VISION 2020
WELCOME TO THE FUTURE OF PROCUREMENT
Imagine it's the year 2020. Procurement has evolved so much that you barely recognize it. Its functions have been decentralized – or outsourced! – leaving leadership to focus on very different things. Job descriptions have changed dramatically. What's more, suppliers seem to have infiltrated the organization!
In this provocative report, visionary procurement leaders predict the future of procurement. They also advise how to prepare for it.
They agree about many things, but does that make them right?
Steps Of Strategic Procurement Process PowerPoint Presentation SlidesSlideTeam
Steps Of Strategic Procurement Process PowerPoint Presentation Slides is a custom virtual solution for management professionals. The outsourcing process PPT theme helps individuals from all domains to represent the steps involved in strategic partnership. Showcase the distribution network of any organization with the help of our partners strategy PowerPoint slideshow. This graphically-gripping strategic sourcing PPT presentation features interesting and informative data visualizations. Employ our comprehensive PowerPoint layout to cover all the fundamentals of the procurement procedure. Use this business process outsourcing PPT templates deck to convey the need for an external service provider by your firm. You can also represent all the related business functions to determine which ones you can outsource. Demonstrate your organization’s partner relationship improvement strategy. Other aspects highlighted in this presentation are requests for proposals, channel partner selection, and SaaS implementation roadmap. Get access to dashboard diagrams to display the evaluation of channel partner performance. Hit the download icon and begin personalization. Our Steps Of Strategic Procurement Process PowerPoint Presentation Slides are explicit and effective. They combine clarity and concise expression. https://bit.ly/3901a9I
Steps Of Strategic Procurement Process PowerPoint Presentation SlidesSlideTeam
Steps Of Strategic Procurement Process PowerPoint Presentation Slides is a custom virtual solution for management professionals. The outsourcing process PPT theme helps individuals from all domains to represent the steps involved in strategic partnership. Showcase the distribution network of any organization with the help of our partners strategy PowerPoint slideshow. This graphically-gripping strategic sourcing PPT presentation features interesting and informative data visualizations. Employ our comprehensive PowerPoint layout to cover all the fundamentals of the procurement procedure. Use this business process outsourcing PPT templates deck to convey the need for an external service provider by your firm. You can also represent all the related business functions to determine which ones you can outsource. Demonstrate your organization’s partner relationship improvement strategy. Other aspects highlighted in this presentation are requests for proposals, channel partner selection, and SaaS implementation roadmap. Get access to dashboard diagrams to display the evaluation of channel partner performance. Hit the download icon and begin personalization. Our Steps Of Strategic Procurement Process PowerPoint Presentation Slides are explicit and effective. They combine clarity and concise expression. https://bit.ly/3901a9I
Present a comprehensive report on your supplier’s delivery performance with our Vendor Evaluation PowerPoint Presentation Slides. With the help of these vendor management systems, PPT slides you can maintain your business and get hold of suppliers. Highlight the important features such as the capacity to deliver the order, consistency, commitment to quality, coordination with the supply chain, cost efficiency, compatibility between buyer and supplier, etc. using our supplier evaluation PowerPoint presentation. This vendor rating presentation deck is here to help you to report the performance of the supplier on the basis of product quality and its services. Most importantly, let the audience be aware of the vendor management process. Describe the various aspects like quality assurance, organizational structure, processes, performance and economic growth with the help of our supplier performance management PowerPoint complete deck. Use professional designs, charts, graphs, and sheets to prepare your report in minutes. Therefore, download this ready to use presentation slides and rank the performance of a supplier.
White Paper: Understanding Tail-spend ManagementGEP
Many organizations, and external consultants, often develop an approach to tackle only the "theoretical" Tail-spend, which fit criteria such as bottom 10 percent, low volume, non-contracted, etc. A numerical definition often makes isolation of such spend itself a daunting task. GEP defines Tail-spend as everything that is not under active management. Find out more about how maximizing spend under management is the only way to address Tail-spend.
Objectives:
Identify the various functions and responsibilities of the warehouse/stores function.
Identify the various costs associated with holding or not holding inventory.
Describe and contribute in the design of an effective warehouse
Explain how to measure the performance of a warehouse
"You can download this product from SlideTeam.net"
Use content-ready Procurement PowerPoint Presentation Slides to execute the process of acquiring goods and services from an external source via tendering. Meet customers & stakeholders demands, analyse processes, optimize strategies and ultimately reduce procurement costs. Incorporate professionally designed procurement PowerPoint PPT templates to transform your business which bring you benefits. This deck comprises of templates such as procurement strategy structure, procurement steps, procurement workflow process, procurement strategy, approach to procurement, formulating procurement strategy, creating procurement strategy, and more. Use this presentation for purchase planning, value analysis, financing, price negotiation, inventory control and stores, standards determination, etc. These procurement PowerPoint templates are completely customizable. Edit color, text, icon and font size as per your requirement. Add or remove content, if needed. Grab ready-to-use procurement PowerPoint complete presentation to go step by step process of acquiring goods and services from external suppliers. Good expression is guaranteed with our Procurement Powerpoint Presentation Slides. Communication becomes explicitly clear. https://bit.ly/3oihfzw
Be Digital or Die - Big Data in Financial ServicesFintricity
Leveraging Big Data, disruptive technologies (such as Blockchain) and new business models to digitally transform financial services companies. Presented by Alpesh Doshi at the Big Data Innovation Summit in San Francisco 2016.
Present a comprehensive report on your supplier’s delivery performance with our Vendor Evaluation PowerPoint Presentation Slides. With the help of these vendor management systems, PPT slides you can maintain your business and get hold of suppliers. Highlight the important features such as the capacity to deliver the order, consistency, commitment to quality, coordination with the supply chain, cost efficiency, compatibility between buyer and supplier, etc. using our supplier evaluation PowerPoint presentation. This vendor rating presentation deck is here to help you to report the performance of the supplier on the basis of product quality and its services. Most importantly, let the audience be aware of the vendor management process. Describe the various aspects like quality assurance, organizational structure, processes, performance and economic growth with the help of our supplier performance management PowerPoint complete deck. Use professional designs, charts, graphs, and sheets to prepare your report in minutes. Therefore, download this ready to use presentation slides and rank the performance of a supplier.
White Paper: Understanding Tail-spend ManagementGEP
Many organizations, and external consultants, often develop an approach to tackle only the "theoretical" Tail-spend, which fit criteria such as bottom 10 percent, low volume, non-contracted, etc. A numerical definition often makes isolation of such spend itself a daunting task. GEP defines Tail-spend as everything that is not under active management. Find out more about how maximizing spend under management is the only way to address Tail-spend.
Objectives:
Identify the various functions and responsibilities of the warehouse/stores function.
Identify the various costs associated with holding or not holding inventory.
Describe and contribute in the design of an effective warehouse
Explain how to measure the performance of a warehouse
"You can download this product from SlideTeam.net"
Use content-ready Procurement PowerPoint Presentation Slides to execute the process of acquiring goods and services from an external source via tendering. Meet customers & stakeholders demands, analyse processes, optimize strategies and ultimately reduce procurement costs. Incorporate professionally designed procurement PowerPoint PPT templates to transform your business which bring you benefits. This deck comprises of templates such as procurement strategy structure, procurement steps, procurement workflow process, procurement strategy, approach to procurement, formulating procurement strategy, creating procurement strategy, and more. Use this presentation for purchase planning, value analysis, financing, price negotiation, inventory control and stores, standards determination, etc. These procurement PowerPoint templates are completely customizable. Edit color, text, icon and font size as per your requirement. Add or remove content, if needed. Grab ready-to-use procurement PowerPoint complete presentation to go step by step process of acquiring goods and services from external suppliers. Good expression is guaranteed with our Procurement Powerpoint Presentation Slides. Communication becomes explicitly clear. https://bit.ly/3oihfzw
Be Digital or Die - Big Data in Financial ServicesFintricity
Leveraging Big Data, disruptive technologies (such as Blockchain) and new business models to digitally transform financial services companies. Presented by Alpesh Doshi at the Big Data Innovation Summit in San Francisco 2016.
With a fundamental shift in the CFO mission, the finance function has become a critical change agent across organizations. The role of financial leaders such as CFOs is evolving, from a traditional financial controller, to one that drives performance improvements across the organization.
