we can getting to the point where they do [of Sodexo’s U.S.] volume today. things better than we can do them. Looking out 10 years, I see us moving “We do not specialize in procuring do them. first to leveraging that expertise and highly engineered items, so we would excellence and then to developing not offer our services to manufacturers relationships with the service providers for their direct materials. We do, that put them completely into synch however, offer procurement services to with our business models. We will firms within our industry or in
Strategy scope widens Much has been done in the past decade to transform procurement from tactical to strategic. But the idea of ‘strategic’ remains hemmed inside the function, the process, or spend category. By 2020, the meaning of strategic gets much bigger. In essence, all strategy will tie directly strategic, budget, and financial planning Procurement Officer Jean-Jacques to an enterprise’s end customers and it for the business,” adds Sodexo’s Beaussart. “Procurement will be will be more cognizant of the diversity Ann Oka. “But, as companies go involved in strategic planning for the of desires and requirements within the forward into 2020 — becoming more enterprise and also in identifying, customer base. In the beginning, the complex and diverse through mergers implementing, and delivering value strategy scope will expand to include and acquisitions — those planning through mergers and acquisitions.” an enterprise’s existing customers; over processes will require much greater time, it will shift to helping the business engagement with end customers, “Even our concept of innovation will acquire new customers and, perhaps, meaning we will need to relook at our expand beyond just the creation of entirely new lines of business. centralized structures.” What is more, new products with suppliers,” adds as procurement professionals engage Donald Ferguson, Head of Procurement “Right now,” remarks BYU professor with end customers, Oka suggests Operational Excellence, AstraZeneca. and former Varian, Inc., CPO Kevin they will step beyond the boundary “In pharmaceuticals, for example, Castle, “we treat all products the same of merely discovering and contracting which is very high margin, adding just within our buying functions and in with suppliers and into the realm 1% on the sales line can be worth a terms of supply chain design. In 2020, of identifying merger or acquisition fortune, far exceeding anything we supply management professionals will candidates for their companies. “As we can do on the cost line. So, we will be capture and quantify unique customer move forward along this path, we will looking for suppliers who can help us requirements, all the way from encounter more things that we do not innovate the ways in which we go to marketing, through R&D, operations, have the competency to do ourselves. In market and sell our products, especially and other parts of the enterprise. Rather those cases, we will either procure from in emerging markets where traditional than treating all customers and all outsourcing partners or will purchase sales models don’t scale. Instead of products the same, we will construct companies outright; either way, supply sales representatives going out to meet supply chains, procurement processes will play a role in those decisions.” doctors, we will use innovation and and functions that meet unique technology to enable influencers and customer and product requirements.” “I believe that procurement will add consumers to interact with and obtain much more value in 2020 than it information from us by the means and “We are already well integrated in does today,” agrees KeyBank Chief at the precise times they choose."
Let’s get financial While still focused on physical supply chains in 2020, procurement will also become more strongly linked to financial supply chains, optimizing cash flow and working capital, implementing dynamic discounting, supply chain financing, and so forth. “As we shift our focus to concentrate need financially astute people directing the model, which derives from live on the commercial consequences of these kinds of activities, so I see much intelligence about our cash flow supplier relationships,” says Dr. Heinz greater integration with finance as well.” and other current market conditions, Schaeffer, Chief Procurement Officer, says it makes sense to pay them sooner.’ Northern and Central Eastern Europe Barbara Whittaker, former Executive The model becomes real time and for AXA, “I believe the procurement Director, Global Purchasing with selective, so we can capture the best function will come to be called General Motors, agrees and believes value — by supplier — leading to something like ‘financial supply that technology will play a big role in greater total value.” chain management.’” shaping the transformation. “Right now, we cannot possibly look at each Dawn Evans, President & CEO of the “Today,” observes Henrik Larsen, Vice condition on its own, so we are forced Sourcing Interests Group (SIG), believes President of Procurement for Maersk, into saying things like ‘Every supplier new skill sets will be needed as well. “we are just pushing money over the needs to be at a payment term of 60 “ We need people that really understand border; either it belongs to us or it days’, or ‘Every invoice needs to be finance and accounting and the impact belongs to our suppliers, but we are handled this way’, or ‘All of our cash that decisons in procurement have on not really leveraging based on who in flow needs to be pushed one way.’ financial statements. Things like total the trading relationship has the greatest cost of ownership (TCO) are well ability to optimize the financing and “I believe there is opportunity for understood in procurement, but true cash management pieces. technology to come along that enables financial acumen is not really being us to measure and look at financial taught in the supply chain schools. “If a supplier is better positioned to supply chains in more discrete ways. leverage, we will take advantage of that. We could have multiple action streams “There needs to be more cross- And there will be value to the supplier based on market conditions, on what is pollination between these two and vice versa in taking that on. going on with particular suppliers, or functions,” Evans adds. “I would love on the different kinds of relationships to start seeing CFOs from Fortune “Trading partners need to get past we have with suppliers. I see technology 1000 companies becoming CPOs of their fears of digging into these areas,” enabling us to say things like, ‘Supplier Fortune 100 companies. That would be Larsen continues. “Of course, they also X will be on a 30-day term because dynamite in this respect.”
Skill Sets Change Think broad, deep, global industry expertise. Finely tunedbusiness acumen. Sales, marketing, communications, performance management, and networking.