Vivaldi UK Capabilities | Financial ServicesRichard Rolka
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Beyond trends: The top 10 transformational realities redefining procurementZycus
In this on-demand webinar, hosted by Zycus and EBG Network, is an international panel of industry experts. The webinar features a presentation by Jon Hansen of Procurement Insights’, who discusses with the panel, about the top ten procurement trends for 2019 before zeroing in on the three specific areas that will have the greatest impact on procurement professionals right now and for the foreseeable future.
Manufacturing Value Streams and Supply ChainsLucas Group
Manufacturers of all sizes now realize that there are profits to be made from an efficient and effective value chain. While the challenges are significant, the benefits of analyzing and improving your value stream are beyond debate.
The Future of Business, Organization and HRMSeta Wicaksana
In an ever-evolving global landscape, the realm of business development is undergoing a profound transformation.
The convergence of technological advancements, shifting consumer preferences, and dynamic market conditions has created a paradigm shift that promises to reshape the way businesses approach growth and expansion.
The future of business development is not only about adapting to change but also about harnessing emerging trends and innovations to thrive in an increasingly competitive environment.
To better organize a business in the future, leaders should embrace nine imperatives that collectively explain “who we are” as an organization, “how we operate,” and “how we grow.”
When it comes to scrutinizing costs, most insurance companies can say “Been there, done that. Got the t-shirt.” Managers are familiar with the refrain from above to trim here and cut there. The typical result is flirtation with the latest management trends like lean, outsourcing and offshoring, and others. However, the results tend to be the same. Budgets reflect last year’s spend plus or minus a couple of percent in the same places.
Building Deeper Advisory Relationships with DataNICSA
An exploration into how asset managers are addressing today’s marketplace challenges and leveraging new tools and technologies to create more fruitful relationships with financial advisors.
The asset management industry is confronted with several challenges to growth. Increased transparency via technology, competitive fee pressure, product commoditization, regulatory change and demographic shifts are contributing to increased margin pressure. One possible solve is to deepen relationships by turning existing client data into an asset. While leveraging analytics to inform client segmentation, client journey mapping and brand enhancement is not a novel exercise in the business world, it has perhaps not been fully adopted and implemented within intermediary distributed asset management.
ESG, Sustainability, Compliance and cognitive sourcingTomas Wiemer
The paper sheds light on new cognitive sourcing concepts and standards that are being implemented in the manufacturing distribution and service industries. It also showcases the path forward as new functional dynamics come into play between the Chief Procurement Officer (CPO), the CFO and the CSO/CCO (chief sustainability officer/chief compliance officer) in an increasingly transparent data environment.
RevOps: Automating Revenue Operations to Drive Revenue GrowthJay C
What is RevOps? What's driving adoption? Why is it important? How can business leaders help their organizations "cross the chasm" and find new ways of growing revenue. Learn about RevOps and 2 customer case studies in Finance and Homebuilding industries.
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Sustainability has become an increasingly critical topic as the world recognizes the need to protect our planet and its resources for future generations. Sustainability means meeting our current needs without compromising the ability of future generations to meet theirs. It involves long-term planning and consideration of the consequences of our actions. The goal is to create strategies that ensure the long-term viability of People, Planet, and Profit.
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LEARNING OBJECTIVES
1. Develop a comprehensive understanding of the fundamental principles and concepts that form the foundation of sustainability within corporate environments.
2. Explore the sustainability implementation model, focusing on effective measures and reporting strategies to track and communicate sustainability efforts.
3. Identify and define best practices and critical success factors essential for achieving sustainability goals within organizations.
CONTENTS
1. Introduction and Key Concepts of Sustainability
2. Principles and Practices of Sustainability
3. Measures and Reporting in Sustainability
4. Sustainability Implementation & Best Practices
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2. Introduction
Welcome to the Vision 2020 Project!
Starting in late 2010, Ariba joined
forces with leading procurement
practitioners and influencers to begin a
dialogue with two intermingled sets of
procurement executives:
• he first represents a visionary and
T
highly seasoned set of procurement
executives — the people who first
rolled up their sleeves in the early
1990s and conducted the arduous
work of leading procurement from
tactical paper pushing into things like
spend management, strategic sourcing,
supplier collaboration, electronic
commerce, sourcing and procurement
process automation.
• he second group represents today’s
T
vanguard — Chief Procurement
Officers in charge of high-performing
spend management organizations
— who will lead procurement to
new and innovative kinds of value
contribution over the coming decade
and beyond.
The objective is to initiate a dialogue on
the future of procurement and to create
a roadmap for how to get there.
The pages of this eBook contain ideas
about the future that have emerged
from the early rounds of discussion.
Consider the contents of these pages to
be one part prediction, one part hopeful
thinking. And while there is surprisingly
strong consensus among project
participants around the essential ideas
presented here, not everyone agrees it
all can or will be accomplished — by
every organization — in just 10 years’
time. Nor does everyone claim to have
all the answers for how they will get to
each of the aspects presented herein.
Of note is that some of the ideas
presented in these pages have been
kicking around for quite some years,
although the conditions under which
they might flourish have yet to
materialize in more than a handful of
enterprises. The hope is that — with all
that has been accomplished in the past
decade — the time for these ideas may
finally be coming.
The report is intended not as an end,
but rather as a point of departure for
much discussion and debate around
where procurement can and should be
setting its sights for the year 2020
and beyond.
We urge all readers of this report to
join the debate and to extend the
discussion with new ideas by joining the
conversation at:
www.futureofprocurement.com
3. Contributors
ANN OKA
Chief Procurement Officer, Sodexo
JEAN-JACQUES BEAUSSART
Chief Procurement Officer, KeyBank
DR. HEINZ SCHAEFFER
Chief Procurement Officer, Northern
and Central Eastern Europe, AXA
DEBORAH (DEBBIE) MANOS-McHENRY
Chief Sourcing Officer
Huntington National Bank
ROY ANDERSON
JOHN CAMPI
former Chief Procurement Officer
DuPont, Chrysler, and The Home Depot
LARRY WELCH
former Vice President of Indirect Procurement
Hewlett-Packard
DAWN EVANS
President and Chief Executive Officer
Sourcing Interests Group (SIG)
BARBARA WHITTAKER
former Executive Director, Global Purchasing,
General Motors
Vice President, Procurement Services
Metasys Technologies
JAVIER URIOSTE
KEVIN CASTLE
HENRIK LARSEN
Professor at BYU and former Chief
Procurement Officer, Varian, Inc.
DONALD FERGUSON
Head of Procurement Operational Excellence
AstraZeneca
former CPO with several non-IT organizations
Vice President of Procurement
Maersk
TIM CUMMINS
President Chief Executive Officer, International
Association for Contract Commercial Management
(IACCM)
4. Contents
Procurement devolves.......................................................................1-5
Spend management shrinks. Profits replace costs savings. Budget fuss fizzles out. So
long sourcing geeks. SBUs absorb procurement.
The new supply management emerges...........................................6-9
Outsourcing explodes. Service providers excel. Strategy scope widens. Let’s
get financial.
Skill sets change ............................................................................10-12
Supply pros get savvy. A new definition for ‘expert’. Talent competition heats up.
Instantaneous intelligence arrives................................................13-16
Prices go transparent. Risk info catches up. Data predicts the future. Intelligence
moves into context.
Collaboration reigns......................................................................17-25
.
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............................26-32
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!
6. 1
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
be very small by 2020,” says Larry
Welch, former Vice President of Indirect
Procurement with Hewlett-Packard.
“You will see a strong central core
that does horizontal work — ensuring
that all the right processes and tools,
skills, relationships, templates, and
performance metrics are in place across
business lines and functions.”
outsource (or insource), assure supply,
innovate, and manage costs.”
But, while enterprise-level spend
management functions shrink in the
coming decade, Welch and many other
project participants see more supplierfacing positions being created at high
levels in the strategic lines of business
that comprise a corporate enterprise.
“The business line leader will no
longer have the experience of someone
knocking on their door, saying ‘It’s
time to develop a spend or supplier
management strategy.’ It will be more
organic than that,” Welch says. “They
will have people embedded in their
organizations, working as dedicated
members of their teams, who will be
part of their businesses in every aspect.”