Supply pros get savvy Professional. Polished. Intelligent. Respected. Influential. Persuasive. Visionary. Strategic. Sharp. Global. Collaborative. Executive. Savvy in business. All are terms used by project participants to describe the new supply professionals of 2020. This set of characteristics feeds four 2020 supply management organizations, procurement and supply management, essential sets of activities for spend I would choose innovation, integration, you will need to be a consultant, a management professionals in 2020: strategic planning, thought leadership, networker, a relationship builder.” and a real understanding of how to • Strategize for the business with end manage third parties.” customers in mind, “Part of supply management in 2020,” • Track and capture innovation adds Roy Anderson, VP Procurement The CPO is going already happening in and around the Services, Metasys Technologies, “is critical supply base; proactively drive innovation where it may be needed in going to be about demonstrating unequivocally that changing — to the to have to be a real the supply base, new solution, to the new supplier, to the new approach — is not only valuable, salesperson — one • Relate with and integrate critical but easy and fast and reduces risk to the suppliers and service providers wherever greatest extent that is possible. capable of selling appropriate and as thoroughly as possible in the business lines, “The CPO is going to have to be a real both internally and salesperson — one capable of selling • Sell positive change within the both internally and externally. It is enterprise and sell the highest- going to be a very strategic position, externally. performing, most innovative suppliers where people have clear understandings on why they should invest in driving of what the supply base can do in terms one company’s success to the of supporting the company.” exclusion of its competitors. Maersk’s Vice President of Procurement Says KeyBank Chief Procurement Henrik Larsen suggests that, by 2020, Officer Jean-Jacques Beaussart: “If I had “Deep category expertise will not to choose key elements of success for be enough. To succeed and work in
A new definition for ‘expert’ A significant characteristic of the new supply professional in 2020 is the extent and depth of his or her knowledge. They will know everything, from the science, to the economics, to the laws and politics of their supply markets on a global scale. John Campi, former CPO with DuPont, be to maintain a constant understanding necessarily believe that deep expertise Chrysler, and The Home Depot, says of the marketplace,” agrees Roy always needs to exist in house or with supply management professionals in Anderson, Vice President, Procurement direct employees. “Very often, it is going 2020 “will be capable of analyzing and Services for Metasys Technologies. to make more sense to source industry understanding the worldwide dynamics “ Supply management professionals or market expertise from outside.” of markets on a variety of fronts. For are going to spend much more time Sometimes that expertise will come example, it may be prudent in some understanding markets from longer- from professionals, but increasingly countries to pay people to witness your term perspectives rather than always it will also come from communities that containers being loaded onto ships looking through the lenses of sourcing share and aggregate information among while in other countries you do not events or transactions.” themselves. need to make that investment. Supply management professionals of the future What is more, Anderson believes that “I believe we are going to see more, will have that kind of deep, detailed understanding will extend down into better sources of third-party market insight into the markets that matter the lowest tiers of the supply chain. Our intelligence and we are going to have most to their enterprises.” job will be to understand how we can more resources to invest in routinely build a product or service as effectively acquiring that intelligence by 2020,” As Debbie Manos-McHenry, Chief as possible by taking knowledge that Anderson adds. Sourcing Officer for Huntington is inside the supply chain and bringing National Bank, sees it, “No company it forward to the designers within our can afford to be surprised by one own companies. supplier leapfrogging past another. Supply management professionals “With technology innovating at such will be like investment analysts, a rapid rate, supply management will possessing both deep and broad be expert enough to understand if a knowledge in and around their supply supplier is staying current, innovative, markets and industries.” and creative in its marketplace or if there are new players coming along to “Supply management’s job in 2020 will unseat them.” But Anderson does not
Talent competition heats up There is a strong feeling that the talent pipeline is too sparsely populated to meet the demand for strategic supplier-facing professionals that will develop by 2020. The outcome will be intense competition to attract the best and brightest on their terms. “We have always been extremely progress along a linear path. Companies the other to individual performance. successful in procurement when will need to find innovative ways to The team bonus comes from a scorecard we have the right talent in place,” allow the newer generations the latitude developed at the beginning of the year observes Jean-Jacques Beaussart, Chief to pursue all of their interests. saying, ‘This is what we are going to Procurement Officer, KeyBank. achieve for the corporation.’ It can be “Already, we (Sodexo) are offering linked to savings, how you manage “By 2020, it will be the CPO’s job to be flexible work arrangements, business relationships, adoption of a magnet for talent. We will accomplish telecommuting, job sharing and other automation technology, whatever it this by promoting global talent, employee value initiatives to keep this takes to manage success for your area.” employing state-of-the-art technologies, new generation engaged. We believe training people consistently and that creating a flexible culture will help broadly, and ensuring they can leave our us build employee engagement and organizations for bigger corporate roles. capacity for business problem solving. But that raises new challenges around “When you focus on talent, you become such topics as how to ensure people known as an organization that can be remain visible in a large corporation, trusted. It is a brand you can use to how to ensure they are developed to attract more business, more projects, be promotable.” and more talented people to work with you. There is no doubt in my mind this From a compensation point of view, will be a number one priority in 2020.” Beaussart believes: “We will need more nontraditional compensation models, “What motivates the emerging bigger bonuses with variable versus workforce will be very different from fixed compensation increasing. what has motivated people in the past,” suggests Sodexo Chief Procurement “I would see a bonus structure, where Officer Ann Oka. “What makes people the bonus has two parts. The first is feel successful will no longer be steady linked to performance of the team and
Instantaneous Intelligence Arrives Information gets better, faster, more networked, moreforward-looking...and available right when you need it.