“Professionals with supplier-facing
responsibilities will be in the business
lines, will know the business lines,
and will participate in business lines’
strategic planning processes,” Welch
predicts. “They will be responsible for
developing — with suppliers in mind —
all the strategies that help the business
organize, design and execute processes,
While the people staffing these new
supplier-facing positions may have
web-like linkages to core enterprise
spend management organizations, their
interests, activities, and allegiances will
be heavily oriented to driving success at
the business line level.
“Functional procurement is something
that should disappear by 2020,” agrees
Javier Urioste, former CPO with several
non-IT organizations.
“However, enterprises will need to
think very carefully and thoroughly
about how to embed the disciplines of
procurement into business processes.
If you are going to eliminate the
function of procurement, you need
to have some very clear resolutions
— perhaps coming from the Board of
Directors — to ensure that there is a
clearly articulated procurement policy
and strategy and that the disciplines of
procurement become a routine part of
the way the business operates.”
7. 2
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
consensus around performance
management for supply and spend
management in 2020:
• Money — be it savings, revenue, or
profitability — will always be a piece
of the performance picture, and
• Metrics will direct supply and spend
management professionals to focus
their efforts on both the top and
bottom lines.
Henrik Larsen, Vice President of
Procurement for Maersk, sees it
this way: “There will still be some
overall metric in place in 2020, but
it will be less focused on savings. I
see metrics around things like spend
coverage — as an indicator the
company is staying focused on the right
things — but also around things like
innovation, collaboration, internal and
external stakeholder satisfaction, and
competitive advantage, which includes
getting to new markets and bringing out
new products.
“Somebody will always be accountable
for controlling costs,” agrees Larry
Welch. “But, I am hopeful we will see a
shift to supply management being more
accountable for costs as they relate to
sales or revenue. It will become more of
a standard to see supply management
being held accountable for delivering
value and not just lower costs.”
Group (SIG), most procurement
organizations will be working on topline growth and product innovation as
well as bottom-line impact and total
cost of ownership. “All of the forwardthinking CPOs I work with are talking
about the top and bottom lines and that
is very different from what we have seen
in the past.”
“Supply management goals in the
future,” adds Roy Anderson, Vice
President of Procurement Services for
Metasys Technologies, “are going to
look a lot more like the goals you see
in marketing — where they are at risk
for growing the market — or the goals
you see in operations — where they are
geared toward profitability. I expect to
see procurement goals starting to follow
those types of solutions, where it is
not just about cost savings but, rather,
about how supply management helps
marketing drive customer acceptance or
helps operations drive profitability.”
Tim Cummins, President and CEO
of the International Association for
Contract Commercial Management
(IACCM), suggests that it will be
up to procurement to drive this
desired change in performance
management approaches. “We must
take responsibility for changing the
circumstances under which we operate
and there are steps procurement
can take to demonstrate why the
narrowness of today’s measurements
inhibit opportunities to create business
value through trusting and collaborative
relationships with suppliers. There is a
growing body of evidence to document
this problem and an urgency to finding
ways to solve it.”
By 2020, agrees Dawn Evans, President
and CEO of the Sourcing Interests
8. 3
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
finance has been unwilling to shift from
its traditional bucket-based method of
budgeting,” observes Roy Anderson.
But, in 10 year’s time, project
participants expect supply management
to have become so embedded, so early
in business strategic planning that no
one will ever think to ask a question
like: Does procurement have a seat in
the budgeting process?
As Ann Oka, Chief Procurement
Officer for Sodexo, sees it, “Supply
management will be heavily embedded
in strategic planning for the business as
well as budget and financial planning.”
Already, Oka says her organization is
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
and expected overhead savings.
“Because we are already so integrated
in the budget process, it is hard to say
we will be integrated more in 10 years,
but I believe this will become the norm
for most companies by 2020.”
Adds Debbie Manos-McHenry, Chief
Sourcing Officer for Huntington
National Bank: “When you get to a
point where you are well respected
within the business segment, and you
are conducting a series of projects that
are expected to have significant impacts
for the business, not just in terms of
expense take out, but on the revenue
line, then you will be working with the
business through the course of each year
and helping them to make their plans.”
9. 4
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
exchange them,” says Dr. Heinz
Schaeffer, Chief Procurement Officer,
Northern and Central Eastern Europe,
for AXA. “We will need people who
are customer- and business-centric, not
people who like procurement processes
the most. Nor will procurement in 2020
require people who are experts at using
procurement and sourcing software.
Rather, we will require people who are
experts at using technology to move
businesses in certain strategic directions.
We need systems supporting our
businesses versus asking our businesses
to support our systems.”
The implication is that procurement
tools will become so intuitive by 2020
that even untrained professionals
can be guided through the processes
of executing successful sourcing and
procurement activities. In many cases,
systems will execute, without any
human intervention, such tasks as:
• Sourcing based on market dynamics
and predefined negotiation strategies,
• rdering based on minimumO
maximum levels, and
• nvoice, reconciliation and payment.
I
“People are not going to need to know
how to write purchase orders,” adds
John Campi, former CPO with DuPont,
Chrysler and The Home Depot.
“They will need to be able to support
supplier relationships that provide their
companies with continuous strategic
advantage in their niche markets.”
“A person who understands contract
provisions or how to execute a sevenstep process is not going to be very
important in 2020,” agrees Debbie
Manos-McHenry of Huntington
National Bank. “Nor will we need
people who are great number crunchers
and analysts. We will be automated
to an extent that the information we
need is always at our fingertips. What
we will need in 2020 is people who
can take information and proactively
develop strategies that advance our
business segments’ priorities instead of
waiting for the business segments to
come looking for help with particular
problems or ideas that have already
been formulated.”
Tim Cummins, President and Chief
Executive Officer of IACCM, agrees:
“It is clear that many of today’s
basic procurement activities can be
automated. What we really need
are skills associated with driving
economic contribution for the
business. That involves financial
assessment, relationship skills, the
ability to coordinate teams and ensure
collaboration internally and externally.
The harsh truth is that these skills are
not particularly associated with the
function today. A very big challenge is
to turn that perception around
for 2020.”
10. 5
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 vision is that the functional
‘procurement’ label fades from the
corporate lexicon over the coming
decade. “My personal point of view,”
says AXA’s Dr. Heinz Schaeffer, “is that
procurement will no longer be called
procurement in 2020.”
‘Embedded’ in this context can mean
either physically or virtually with the
central idea being that the new spend
management professionals get involved
only where they are needed and move
on once the right supplier relationships,
processes, information flows, KPIs and
performance metrics, technology tools,
and so forth are in place and running
both smoothly and predictably.
“Great companies transform themselves
continuously to evolve with their
markets,” observes Huntington
National Bank’s Debbie ManosMcHenry. “Sourcing organizations
absolutely have to do the same. It won’t
be about sticking to that seven- or
eight-step strategic sourcing process in
2020. It will be about thinking outside
of the box to do things much differently
as the business itself transforms. Tools,
strategies, and information sources that
make sourcing organizations incredibly
nimble are going to be important in
2020,” she adds.
“As companies go forward in 2020, as
consolidation occurs, there will be a
need to engage end customers more and
more and that will require a relook at
the centralized or center-led structure
[for procurement],” adds Sodexo’s CPO
Ann Oka.
“We will leverage and centralize where
we create value — that’s the sourcing
side — and we will constantly reinvent
our customer response group to get
as close to and as intimate with our
internal and external customers
as possible.”
Donald Ferguson, Head of Procurement
Operational Excellence at AstraZeneca,
shares a similar vision for 2020: “I see
procurement professionals working
more in a ‘design-to-value’ concept,
participating as one part of a much
bigger thing the business is trying to
achieve, which is innovation. Critical
spend categories will gravitate much
closer to and become much more
integrated into the business lines.
They will be driven much less by
cost management and much more by
innovation and contribution in terms of
selling the products we are trying
to create.”
11. The New Supply
Management Emerges
After a big wave of procurement outsourcing, a
different animal will be left standing.