Prices go transparent Market pricing for goods and services will become so transparent — due to e-sourcing, global trading networks, online communities, and procurements intrepid scrutiny into still-cloaked categories — that negotiation will be a lost art. “The value proposition,” says Debbie because it is such a small piece of the that procurement does to add value Manos-McHenry, Chief Sourcing whole effort and it is a piece that can be today. “Transparency will enable us to Officer with Huntington National Bank, driven by the marketplace. get our teams interacting with suppliers’ “will be much more about speed-to- teams and working to find bright market, exclusivity, innovation, and “The cloud,” Anderson predicts, “will new ways of delivering competitive gainsharing in supplier relationships force price transparency. Savings will be advantage to both sides.” than about harvesting 3-5% savings tied to things like discounts and rebates from contracts coming up for renewal.” for reaching certain volumes or paying early. Meanwhile, in services categories, Replacing the old price negotiation such as consulting, we will continue to focus will be much greater emphasis on: gain visibility into things like labor and overhead costs, so transparency will • Assembling the correct portfolios come to those categories and we will be of suppliers, able to shift the conversation to how suppliers create value for us. • Rapidly extracting innovation and other value from supplier bases, and “We need to get more focused on making sure we have the right supplier • Building exclusive commercial portfolios to bring innovation and value relationships with leading suppliers to our companies, which has a tenfold that share both risks and rewards. improvement over getting another dollar off their unit price.” “We spend so much time today trying to obtain fair prices for the Maersk Vice President of Procurement goods and services we purchase,” Henrik Larsen suggests that transparent, says Roy Anderson, Vice President of open-book trading relationships will be Procurement Services with Metasys the key that empowers procurement to Technologies. “That has to go away move beyond the “very tedious” things
Risk info catches up Alongside the general awakening around supply-related risk comes more agreement around how to measure risk, more standardized, more readily available third-party info and networked communities where people pool data for operational risk assessment. “We expect to be leveraging portals practices become more embedded into supplier-risk profiles.” In 10 years’ time, of industry and supplier data to detect sourcing and contracting routines. Anderson believes, suppliers will be control failures early,” says Debbie “ We will assess and rate supplier risk scored independently and collectively Manos-McHenry of Huntington early in our due diligence process, on a variety of factors: financial, ethical, National Bank. “We will access enabling segment leaders to make and operational performance, creating operational risk data captured through informed decisions. 360-degree performance ratings and industry portals and will see more providing greater transparency into shared assessments, standardized “Our RFP process will identify market dynamics, potential supply among buyers and sellers, with one- alternative sources of supply and disruptions, and supplier capabilities. to-many sharing by members through we will see more stringent contract communities. language, requiring strong security, disaster recovery, and third-party risk “Supply management will have management programs to be in place responsibility for third-party risk with suppliers.” management, centralized governance and control over third-party risk, Roy Anderson, Vice President of providing business segments with Procurement Services, Metasys the tools to assess and monitor risks Technologies, believes that acquisition, together with oversight and reporting aggregation, and management of risk- on the entire portfolio of suppliers related information will transition to identify undue concentrations of fully to third-parties and networked risk within a segment, process, or communities in the coming decade. supply industry.” “We see an awful lot of work being With such rigorous information assets done today on the risk side, but we and tools in place, Manos-McHenry are never going to be risk experts, so also expects to see risk management it is a waste of time to create our own
Data predicts the future Procurement has spent the last decade looking backward in time — at money spent last year, supplier performance in the past week, month or quarter. The coming decade will bring information and models that look forward. “We have all this data at our fingertips proactively to improve processes predictive information about how a in procurement,” says Kevin Castle, to point where we are confident that person is likely to perform on the job, professor at Brigham Young University a supplier’s performance will always (BYU) and former CPO with Varian, fall within our own customers’ • eBay gives one information about Inc., “but it is data that tells us specific requirements.” how a particular seller is likely to what already happened, how many behave, and defects we had in the last month, how While the ability to execute predictive many shipments were late, and how performance management is elusive • Amazon can suggest books one is much savings we achieved (or did today, Castle feels strongly that likely to enjoy by comparing searches not achieve). In the future, I believe procurement needs to push in this and purchases among people with procurement will focus more on direction if it wants to become more similar habits. forward-looking, predictive analysis. deeply ingrained in such functions as business strategy development and Depth and value of predictive • We will use models to project where new product design, development, and information being exchanged among supplier defects are most likely launch. “We need to be able to predict trading partners will grow in the to occur. how a product will perform from both coming decade as participation in quality and total cost perspectives. We networked business communities • We will have KPIs for suppliers that need to know rapidly and be able to expands exponentially. measure the discrete pieces of their react immediately when changes in the processes that are most likely to affect data predict a problem in the future.” our end customers. Supporting and reinforcing • We will prioritize supplier processes predictability will be business according to our customer communities trading information in requirements and measure them. real time in much the same way that communities such as, • We will establish upper and lower process control limits and work • LinkedIn enables one to obtain
Intelligence moves into context Full visibility — into spend, risk, performance — will be a given in 2020. Ready access to accurate, timely, structured internal and external business intelligence will create unprecedented abilities to synthesize info in support of decision making. “My hope,” says Dawn Evans, President that both the quality and depth of “Imagine being able to understand and Chief Executive Officer, Sourcing third-party information will continue the effects of particular decisions on Interests Group (SIG), “is to see to improve and costs to acquire it your company’s bottom line and your automation technology with leading will decline. What is more, they say, suppliers’ bottom lines instantaneously. market and economic intelligence built companies will turn increasingly People are starting to do this today, in, alerting procurement and sourcing to external market intelligence but I see it becoming much more professionals in real time — within the gleaned through digitally networked commonplace in the coming decade. We context of their business processes — to communities of suppliers, peers, and will create transparent views together the risks as well as the opportunities experts. Real-time intelligence will be with our supplier networks. We will they have to achieve benefits.” delivered via the web at the precise be able to see and understand what is times when buying and other decisions happening at any given time.” Debbie Manos-McHenry of Huntington are being made. And, while these National Bank believes that, “By networked communities will share roots 2020, it will be normal to reach with business and social networks such into your system and pull out all the as LinkedIn, Facebook and Twitter, information you need, be it internal they will deliver information within the spend data, external performance context of business processes and their benchmarks, market intelligence, supporting applications. emerging technologies, new products, best management practices and “As information quality improves processes, and so forth. Similar to the and real-time delivery of information way investment analysts use Thompson to business processes becomes more Reuters or Bloomberg to manage commonplace,” says Henrik Larsen, investment portfolios, procurement will Vice President of Procurement at have immediate access to everything it Maersk, “I expect negotiations and needs to manage supplier portfolios.” other interactions with suppliers to go in very different directions than they Other project contributors agree do today.