12. 6
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,
Chrysler and The Home Depot, puts
it quite simply: “If it’s not critical, it
will go to third parties.” Traditional
procurement activities that the
executives envision outsourcing by
2020 include:
• irtually all transactions processing
V
including POs, invoices, and payments
• ll noncritical/nonstrategic spend
A
category management, including
supplier catalog, contract management
and sourcing event execution
• Most data gathering, structuring,
storing, analysis and reporting
activities, be they for spend analysis,
external market intelligence, risk
intelligence, supplier performance
management, and so forth
Donald Ferguson, Head of Procurement
Operational Excellence at AstraZeneca,
suggests that, “By 2020, procurement
of the more traditional commodity,
leverage-type categories will exit the
company and be sourced by people
who specialize in sourcing them. The
skills that go outside will be around
creation of standards, specifications,
performance management, and cost
reduction. The skills we retain will be
more focused around strategic influence
and business acumen.”
“We are spending a great deal of time
today looking at what is core and not
core for us,” agrees the procurement
executive for a major U.S. insurance
company. “We have seen this happening
in the last five years, but I think the
trend is going to get much bigger in the
coming five years.”
The first stage, this procurement
leader says, will be companies figuring
out what they can move outside and
finding partners on whom they can
rely completely for service support.
But, as procurement outsourcing
matures, he expects to see a second
stage of development where companies
begin to innovate within outsourcing
relationships, exploring creative ways
in which their partnerships can drive
competitive performance improvements
and business success.
As Dawn Evans, President and CEO of
the Sourcing Interests Group (SIG), sees
it, “If we can outsource transactional
procurement and bring in more strategic
thinkers — people who are not afraid to
drive innovation — then we can build
a mindset that is dramatically different
than the one we have now.”
Nonetheless, Evans thinks, “we still
need a huge amount of education
for corporate leaders to understand
the best uses of supply management
and why a majority of the tactical
procurement and sourcing work should
be outsourced.”
13. 7
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.
“We have seen this developing for a
number of years but, if you look back,
you see the service providers really
fighting with their offerings, building
their business models, tying in the
technology, and so forth.
“Today, we are seeing service providers
getting to the point where they do
things better than we can do them.
Looking out 10 years, I see us moving
first to leveraging that expertise and
excellence and then to developing
relationships with the service providers
that put them completely into synch
with our business models. We will
extract more and more value from
outsourcing relationships as the
decade progresses.”
Another factor in play is that highperformance enterprise procurement
organizations — those that began
their strategic transformations 10 or
15 years ago and have attained high
levels of spend management maturity
— will continue to spin out discrete
business units that offer procurement
and sourcing services often geared to
specialized segments of industry.
This is already happening in sectors
like healthcare, hospitality, and food
services. For example, Ann Oka, Chief
Procurement Officer with Sodexo, says:
“Procurement services account for half
[of Sodexo’s U.S.] volume today.
“We do not specialize in procuring
highly engineered items, so we would
not offer our services to manufacturers
for their direct materials. We do,
however, offer procurement services to
firms within our industry or in
industry segments that are closely
related to ours, for example, lodging,
leisure, camps, and some multi-unit
restaurant chains.”
“
Today, we are
seeing service
“
“Procurement is core in that we need
to have the right strategies,” says the
procurement executive for a major
U.S. insurance company. “But it is not
core to the extent that we can leverage
service providers who have developed
exponentially better capabilities than we
have in particular commodities or spend
categories because they source them on
a more regular and broader basis than
we will ever do internally.
providers getting
to the point where
they do things
better than we can
do them.
14. 8
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
to an enterprise’s end customers and it
will be more cognizant of the diversity
of desires and requirements within the
customer base. In the beginning, the
strategy scope will expand to include
an enterprise’s existing customers; over
time, it will shift to helping the business
acquire new customers and, perhaps,
entirely new lines of business.
“Right now,” remarks BYU professor
and former Varian, Inc., CPO Kevin
Castle, “we treat all products the same
within our buying functions and in
terms of supply chain design. In 2020,
supply management professionals will
capture and quantify unique customer
requirements, all the way from
marketing, through RD, operations,
and other parts of the enterprise. Rather
than treating all customers and all
products the same, we will construct
supply chains, procurement processes
and functions that meet unique
customer and product requirements.”
“We are already well integrated in
strategic, budget, and financial planning
for the business,” adds Sodexo’s
Ann Oka. “But, as companies go
forward into 2020 — becoming more
complex and diverse through mergers
and acquisitions — those planning
processes will require much greater
engagement with end customers,
meaning we will need to relook at our
centralized structures.” What is more,
as procurement professionals engage
with end customers, Oka suggests
they 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. “As we
move forward along this path, we will
encounter more things that we do not
have the competency to do ourselves. In
those cases, we will either procure from
outsourcing partners or will purchase
companies outright; either way, supply
will play a role in those decisions.”
“I believe that procurement will add
much more value in 2020 than it
does today,” agrees KeyBank Chief
Procurement Officer Jean-Jacques
Beaussart. “Procurement will be
involved in strategic planning for the
enterprise and also in identifying,
implementing, and delivering value
through mergers and acquisitions.”
“Even our concept of innovation will
expand beyond just the creation of
new products with suppliers,” adds
Donald Ferguson, Head of Procurement
Operational Excellence, AstraZeneca.
“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. Instead of
sales representatives going out to meet
doctors, we will use innovation and
technology to enable influencers and
consumers to interact with and obtain
information from us by the means and
at the precise times they choose.
15. 9
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
on the commercial consequences of
supplier relationships,” says Dr. Heinz
Schaeffer, Chief Procurement Officer,
Northern and Central Eastern Europe
for AXA, “I believe the procurement
function will come to be called
something like ‘financial supply
chain management.’”
“Today,” observes Henrik Larsen, Vice
President of Procurement for Maersk,
“we are just pushing money over the
border; either it belongs to us or it
belongs to our suppliers, but we are
not really leveraging based on who in
the trading relationship has the greatest
ability to optimize the financing and
cash management pieces.
“If a supplier is better positioned to
leverage, we will take advantage of that.
And there will be value to the supplier
and vice versa in taking that on.
“Trading partners need to get past
their fears of digging into these areas,”
Larsen continues. “Of course, they also
need financially astute people directing
these kinds of activities, so I see much
greater integration with finance as well.”
Barbara Whittaker, former Executive
Director, Global Purchasing with
General Motors, agrees and believes
that technology will play a big role in
shaping the transformation. “Right
now, we cannot possibly look at each
condition on its own, so we are forced
into saying things like ‘Every supplier
needs to be at a payment term of 60
days’, or ‘Every invoice needs to be
handled this way’, or ‘All of our cash
flow needs to be pushed one way.’
“I believe there is opportunity for
technology to come along that enables
us to measure and look at financial
supply chains in more discrete ways.
We could have multiple action streams
based on market conditions, on what is
going on with particular suppliers, or
on the different kinds of relationships
we have with suppliers. I see technology
enabling us to say things like, ‘Supplier
X will be on a 30-day term because
the model, which derives from live
intelligence about our cash flow
and other current market conditions,
says it makes sense to pay them sooner.’
The model becomes real time and
selective, so we can capture the best
value — by supplier — leading to
greater total value.”
Dawn Evans, President CEO of the
Sourcing Interests Group (SIG), believes
new skill sets will be needed as well.
“We need people that really understand
finance and accounting and the impact
that decisons in procurement have on
financial statements. Things like total
cost of ownership (TCO) are well
understood in procurement, but true
financial acumen is not really being
taught in the supply chain schools.
“There needs to be more crosspollination between these two
functions,” Evans adds. “I would love
to start seeing CFOs from Fortune
1000 companies becoming CPOs of
Fortune 100 companies. That would be
dynamite in this respect.”
16. Skill Sets Change
Think broad, deep, global industry expertise. Finely tuned
business acumen. Sales, marketing, communications, performance
management, and networking.
17. 10
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.
• trategize for the business with end
S
customers in mind,
• rack and capture innovation
T
already happening in and around the
critical supply base; proactively drive
innovation where it may be needed in
the supply base,
• elate with and integrate critical
R
suppliers and service providers wherever
appropriate and as thoroughly as
possible in the business lines,
• Sell positive change within the
enterprise and sell the highestperforming, most innovative suppliers
on why they should invest in driving
one company’s success to the
exclusion of its competitors.
Says KeyBank Chief Procurement
Officer Jean-Jacques Beaussart: “If I had
to choose key elements of success for
2020 supply management organizations,
I would choose innovation, integration,
strategic planning, thought leadership,
and a real understanding of how to
manage third parties.”
“Part of supply management in 2020,”
adds Roy Anderson, VP Procurement
Services, Metasys Technologies, “is
going to be about demonstrating
unequivocally that changing — to the
new solution, to the new supplier, to the
new approach — is not only valuable,
but easy and fast and reduces risk to the
greatest extent that is possible.
“The CPO is going to have to be a real
salesperson — one capable of selling
both internally and externally. It is
going to be a very strategic position,
where people have clear understandings
of what the supply base can do in terms
of supporting the company.”
Maersk’s Vice President of Procurement
Henrik Larsen suggests that, by 2020,
“Deep category expertise will not
be enough. To succeed and work in
procurement and supply management,
you will need to be a consultant, a
networker, a relationship builder.”
“
The CPO is going
to have to be a real
“
This set of characteristics feeds four
essential sets of activities for spend
management professionals in 2020:
salesperson — one
capable of selling
both internally and
externally.
18. 11
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,
Chrysler, and The Home Depot, says
supply management professionals in
2020 “will be capable of analyzing and
understanding the worldwide dynamics
of markets on a variety of fronts. For
example, it may be prudent in some
countries to pay people to witness your
containers being loaded onto ships
while in other countries you do not
need to make that investment. Supply
management professionals of the future
will have that kind of deep, detailed
insight into the markets that matter
most to their enterprises.”
As Debbie Manos-McHenry, Chief
Sourcing Officer for Huntington
National Bank, sees it, “No company
can afford to be surprised by one
supplier leapfrogging past another.
Supply management professionals
will be like investment analysts,
possessing both deep and broad
knowledge in and around their supply
markets and industries.”
“Supply management’s job in 2020 will
be to maintain a constant understanding
of the marketplace,” agrees Roy
Anderson, Vice President, Procurement
Services for Metasys Technologies.
“Supply management professionals
are going to spend much more time
understanding markets from longerterm perspectives rather than always
looking through the lenses of sourcing
events or transactions.”
necessarily believe that deep expertise
always needs to exist in house or with
direct employees. “Very often, it is going
to make more sense to source industry
or market expertise from outside.”
Sometimes that expertise will come
from professionals, but increasingly
it will also come from communities that
share and aggregate information among
themselves.
What is more, Anderson believes that
understanding will extend down into
the lowest tiers of the supply chain. Our
job will be to understand how we can
build a product or service as effectively
as possible by taking knowledge that
is inside the supply chain and bringing
it forward to the designers within our
own companies.
“I believe we are going to see more,
better sources of third-party market
intelligence and we are going to have
more resources to invest in routinely
acquiring that intelligence by 2020,”
Anderson adds.
“With technology innovating at such
a rapid rate, supply management will
be expert enough to understand if a
supplier is staying current, innovative,
and creative in its marketplace or if
there are new players coming along to
unseat them.” But Anderson does not
19. 12
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
successful in procurement when
we have the right talent in place,”
observes Jean-Jacques Beaussart, Chief
Procurement Officer, KeyBank.
“By 2020, it will be the CPO’s job to be
a magnet for talent. We will accomplish
this by promoting global talent,
employing state-of-the-art technologies,
training people consistently and
broadly, and ensuring they can leave our
organizations for bigger corporate roles.
“When you focus on talent, you become
known as an organization that can be
trusted. It is a brand you can use to
attract more business, more projects,
and more talented people to work with
you. There is no doubt in my mind this
will be a number one priority in 2020.”
“What motivates the emerging
workforce will be very different from
what has motivated people in the past,”
suggests Sodexo Chief Procurement
Officer Ann Oka. “What makes people
feel successful will no longer be steady
progress along a linear path. Companies
will need to find innovative ways to
allow the newer generations the latitude
to pursue all of their interests.
“Already, we (Sodexo) are offering
flexible work arrangements,
telecommuting, job sharing and other
employee value initiatives to keep this
new generation engaged. We believe
that creating a flexible culture will help
us build employee engagement and
capacity for business problem solving.
But that raises new challenges around
such topics as how to ensure people
remain visible in a large corporation,
how to ensure they are developed to
be promotable.”
From a compensation point of view,
Beaussart believes: “We will need more
nontraditional compensation models,
bigger bonuses with variable versus
fixed compensation increasing.
“I would see a bonus structure, where
the bonus has two parts. The first is
linked to performance of the team and
the other to individual performance.
The team bonus comes from a scorecard
developed at the beginning of the year
saying, ‘This is what we are going to
achieve for the corporation.’ It can be
linked to savings, how you manage
business relationships, adoption of
automation technology, whatever it
takes to manage success for your area.”
21. 13
Prices go transparent
Market pricing for goods and services will become so transparent — due to
e-sourcing, global trading networks, online communities, and procurement's
intrepid scrutiny into still-cloaked categories — that negotiation will be a lost art.
“The value proposition,” says Debbie
Manos-McHenry, Chief Sourcing
Officer with Huntington National Bank,
“will be much more about speed-tomarket, exclusivity, innovation, and
gainsharing in supplier relationships
than about harvesting 3-5% savings
from contracts coming up for renewal.”
Replacing the old price negotiation
focus will be much greater emphasis on:
• ssembling the correct portfolios
A
of suppliers,
• Rapidly extracting innovation and
other value from supplier bases, and
• Building exclusive commercial
relationships with leading suppliers
that share both risks and rewards.
“We spend so much time today
trying to obtain fair prices for the
goods and services we purchase,”
says Roy Anderson, Vice President of
Procurement Services with Metasys
Technologies. “That has to go away
because it is such a small piece of the
whole effort and it is a piece that can be
driven by the marketplace.
“The cloud,” Anderson predicts, “will
force price transparency. Savings will be
tied to things like discounts and rebates
for reaching certain volumes or paying
early. Meanwhile, in services categories,
such as consulting, we will continue to
gain visibility into things like labor and
overhead costs, so transparency will
come to those categories and we will be
able to shift the conversation to how
suppliers create value for us.
“We need to get more focused on
making sure we have the right supplier
portfolios to bring innovation and value
to our companies, which has a tenfold
improvement over getting another
dollar off their unit price.”
Maersk Vice President of Procurement
Henrik Larsen suggests that transparent,
open-book trading relationships will be
the key that empowers procurement to
move beyond the “very tedious” things
that procurement does to add value
today. “Transparency will enable us to
get our teams interacting with suppliers’
teams and working to find bright
new ways of delivering competitive
advantage to both sides.”
22. 14
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
of industry and supplier data to detect
control failures early,” says Debbie
Manos-McHenry of Huntington
National Bank. “We will access
operational risk data captured through
industry portals and will see more
shared assessments, standardized
among buyers and sellers, with oneto-many sharing by members through
communities.
“Supply management will have
responsibility for third-party risk
management, centralized governance
and control over third-party risk,
providing business segments with
the tools to assess and monitor risks
together with oversight and reporting
on the entire portfolio of suppliers
to identify undue concentrations of
risk within a segment, process, or
supply industry.”
With such rigorous information assets
and tools in place, Manos-McHenry
also expects to see risk management
practices become more embedded into
sourcing and contracting routines.
“We will assess and rate supplier risk
early in our due diligence process,
enabling segment leaders to make
informed decisions.
“Our RFP process will identify
alternative sources of supply and
we will see more stringent contract
language, requiring strong security,
disaster recovery, and third-party risk
management programs to be in place
with suppliers.”
Roy Anderson, Vice President of
Procurement Services, Metasys
Technologies, believes that acquisition,
aggregation, and management of riskrelated information will transition
fully to third-parties and networked
communities in the coming decade.
“We see an awful lot of work being
done today on the risk side, but we
are never going to be risk experts, so
it is a waste of time to create our own
supplier-risk profiles.” In 10 years’ time,
Anderson believes, suppliers will be
scored independently and collectively
on a variety of factors: financial, ethical,
and operational performance, creating
360-degree performance ratings and
providing greater transparency into
market dynamics, potential supply
disruptions, and supplier capabilities.