Collaboration Reigns Companies will dramatically increase their dependenceon suppliers for products, services, manpower, expertise, and new ideas.
Innovation comes from without 2020 will see a big emphasis on driving and taking innovation from the supply base. However, the supply role will be less ‘person-who-brings-innovation-in’ and more ‘person-who-assembles-innovation-communities-and-gets-out-of-the-way’. “We already have a goal that some 40% customer-supplier innovation always • You need to ensure all the appropriate of what we create should come from stays with the parties who drive it. intellectual property (IP) protections outside companies. That target is only are in place, going to increase as we move toward As Sodexo’s Chief Procurement Officer 2020,” says Donald Ferguson, Head of Ann Oka describes it, “Our supply • You need to be abreast of all the Procurement Operational Excellence chain comprises many consumer potential suppliers, what they have to for AstraZeneca. “Having an ability packaged goods (CPG) and finished offer, and how they might help to get to screen the entire global population product manufacturers. We rely heavily your people thinking out of the box of suppliers, universities and research on their insights into consumer trends on new product development, and institutions will help us to identify not and their innovation to develop new only the next generation of medicines products and offers for clients. But, • You must be able to weigh the risks but also the best ways for getting them in a world where we are taking down and rewards of working with a more to people all over the world.” barriers, we need to be very good at established supplier — who may mapping where things are proprietary. carry less risk — versus a startup, Roy Anderson, VP Procurement Services The challenge for supply managers is who might be riskier but offers you for Metasys Technologies, suggests also to get much better at segmentation and an opportunity to move past your that supply managers will need to go really formalizing these relationships competition in the market.” beyond merely looking for innovation to ensure they create and sustain in the supply base. “Our job,” he says, competitive advantage for our company, Sourcing Interests Group (SIG) “will be to drive innovation where it is our suppliers and for our diverse and President & CEO Dawn Evans suggests needed in the supply base.” unique clients.” that procurement must also be fearless about selling innovation and influencing An important role for supply “If you are working to find a new for change. “Suppliers have so many management pros will be to segment product or co-developing with a great ideas that we stop at the door and formalize innovation relationships supplier,” adds Huntington National because they require us to implement in ways that protect intellectual Bank’s Chief Sourcing Officer Debbie changes in our own organizations; we property, manage risk, and ensure the Manos-McHenry, “you have several don’t capitalize on their R&D and all competitive advantage flowing from jobs as a sourcing pro: they observe in other organizations.”
Enter the extended enterprise OEMs have been on a ‘buy-more, make-less’ path for many years; they intend to stay there while services companies will join the outsourcing fray. The expanding trend to extended enterprises promises exciting times for supply pros in 2020. “What we do today is very high they start to really know the businesses “I am a great advocate of outsourcing,” cost,” says Dr. Heinz Schaeffer CPO, and become part of strategic planning says Tim Cummins President & CEO Northern and Central Eastern Europe processes, the result will be different for IACCM, “but I believe the process for AXA. “So we are thinking about decisions about what gets done in house will need to become more thoughtful in how to outsource activities that are and what is done outside and how the coming decade. We need to see three not among our core competencies. you will bring suppliers inside to help levels of thought and assessment: Importance and complexity are the innovate the business.” two dimensions we will use to evaluate • One, can we reduce costs purely from outsourcing,” Schaeffer continues. “If a Adds KeyBank CPO Jean-Jacques a labor arbitrage point of view? process or activity cannot be described Beaussart: “We are focused on easily or happens infrequently, we will increasing variable versus fixed costs, • Two, can we add expertise probably keep it in house. But if an which means we must work more with incrementally? (this should not be activity is repetitive and we can give business partners. We need different confused with the low-cost discussion) clear instructions, we will give it to the business models and we need to external market.” And that outsourcing integrate business partners within our • Three, are we being honest about our is going to happen, Schaeffer suggests, organizations. Innovation will come own corporate culture and behaviors? whether or not the marketplace is from our business partners. We need to ready. The reinvented procurement, leverage innovation to make sure we “For example,” Cummins says, he says, will “play an active role in continually create efficiencies.” “autocratic organizations will never determining if it is possible to buy or be particularly good at managing or if we need to define something with AstraZeneca’s Head of Procurement deriving benefits from outsourcing potential suppliers so we can buy Operational Excellence Donald relationships, which need to be driven instead of make.” Ferguson agrees that, “There is and valued on the basis of outcomes. definitely a move to externalize the For some businesses, using all three “As supplier-facing personnel begin expense side of the equation, to create levels of assessment would lead, to sit with the business lines,” says flexibility in the cost base so we can rightly so, to the conclusion they have Larry Welch, former VP of Indirect turn our investments on and off much outsourced things they should not Procurement for Hewlett-Packard, “as more quickly.” have done.”