23. 15
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
in procurement,” says Kevin Castle,
professor at Brigham Young University
(BYU) and former CPO with Varian,
Inc., “but it is data that tells us
what already happened, how many
defects we had in the last month, how
many shipments were late, and how
much savings we achieved (or did
not achieve). In the future, I believe
procurement will focus more on
forward-looking, predictive analysis.
• e will use models to project where
W
supplier defects are most likely
to occur.
• e will have KPIs for suppliers that
W
measure the discrete pieces of their
processes that are most likely to affect
our end customers.
• e will prioritize supplier processes
W
according to our customer
requirements and measure them.
• e will establish upper and lower
W
process control limits and work
proactively to improve processes
to point where we are confident that
a supplier’s performance will always
fall within our own customers’
specific requirements.”
While the ability to execute predictive
performance management is elusive
today, Castle feels strongly that
procurement needs to push in this
direction if it wants to become more
deeply ingrained in such functions as
business strategy development and
new product design, development, and
launch. “We need to be able to predict
how a product will perform from both
quality and total cost perspectives. We
need to know rapidly and be able to
react immediately when changes in the
data predict a problem in the future.”
Supporting and reinforcing
predictability will be business
communities trading information in
real time in much the same way that
communities such as,
• inkedIn enables one to obtain
L
predictive information about how a
person is likely to perform on the job,
• Bay gives one information about
e
how a particular seller is likely to
behave, and
• mazon can suggest books one is
A
likely to enjoy by comparing searches
and purchases among people with
similar habits.
Depth and value of predictive
information being exchanged among
trading partners will grow in the
coming decade as participation in
networked business communities
expands exponentially.
24. 16
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
and Chief Executive Officer, Sourcing
Interests Group (SIG), “is to see
automation technology with leading
market and economic intelligence built
in, alerting procurement and sourcing
professionals in real time — within the
context of their business processes — to
the risks as well as the opportunities
they have to achieve benefits.”
Debbie Manos-McHenry of Huntington
National Bank believes that, “By
2020, it will be normal to reach
into your system and pull out all the
information you need, be it internal
spend data, external performance
benchmarks, market intelligence,
emerging technologies, new products,
best management practices and
processes, and so forth. Similar to the
way investment analysts use Thompson
Reuters or Bloomberg to manage
investment portfolios, procurement will
have immediate access to everything it
needs to manage supplier portfolios.”
Other project contributors agree
that both the quality and depth of
third-party information will continue
to improve and costs to acquire it
will decline. What is more, they say,
companies will turn increasingly
to external market intelligence
gleaned through digitally networked
communities of suppliers, peers, and
experts. Real-time intelligence will be
delivered via the web at the precise
times when buying and other decisions
are being made. And, while these
networked communities will share roots
with business and social networks such
as LinkedIn, Facebook and Twitter,
they will deliver information within the
context of business processes and their
supporting applications.
“As information quality improves
and real-time delivery of information
to business processes becomes more
commonplace,” says Henrik Larsen,
Vice President of Procurement at
Maersk, “I expect negotiations and
other interactions with suppliers to go
in very different directions than they
do today.
“Imagine being able to understand
the effects of particular decisions on
your company’s bottom line and your
suppliers’ bottom lines instantaneously.
People are starting to do this today,
but I see it becoming much more
commonplace in the coming decade. We
will create transparent views together
with our supplier networks. We will
be able to see and understand what is
happening at any given time.”
25. Collaboration Reigns
Companies will dramatically increase their dependence
on suppliers for products, services, manpower, expertise,
and new ideas.
26. 17
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%
of what we create should come from
outside companies. That target is only
going to increase as we move toward
2020,” says Donald Ferguson, Head of
Procurement Operational Excellence
for AstraZeneca. “Having an ability
to screen the entire global population
of suppliers, universities and research
institutions will help us to identify not
only the next generation of medicines
but also the best ways for getting them
to people all over the world.”
customer-supplier innovation always
stays with the parties who drive it.
Roy Anderson, VP Procurement Services
for Metasys Technologies, suggests also
that supply managers will need to go
beyond merely looking for innovation
in the supply base. “Our job,” he says,
“will be to drive innovation where it is
needed in the supply base.”
As Sodexo’s Chief Procurement Officer
Ann Oka describes it, “Our supply
chain comprises many consumer
packaged goods (CPG) and finished
product manufacturers. We rely heavily
on their insights into consumer trends
and their innovation to develop new
products and offers for clients. But,
in a world where we are taking down
barriers, we need to be very good at
mapping where things are proprietary.
The challenge for supply managers is
to get much better at segmentation and
really formalizing these relationships
to ensure they create and sustain
competitive advantage for our company,
our suppliers and for our diverse and
unique clients.”
An important role for supply
management pros will be to segment
and formalize innovation relationships
in ways that protect intellectual
property, manage risk, and ensure the
competitive advantage flowing from
“If you are working to find a new
product or co-developing with a
supplier,” adds Huntington National
Bank’s Chief Sourcing Officer Debbie
Manos-McHenry, “you have several
jobs as a sourcing pro:
• ou need to ensure all the appropriate
Y
intellectual property (IP) protections
are in place,
• ou need to be abreast of all the
Y
potential suppliers, what they have to
offer, and how they might help to get
your people thinking out of the box
on new product development, and
• ou must be able to weigh the risks
Y
and rewards of working with a more
established supplier — who may
carry less risk — versus a startup,
who might be riskier but offers you
an opportunity to move past your
competition in the market.”
Sourcing Interests Group (SIG)
President CEO Dawn Evans suggests
that procurement must also be fearless
about selling innovation and influencing
for change. “Suppliers have so many
great ideas that we stop at the door
because they require us to implement
changes in our own organizations; we
don’t capitalize on their RD and all
they observe in other organizations.”
27. 18
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
cost,” says Dr. Heinz Schaeffer CPO,
Northern and Central Eastern Europe
for AXA. “So we are thinking about
how to outsource activities that are
not among our core competencies.
Importance and complexity are the
two dimensions we will use to evaluate
outsourcing,” Schaeffer continues. “If a
process or activity cannot be described
easily or happens infrequently, we will
probably keep it in house. But if an
activity is repetitive and we can give
clear instructions, we will give it to the
external market.” And that outsourcing
is going to happen, Schaeffer suggests,
whether or not the marketplace is
ready. The reinvented procurement,
he says, will “play an active role in
determining if it is possible to buy or
if we need to define something with
potential suppliers so we can buy
instead of make.”
“As supplier-facing personnel begin
to sit with the business lines,” says
Larry Welch, former VP of Indirect
Procurement for Hewlett-Packard, “as
they start to really know the businesses
and become part of strategic planning
processes, the result will be different
decisions about what gets done in house
and what is done outside and how
you will bring suppliers inside to help
innovate the business.”
Adds KeyBank CPO Jean-Jacques
Beaussart: “We are focused on
increasing variable versus fixed costs,
which means we must work more with
business partners. We need different
business models and we need to
integrate business partners within our
organizations. Innovation will come
from our business partners. We need to
leverage innovation to make sure we
continually create efficiencies.”
AstraZeneca’s Head of Procurement
Operational Excellence Donald
Ferguson agrees that, “There is
definitely a move to externalize the
expense side of the equation, to create
flexibility in the cost base so we can
turn our investments on and off much
more quickly.”
“I am a great advocate of outsourcing,”
says Tim Cummins President CEO
for IACCM, “but I believe the process
will need to become more thoughtful in
the coming decade. We need to see three
levels of thought and assessment:
• ne, can we reduce costs purely from
O
a labor arbitrage point of view?
• wo, can we add expertise
T
incrementally? (this should not be
confused with the low-cost discussion)
• hree, are we being honest about our
T
own corporate culture and behaviors?
“For example,” Cummins says,
“autocratic organizations will never
be particularly good at managing or
deriving benefits from outsourcing
relationships, which need to be driven
and valued on the basis of outcomes.
For some businesses, using all three
levels of assessment would lead,
rightly so, to the conclusion they have
outsourced things they should not
have done.”
28. 19
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.
So, for example, a supplier of printing
hardware for the office will either
morph into — or be replaced by — a
supplier of total print management
solutions. The solution provider will
take on the responsibility for things like,
• Optimizing office productivity in the
placement and quantity of printers,
• Reducing total printing costs from a
360-degree perspective, covering costs
and total consumption of printing
supplies, costs associated with service,
support, equipment upgrade and
replacement, and so forth, and
• Developing and implementing printing
best practices within the customer’s
organization, for example, two-sided
printing, black and white versus color
printing, copy-center versus individual
printing, and so forth.