Bye products, hello solutions Suppliers in the coming decade will continue to take on bigger pieces of things they already do for customers. Think of it as ‘integrated supply on steroids’ where suppliers step out of their comfort zones to drive customer performance. “I expect to see a lot more total printing, copy-center versus individual directly to our internal stakeholders solution-type relationships with printing, and so forth. — to sell the benefits of their solutions suppliers, whether it’s an OEM, a directly — you see internal resistance third-party distribution partner, or a Where end-to-end supplier solutions breaking down,” Whittaker adds. marketing partner,” says Larry Welch, do not already exist, suppliers are formerly of Hewlett-Packard. expected to develop them. And where the solutions already exist, project So, for example, a supplier of printing participants expect customer enterprises I expect to see a lot hardware for the office will either to become much more receptive to morph into — or be replaced by — a sourcing them in the coming decade. supplier of total print management “There is a need to find creative more total solution- solutions. The solution provider will solutions in just about any of the take on the responsibility for things like, work that we do,” observes former type relationships GM Executive Director, Global • Optimizing office productivity in the Purchasing Barbara Whittaker. “Take with suppliers, placement and quantity of printers, an example like call centers, which so many companies use. Finding the right • Reducing total printing costs from a creative solution around call centers is whether it is an 360-degree perspective, covering costs something that can bring tremendous and total consumption of printing value to our end customers.” OEM, a third-party supplies, costs associated with service, support, equipment upgrade and However, finding those creative replacement, and so forth, and solutions relies on developing new distribution partner, models for buyer-seller relationships • Developing and implementing printing and for creating direct connections or a marketing best practices within the customer’s between solution providers and organization, for example, two-sided internal stakehoders. “When we allow printing, black and white versus color the people bringing solutions to talk partner.
Early is the new black Timing of customer-supplier collaboration will shift by 2020 as well. Where, today, suppliers may be asked to contribute ideas to existing designs or to help fix existing processes, in 10 years’ time they will be more consistently in on the ground floor. “Customer-supplier relationships “We begin to think about what services are going to get very, very integrated might be added to the solution. Some going forward,” says Sodexo’s CPO of these could end up being outsourced Ann Oka. “For example, when or acquired. In that case, supply has a Sodexo determined that our strategic critical role in terms of identifying and evolution was to branch out from food developing the partners or acquisitions service management into facilities and comprehensive service solutions, I that can provide the services on regional or national levels.” With critical chaired a group to look globally at what it would mean in terms of building the “With critical suppliers,” adds John suppliers, we will supply chains to support it. Campi, former Chief Procurement Officer with DuPont, Chrysler, and commit to working “The strategy is based on the belief The Home Depot, “we will commit that we have developed such intimacy with our client base, we know so to working with them at the very inception of our product development with them at the very clearly what problems they are trying cycle. The future is where suppliers’ to solve that we can offer solutions to engineering teams sit down with our inception of our new solve these problems rather than simply engineering teams and the supplier team providing services. has an opportunity to say, ‘Here is the optimal way to get our subassembly product development “In the case of hospitals, for example, for your product made. Now how can a key challenge is a worsening shortage we manage that within the construct cycle. of nurses going forward. So, we asked, of how you want to build your new ‘What are the programs that we have in product?’ What I am suggesting is not place that enhance the environment for new. It has been done successfully, but nurses so the hospital can become an not by many.” employer of choice?’
Buyer-seller lines blur Spend management pros will look to extract more value from suppliers in 2020. But it wont always be about improving processes. Rather, it will be about leveraging supplier resources and integrating supplier functions 1-to-1 with their own. “We have an essentially unlimited “It is a better world for suppliers in this evolving to something we are doing amount of talent and knowledge sitting 2020,” agrees Larry Welch. “When much more effectively by 2020. out in our supply bases,” says Roy you have supply professionals who are Anderson, VP Procurement Services, partnering directly in the business, who “Right now, we are on the emergent Metasys Technologies. “Let’s say your represent the business to the supply side of achieving collaboration with company has a 30-person marketing side, the whole concept of front- versus multiple suppliers on a development department. Each one of your suppliers backdoor selling disappears.” project. In some cases, this involves also has a marketing department. Some competing suppliers, so it gets a little will be larger and more sophisticated And embedding supplier personnel interesting when you have to map the than yours; some will be smaller but will become much easier, suggests John field for who gets to own what portion they may have expertise in certain areas Campi, as the lines separating corporate of the portfolio and then you bring or methods that you need to tap into. functional silos continue to dissolve. them all in a room together to start “Today, you have to think about getting innovating for the future.” “Even if they each have only 3-5 engineering on board, and sales on people, if you have 100 suppliers, board, and marketing on board. It is that’s 300-500 marketing people in always difficult to get those functional your supply network that you don’t silos to agree. But, I see a movement even touch. If you can utilize even a in corporations becoming more cross- small piece — just 10% — of that, you functional in nature. That paves the can virtually double the size of your way for getting suppliers more involved marketing resource. We will spend the in strategy development, both for your next decade focusing on how to bring firm and for theirs.” that talent and knowledge to bear for our companies. We are going to have Sodexo’s CPO Ann Oka notes that, suppliers working inside our companies “We already are looking for ways to and it may be difficult to tell the integrate functions from upstream in difference between who is an employee our supply chains with our own internal and who is a supplier employee.” functions, for example, marketing. I see
It takes a network Instead of enterprises charting their own courses in innovation, a transition from ‘buyers and suppliers’ to ‘integrated supplier networks’ will enable greater coordination of innovation roadmaps across connected businesses and industries. “My thought,” says Javier Urioste, companies have already succeeded in within the networks, while also trying former CPO with several non-IT doing this kind of thing, “It requires to dominate and to optimize our own organizations, “is that by 2020, or complete transformation of the companies’ business objectives. But perhaps a bit beyond, the world will procurement organization. It means domination of the networks has to evolve to be less about buyers and establishing highly skilled technical be such that it puts us in a position sellers and more about integrated entities that can be embedded with of becoming the customer of choice supply networks serving marketplaces.” engineering. It forces companies to with suppliers. It is a dilemma we need One outcome, according to Urioste, will open their books and their patents to to solve in the next 10 years: how be innovation that is more synchronized suppliers who could be supplying their to evolve from confrontation or two across industry segments, more finely competition, so understandably, it is a different worlds to a single networked tuned to the total customer experience. very difficult thing to accomplish.” entity where we dominate but are also So, for example, innovation among loved by our subjects.” makers of electric cars, makers of “We are in a transformation,” remarks electric car batteries, and the entire Henrik Larsen, VP of Procurement AstraZeneca’s Donald Ferguson says, infrastructure of service stations that with Maersk. “In the same way that “We are very interested in the kind of support electric car drivers will be Apple has thousands of developers networking technology that enables coordinated and driven simultaneously worldwide creating applications, I see us to push our ideas out to the global to the same objectives. us and our suppliers building loose supply base and see who responds. At networks where relationships are fluid the same time, I foresee technology “This will depend on having very open- and production moves out to a much that enables suppliers to put their book relationships,” Urioste says. “We broader spectrum of suppliers. We ideas forward more easily to potential will define together where we intend to will be fighting over the same pools of customers. Rather than buyers saying, arrive in 10 years. We will collaborate supplier and customer resources.” ‘Here are the problems we are trying to simultaneously to develop, to prepare, solve,’ it will be suppliers saying, ‘Here and go to market with the exact Urioste agrees that, within these are solutions we have.’ In the coming same strategies.” supply networks, there will always be 10 years, I see us creating networks in competition for dominance. “We will which ideas and propositions get shared Urioste notes that while a handful of need to work very closely with suppliers very quickly and widely.”
Suppliers gain power An outgrowth of more outsourcing, tighter integration, and heavier reliance upon suppliers is that they will gain substantially more leverage in buyer-supplier relationships by 2020. Instead of them selling to you, it may be you selling to them. The idea of working to become a they cannot join forces with everyone. continue to ebb and flow, depending supplier’s most favored customer has Even if they were to partner with on supply-market economics. “In the been around for a long time and tends two or three customers within an commodity land, it will always be to fade and gain strength as market industry, there would be no competitive about simplification, standardization pricing leverage swings back and forth advantage; we wouldn’t be placing and performance to contract. There is a between buyers and sellers. ourselves ahead if we were one of brutality to that type of buying because three.” The challenge, then, Oka it is not really what interests us as an But participants in the Vision 2020 says will be to “drive our supplier organization. It will always be just Project believe procurement executives relationships in critical areas to the about performance to the contract.” will need to take the concept up a point where we are their most desirable notch in the coming decade as the customer out there.” The second bucket, according to leverage shift to sellers will be more Ferguson, will contain all the critical structural than it is cyclical. In addition “Very few companies have the luxury strategic categories. “Our objective will to being focused on getting the of being merely demanding customers,” be to access the largest possible set of most competitive performance from agrees Henrik Larsen, Vice President of information and identify the few really suppliers, they expect to be out actively Procurement for Maersk. “If you are great ideas among the millions out selling their companies as