Where end-to-end supplier solutions
do not already exist, suppliers are
expected to develop them. And where
the solutions already exist, project
participants expect customer enterprises
to become much more receptive to
sourcing them in the coming decade.
“There is a need to find creative
solutions in just about any of the
work that we do,” observes former
GM Executive Director, Global
Purchasing Barbara Whittaker. “Take
an example like call centers, which so
many companies use. Finding the right
creative solution around call centers is
something that can bring tremendous
value to our end customers.”
However, finding those creative
solutions relies on developing new
models for buyer-seller relationships
and for creating direct connections
between solution providers and
internal stakehoders. “When we allow
the people bringing solutions to talk
directly to our internal stakeholders
— to sell the benefits of their solutions
directly — you see internal resistance
breaking down,” Whittaker adds.
“
I expect to see a lot
more total solutiontype relationships
with suppliers,
whether it is an
“
“I expect to see a lot more total
solution-type relationships with
suppliers, whether it’s an OEM, a
third-party distribution partner, or a
marketing partner,” says Larry Welch,
formerly of Hewlett-Packard.
OEM, a third-party
distribution partner,
or a marketing
partner.
29. 20
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.
“The strategy is based on the belief
that we have developed such intimacy
with our client base, we know so
clearly what problems they are trying
to solve that we can offer solutions to
solve these problems rather than simply
providing services.
“In the case of hospitals, for example,
a key challenge is a worsening shortage
of nurses going forward. So, we asked,
‘What are the programs that we have in
place that enhance the environment for
nurses so the hospital can become an
employer of choice?’
“We begin to think about what services
might be added to the solution. Some
of these could end up being outsourced
or acquired. In that case, supply has a
critical role in terms of identifying and
developing the partners or acquisitions
that can provide the services on regional
or national levels.”
“With critical suppliers,” adds John
Campi, former Chief Procurement
Officer with DuPont, Chrysler, and
The Home Depot, “we will commit
to working with them at the very
inception of our product development
cycle. The future is where suppliers’
engineering teams sit down with our
engineering teams and the supplier team
has an opportunity to say, ‘Here is the
optimal way to get our subassembly
for your product made. Now how can
we manage that within the construct
of how you want to build your new
product?’ What I am suggesting is not
new. It has been done successfully, but
not by many.”
“
With critical
suppliers, we will
commit to working
“
“Customer-supplier relationships
are going to get very, very integrated
going forward,” says Sodexo’s CPO
Ann Oka. “For example, when
Sodexo determined that our strategic
evolution was to branch out from food
service management into facilities and
comprehensive service solutions, I
chaired a group to look globally at what
it would mean in terms of building the
supply chains to support it.
with them at the very
inception of our new
product development
cycle.
30. 21
Buyer-seller lines blur
Spend management pros will look to extract more value from suppliers in 2020. But
it won't 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
amount of talent and knowledge sitting
out in our supply bases,” says Roy
Anderson, VP Procurement Services,
Metasys Technologies. “Let’s say your
company has a 30-person marketing
department. Each one of your suppliers
also has a marketing department. Some
will be larger and more sophisticated
than yours; some will be smaller but
they may have expertise in certain areas
or methods that you need to tap into.
“Even if they each have only 3-5
people, if you have 100 suppliers,
that’s 300-500 marketing people in
your supply network that you don’t
even touch. If you can utilize even a
small piece — just 10% — of that, you
can virtually double the size of your
marketing resource. We will spend the
next decade focusing on how to bring
that talent and knowledge to bear for
our companies. We are going to have
suppliers working inside our companies
and it may be difficult to tell the
difference between who is an employee
and who is a supplier employee.”
“It is a better world for suppliers in
2020,” agrees Larry Welch. “When
you have supply professionals who are
partnering directly in the business, who
represent the business to the supply
side, the whole concept of front- versus
backdoor selling disappears.”
And embedding supplier personnel
will become much easier, suggests John
Campi, as the lines separating corporate
functional silos continue to dissolve.
“Today, you have to think about getting
engineering on board, and sales on
board, and marketing on board. It is
always difficult to get those functional
silos to agree. But, I see a movement
in corporations becoming more crossfunctional in nature. That paves the
way for getting suppliers more involved
in strategy development, both for your
firm and for theirs.”
Sodexo’s CPO Ann Oka notes that,
“We already are looking for ways to
integrate functions from upstream in
our supply chains with our own internal
functions, for example, marketing. I see
this evolving to something we are doing
much more effectively by 2020.
“Right now, we are on the emergent
side of achieving collaboration with
multiple suppliers on a development
project. In some cases, this involves
competing suppliers, so it gets a little
interesting when you have to map the
field for who gets to own what portion
of the portfolio and then you bring
them all in a room together to start
innovating for the future.”
31. 22
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,
former CPO with several non-IT
organizations, “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.”
One outcome, according to Urioste, will
be innovation that is more synchronized
across industry segments, more finely
tuned to the total customer experience.
So, for example, innovation among
makers of electric cars, makers of
electric car batteries, and the entire
infrastructure of service stations that
support electric car drivers will be
coordinated and driven simultaneously
to the same objectives.
“This will depend on having very openbook relationships,” Urioste says. “We
will define together where we intend to
arrive in 10 years. We will collaborate
simultaneously to develop, to prepare,
and go to market with the exact
same strategies.”
Urioste notes that while a handful of
companies have already succeeded in
doing this kind of thing, “It requires
complete transformation of the
procurement organization. It means
establishing highly skilled technical
entities that can be embedded with
engineering. It forces companies to
open their books and their patents to
suppliers who could be supplying their
competition, so understandably, it is a
very difficult thing to accomplish.”
“We are in a transformation,” remarks
Henrik Larsen, VP of Procurement
with Maersk. “In the same way that
Apple has thousands of developers
worldwide creating applications, I see
us and our suppliers building loose
networks where relationships are fluid
and production moves out to a much
broader spectrum of suppliers. We
will be fighting over the same pools of
supplier and customer resources.”
Urioste agrees that, within these
supply networks, there will always be
competition for dominance. “We will
need to work very closely with suppliers
within the networks, while also trying
to dominate and to optimize our own
companies’ business objectives. But
domination of the networks has to
be such that it puts us in a position
of becoming the customer of choice
with suppliers. It is a dilemma we need
to solve in the next 10 years: how
to evolve from confrontation or two
different worlds to a single networked
entity where we dominate but are also
loved by our subjects.”
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. At
the same time, I foresee technology
that enables suppliers to put their
ideas forward more easily to potential
customers. Rather than buyers saying,
‘Here are the problems we are trying to
solve,’ it will be suppliers saying, ‘Here
are solutions we have.’ In the coming
10 years, I see us creating networks in
which ideas and propositions get shared
very quickly and widely.”
32. 23
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
supplier’s most favored customer has
been around for a long time and tends
to fade and gain strength as market
pricing leverage swings back and forth
between buyers and sellers.
But participants in the Vision 2020
Project believe procurement executives
will need to take the concept up a
notch in the coming decade as the
leverage shift to sellers will be more
structural than it is cyclical. In addition
to being focused on getting the
most competitive performance from
suppliers, they expect to be out actively
selling their companies as the long-term
exclusive business partners of choice to
the best, most innovative suppliers in
the marketplace.
“At the end of the day,” says Sodexo’s
CPO Ann Oka, “it will be suppliers
who are in the power seat in terms of
deciding who they are going to partner
with for the kind of collaborative
innovation we are talking about. If
there is to be competitive advantage,
they cannot join forces with everyone.
Even if they were to partner with
two or three customers within an
industry, there would be no competitive
advantage; we wouldn’t be placing
ourselves ahead if we were one of
three.” The challenge, then, Oka
says will be to “drive our supplier
relationships in critical areas to the
point where we are their most desirable
customer out there.”
“Very few companies have the luxury
of being merely demanding customers,”
agrees Henrik Larsen, Vice President of
Procurement for Maersk. “If you are
not number one or the most sexy, then
you need to be able to show that you
are a willing, capable and attractive
customer if you are hoping to persuade
the most innovative suppliers to work
with you, to develop their businesses
through you.”