the long-term not number one or the most sexy, then there. In the current model, you pay to exclusive business partners of choice to you need to be able to show that you access an entire library of information. the best, most innovative suppliers in are a willing, capable and attractive But, we don’t want to pay for a hundred the marketplace. customer if you are hoping to persuade thousand pieces of information. We will the most innovative suppliers to work pay handsomely, though, for the five or “At the end of the day,” says Sodexo’s with you, to develop their businesses so ideas that are really worth something CPO Ann Oka, “it will be suppliers through you.” to us. The objective of isolating those who are in the power seat in terms of truly great ideas will drive us toward deciding who they are going to partner Donald Ferguson of AstraZeneca sees gain sharing. So, in some years, you may with for the kind of collaborative two distinct buckets of activity. The get nothing in payment but in others innovation we are talking about. If first is the commodity or leverage- you will be paid quite handsomely.” there is to be competitive advantage, type bucket where power will
Firms share risks and rewards As the new spend management pros get better at segmenting, defining, and measuring value, they will begin to incorporate both gain- and risk-sharing into commercial relationships with suppliers. “We have seen an enormous erosion with certain key suppliers today,” says have in mind. We are looking for real of trust,” remarks Tim Cummins of Sodexo CPO Ann Oka. “We have open partners with whom we can run the IACCM, “as procurement has driven book relationships that say ‘If I win, business together. So we have to define strongly to allocate more risk to you win’ and we map the ways in which a new way of interacting with our suppliers. We have seen in our data that we will share benefits and penalties. If external partners and new kinds of many in procurement believe they are our own behavior starts creating cost contractual relationships to support becoming more collaborative, while in the supply chain, we share in the that interaction. The new business suppliers claim just the opposite. We negative impact of that behavior. Still, model will be something that evolves need to create new instruments that in the future, we need to be much better rather than being stable over time. It foster trust, at least in the relationships at articulating the value we bring to will develop according to the level of where innovation and creativity matter. the top line through collaboration with maturity in the relationship.” It goes back to the issue being able to suppliers. It is very difficult — and I look at the supply base and recognize believe it will always be difficult — to “Price should be the last thing we care the sources of real value.” segment and identify how much of our about,” suggests Anderson of Metasys success is due to our own brilliance Technologies. “We want results. We “In a world that moves faster than and how much is due to a supplier want overall value. So, we are going ever — where volatility is a fact of life coming into the process. It will be a key to see the emphasis in contracts go — there is no such thing as an optimal challenge for us moving forward.” from price to fairness and value. There contract,” says Maersk’s Henrik Larsen. still has to be a unit of measure, but it “And, while we obviously cannot “We conducted a study,” adds AXA doesn’t have to be a dollar. It could be rewrite contracts on a daily basis, we CPO Dr. Heinz Schaeffer, “to find effort. It could be something else. We can write contracts that share both the business partners that could work will say to suppliers: ‘Show us that you good and the bad things that happen. according to our concepts. We came are giving us better value than someone We will get to those kinds of contracts to the conclusion that those business else and then break down the value by changing our mindsets, by being partners do not yet exist. Companies so we have transparency, so we can more open with suppliers.” pursuing typical outsourcing models work together on how to tie it in to a want to charge either for hours or compensation structure.” “We do benefit and penalty sharing transactions. But that is not what we
Contracts motivate Beyond sharing risks and rewards in contracts, some project participants suggest they will accept greater risk in commercial relationships with critical suppliers by leaving out all the classic kinds of legal protections that can de-motivate suppliers. “Suppliers create and sell their of what motivates companies to always change in how we relate to suppliers, solutions,” observes Roy Anderson, offer the solutions that are best for us, but our contracts must be balanced VP Procurement Services, Metasys to invest in creating the best solutions with no ‘not-for-cause’ exit clauses. Technologies, “but there are hundreds for us, and to give us their best support Those who have done this already of suppliers out there with the wrong — their best and brightest people — for have enormous advantage over their solutions. They might be good — or the long haul.” competition for reaching end customers even great — solutions, but they are not first with innovations and assuring the right solutions for you. Likewise, Classic demotivators — such as 30-day supply when there are shortages or we have all seen situations where escape clauses — need to disappear, other problems.” suppliers come in to sell with their best Anderson contends. “How can you ask and brightest people. They make the a supplier to invest in people, talent and On a global scale, observes Tim sale and then their best and brightest innovative thinking, to put money into Cummins of IACCM, contracts are a disappear. You end up with their second the development of your relationship relatively new phenomenon. “If you team supporting the relationship and when you can leave the relationship in were to track the number of contracts you don’t always get the value or the 30 days if you feel like it? With every most organizations had 20 years ago results you anticipated because their critical supplier we work with, we have compared to today, you would see a best and brightest people are out to make sure that we are brought into dramatic increase, so I think we are at earning big commissions on winning the their success and they are brought into the beginning of an evolution in the role next sale, not on keeping the ours. We need to be willing to show of the contract. We will see companies old business. that, if they are going to invest millions discover how to use contracting less as of dollars or thousands of hours and lay a way to shift risk and more as a way “We have to change this around open their core competencies to us, it is to ensure there is mutual understanding entirely in the coming decade. We have going to be a win-win scenario. We will and genuine alignment. Our contracts to understand the full scope of how be making sure they survive and earn a will let us know we are on track and to motivate suppliers. As soon as we fair profit for the work they do and the managing change effectively. Contracts understand motivation, it will be a value contributions they make.” will show that we understand and different world. Our contracts in 2020 accept the differences between issues of will be based on a better understanding Javier Urioste agrees: “I see momentous competence and of honesty or ethics.”
Risk Management Capacity and Demands Soar Work environments are mobile, virtual and highlyautomated, freeing supply management pros to wrestle with rising complexity and risk.
Everything is automated Procure-to-pay (P2P), sourcing, contract management and other automation engines will be de rigueur in 2020; they will be integrated up and down supply chains, fully adopted, providing full transparency and real-time insight. As Debbie Manos-McHenry, Chief be built into systems and processes decentralized to the people who need Sourcing Officer for Huntington (versus being ad hoc activities).” goods and services.” National Bank, envisions it: “Managing purchase orders and Where it makes sense, Anderson says, • “Procure-to-pay systems will be open invoices will be fully automated by items will be available in catalogs. But architecture, web-based, and able to 2020, even in the least developed other situations may require access to interface with many systems within an companies,” agrees Javier Urioste, markets for real-time competitive bids. enterprise and among its supply base, former CPO with several non- “End users will execute their own bids. IT organizations. “So, too will Procurement’s role will be to set the • Routine purchase transactions will processes for competitive sourcing automation engines up, then monitor be done by end-users with little to no and contracting. There will be and manage to make sure they continue involvement from sourcing; systems certain exceptions, but, in general, all to run.” will enforce appropriate compliance, nonstrategic, highly critical elements of workflow, and rules, the sourcing process can and should And while he believes there will always be automated.” be value in procurement seeking • Contract management and creative ways to manage noncritical administration will be highly Roy Anderson, VP Procurement spending categories, Anderson expects automated, using templates and Services, Metasys Technologies, who that efforts in those directions will be collaborative tools in traditional red- has made a career of automating “kept in perspective.” lining of agreements between buyers procurement, sourcing and supply and sellers, chain operations in both manufacturing and services environments, agrees • Workflow will enable end users emphatically: “For the portion of to produce agreements that meet the supply base that is not critical, minimum criteria while exceptions procurement will put automation will be escalated to sourcing, and engines into place, get them working properly, and then get out of the • Risk evaluation and assessment will way. Buying will be completely
Work goes mobile Smart phones, tablets, embedded chips, and not-yet-imagined devices will create a massively mobile work environment for procurement and suppliers by 2020. “We have not fully engaged the from far greater distances, more easily idea that almost every smart phone into critical sourcing and supply already has voice-to-text recognition management processes and into other and two-way video,” remarks Roy strategic information gathering and Anderson, VP Procurement Services, analysis exercises. Metasys Technologies. “That means you can sit in your office and observe a manufacturing process in real time on the other side of the world or you can capture supplier performance data instantaneously in a voice-to-text message from a person who is standing ...you can sit in your office out in the middle of nowhere.” and observe a manufacturing As such, Anderson sees more procurement and supply management work being done in the field with real- process in real time on the time access to business data and the ability to execute processes — whether other side of the world... to approve purchase requests or check the status of invoices or auctions — from any device, anywhere. While mobility will enable procurement professionals to work from anywhere in the world, project participants expect it will also enable them to bring far greater numbers of people,
Communities collaborate Forget jumping on planes and sitting at conference tables. Buyers and sellers will increasingly rely upon digital trading networks and communities that allow them to quickly and easily discover each other, connect, and collaborate. Discovering, evaluating, and need to rip the barriers down. Our “Technology,” Whittaker continues, interacting with suppliers will be a objective should be to let people do “will make collaboration faster and virtual experience. Digital trading their own work with suppliers. Our more secure. Information about networks will yield a wealth of real- job will be to create the contractual customer requirements will flow time intelligence on trading partner environments that enable them to from internal stakeholders directly to qualifications and performance, market be effective and innovative in the suppliers and there will no longer be a intelligence, and other services — for collaboration they undertake.” procurement professional filtering the example, payment mechanisms, logistics flow of information.” visibility and execution, tax data, and Barbara Whittaker, former Executive so forth — that will make it easy to Director, Global Purchasing with engage, forge trading relationships, and General Motors, offers a similar vision: collaborate with suppliers. “Technology will improve the flow of communications between buyers and Procurement’s job, Roy Anderson sellers. I can see more information believes, will be to direct and observe moving securely, in real time and in the flow of information and to take both directions between buyers and meaning from it rather than being the sellers. This has the potential to raise creator or conduit for information the level of trust between buyers and moving between and among internal sellers, but it will depend on how it is personnel and suppliers. crafted to guard against information leakage or loss. And, while Anderson expects there to always be a necessity for in-person “We want to get to the point where encounters, the real obstacle to more suppliers understand customers better virtual collaboration, he says, is that and more deeply so they can bring forth “so many procurement professionals solutions for all kinds of things that still want to serve as barriers between improve the business. Today, this is a suppliers and internal customers. We long dance when it should be a sprint.
Offensive line takes the field The last 10-15 years have seen intense inward cost focus. The coming 10 years will see attention turn to growth via digitally connected networks that empower buyers to discover, qualify, connect, and collaborate with suppliers, peers and partners. Analyzing spending to the Nth detail. “I think we are probably coming to the defining how this is going to work,” he Fixing and automating processes. All end of the cost-reduction trend that has says. “When you look out 10 years, it is that inward-looking, intense focus on been very much with us for the last 15 going to be all about execution.” cutting costs is going to end. Replacing or 20 years.” it will be a new outwardly pointed And while, due to performance gaps, focus on driving growth and expansion In lieu of that intense focus on reducing the executive sees some hesitancy through exclusive and integrated costs, the procurement executive for a to pursue deeply integrated supplier supplier relationships and innovation. major U.S. insurance company sees life relationships today, he believes it is for procurement becoming much more more important to identify suppliers “Much of what procurement does outwardly focused and collaborative. with the greatest potential for long- today is driven by spend management, “We will ask: term alignment than it is to find perfect but I think, in 10 years, those disciplines performance in every aspect. will be much more integrated into • What are the core capabilities the normal ways of doing business,” suppliers have? “In the end, you need supplier remarks Larry Welch, former Vice relationships that are tied to your goals. President of Indirect Procurement for • What are the core capabilities we need If you can find those, you will have little Hewlett-Packard. in order to do our business well? difficulty working with them to close performance gaps.” “We have seen procurement adopt • How can we align and link our an aggressive role in executing business strategies with suppliers’ massive cost reductions,” agrees Tim business strategies? and Cummins, President & Chief Executive Officer, International Association for • How can we drive to best-in-class Contract & Commercial Management performance with the suppliers that (IACCM). “And, while this has been are best positioned to help us execute seen as fundamental to business our business strategies? competitiveness, we all know it is not an endless opportunity. “In the shorter term, it will be all about