Donald Ferguson of AstraZeneca sees
two distinct buckets of activity. The
first is the commodity or leveragetype bucket where power will
continue to ebb and flow, depending
on supply-market economics. “In the
commodity land, it will always be
about simplification, standardization
and performance to contract. There is a
brutality to that type of buying because
it is not really what interests us as an
organization. It will always be just
about performance to the contract.”
The second bucket, according to
Ferguson, will contain all the critical
strategic categories. “Our objective will
be to access the largest possible set of
information and identify the few really
great ideas among the millions out
there. In the current model, you pay to
access an entire library of information.
But, we don’t want to pay for a hundred
thousand pieces of information. We will
pay handsomely, though, for the five or
so ideas that are really worth something
to us. The objective of isolating those
truly great ideas will drive us toward
gain sharing. So, in some years, you may
get nothing in payment but in others
you will be paid quite handsomely.”
33. 24
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
of trust,” remarks Tim Cummins of
IACCM, “as procurement has driven
strongly to allocate more risk to
suppliers. We have seen in our data that
many in procurement believe they are
becoming more collaborative, while
suppliers claim just the opposite. We
need to create new instruments that
foster trust, at least in the relationships
where innovation and creativity matter.
It goes back to the issue being able to
look at the supply base and recognize
the sources of real value.”
“In a world that moves faster than
ever — where volatility is a fact of life
— there is no such thing as an optimal
contract,” says Maersk’s Henrik Larsen.
“And, while we obviously cannot
rewrite contracts on a daily basis, we
can write contracts that share both the
good and the bad things that happen.
We will get to those kinds of contracts
by changing our mindsets, by being
more open with suppliers.”
“We do benefit and penalty sharing
with certain key suppliers today,” says
Sodexo CPO Ann Oka. “We have open
book relationships that say ‘If I win,
you win’ and we map the ways in which
we will share benefits and penalties. If
our own behavior starts creating cost
in the supply chain, we share in the
negative impact of that behavior. Still,
in the future, we need to be much better
at articulating the value we bring to
the top line through collaboration with
suppliers. It is very difficult — and I
believe it will always be difficult — to
segment and identify how much of our
success is due to our own brilliance
and how much is due to a supplier
coming into the process. It will be a key
challenge for us moving forward.”
“We conducted a study,” adds AXA
CPO Dr. Heinz Schaeffer, “to find
business partners that could work
according to our concepts. We came
to the conclusion that those business
partners do not yet exist. Companies
pursuing typical outsourcing models
want to charge either for hours or
transactions. But that is not what we
have in mind. We are looking for real
partners with whom we can run the
business together. So we have to define
a new way of interacting with our
external partners and new kinds of
contractual relationships to support
that interaction. The new business
model will be something that evolves
rather than being stable over time. It
will develop according to the level of
maturity in the relationship.”
“Price should be the last thing we care
about,” suggests Anderson of Metasys
Technologies. “We want results. We
want overall value. So, we are going
to see the emphasis in contracts go
from price to fairness and value. There
still has to be a unit of measure, but it
doesn’t have to be a dollar. It could be
effort. It could be something else. We
will say to suppliers: ‘Show us that you
are giving us better value than someone
else and then break down the value
so we have transparency, so we can
work together on how to tie it in to a
compensation structure.”
34. 25
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
solutions,” observes Roy Anderson,
VP Procurement Services, Metasys
Technologies, “but there are hundreds
of suppliers out there with the wrong
solutions. They might be good — or
even great — solutions, but they are not
the right solutions for you. Likewise,
we have all seen situations where
suppliers come in to sell with their best
and brightest people. They make the
sale and then their best and brightest
disappear. You end up with their second
team supporting the relationship and
you don’t always get the value or the
results you anticipated because their
best and brightest people are out
earning big commissions on winning the
next sale, not on keeping the
old business.
“We have to change this around
entirely in the coming decade. We have
to understand the full scope of how
to motivate suppliers. As soon as we
understand motivation, it will be a
different world. Our contracts in 2020
will be based on a better understanding
of what motivates companies to always
offer the solutions that are best for us,
to invest in creating the best solutions
for us, and to give us their best support
— their best and brightest people — for
the long haul.”
Classic demotivators — such as 30-day
escape clauses — need to disappear,
Anderson contends. “How can you ask
a supplier to invest in people, talent and
innovative thinking, to put money into
the development of your relationship
when you can leave the relationship in
30 days if you feel like it? With every
critical supplier we work with, we have
to make sure that we are brought into
their success and they are brought into
ours. We need to be willing to show
that, if they are going to invest millions
of dollars or thousands of hours and lay
open their core competencies to us, it is
going to be a win-win scenario. We will
be making sure they survive and earn a
fair profit for the work they do and the
value contributions they make.”
Javier Urioste agrees: “I see momentous
change in how we relate to suppliers,
but our contracts must be balanced
with no ‘not-for-cause’ exit clauses.
Those who have done this already
have enormous advantage over their
competition for reaching end customers
first with innovations and assuring
supply when there are shortages or
other problems.”
On a global scale, observes Tim
Cummins of IACCM, contracts are a
relatively new phenomenon. “If you
were to track the number of contracts
most organizations had 20 years ago
compared to today, you would see a
dramatic increase, so I think we are at
the beginning of an evolution in the role
of the contract. We will see companies
discover how to use contracting less as
a way to shift risk and more as a way
to ensure there is mutual understanding
and genuine alignment. Our contracts
will let us know we are on track and
managing change effectively. Contracts
will show that we understand and
accept the differences between issues of
competence and of honesty or ethics.”
35. Risk Management Capacity
and Demands Soar
Work environments are mobile, virtual and highly
automated, freeing supply management pros to wrestle with
rising complexity and risk.
36. 26
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
Sourcing Officer for Huntington
National Bank, envisions it:
• Procure-to-pay systems will be open
“
architecture, web-based, and able to
interface with many systems within an
enterprise and among its supply base,
• Routine purchase transactions will
be done by end-users with little to no
involvement from sourcing; systems
will enforce appropriate compliance,
workflow, and rules,
• Contract management and
administration will be highly
automated, using templates and
collaborative tools in traditional redlining of agreements between buyers
and sellers,
• orkflow will enable end users
W
to produce agreements that meet
minimum criteria while exceptions
will be escalated to sourcing, and
• Risk evaluation and assessment will
be built into systems and processes
(versus being ad hoc activities).”
“Managing purchase orders and
invoices will be fully automated by
2020, even in the least developed
companies,” agrees Javier Urioste,
former CPO with several nonIT organizations. “So, too will
processes for competitive sourcing
and contracting. There will be
certain exceptions, but, in general, all
nonstrategic, highly critical elements of
the sourcing process can and should
be automated.”
Roy Anderson, VP Procurement
Services, Metasys Technologies, who
has made a career of automating
procurement, sourcing and supply
chain operations in both manufacturing
and services environments, agrees
emphatically: “For the portion of
the supply base that is not critical,
procurement will put automation
engines into place, get them working
properly, and then get out of the
way. Buying will be completely
decentralized to the people who need
goods and services.”
Where it makes sense, Anderson says,
items will be available in catalogs. But
other situations may require access to
markets for real-time competitive bids.
“End users will execute their own bids.
Procurement’s role will be to set the
automation engines up, then monitor
and manage to make sure they continue
to run.”
And while he believes there will always
be value in procurement seeking
creative ways to manage noncritical
spending categories, Anderson expects
that efforts in those directions will be
“kept in perspective.”
37. 27
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.
As such, Anderson sees more
procurement and supply management
work being done in the field with realtime access to business data and the
ability to execute processes — whether
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,
from far greater distances, more easily
into critical sourcing and supply
management processes and into other
strategic information gathering and
analysis exercises.
“
“
“We have not fully engaged the
idea that almost every smart phone
already has voice-to-text recognition
and two-way video,” remarks Roy
Anderson, VP Procurement Services,
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
out in the middle of nowhere.”
...you can sit in your office
and observe a manufacturing
process in real time on the
other side of the world...
38. 28
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
interacting with suppliers will be a
virtual experience. Digital trading
networks will yield a wealth of realtime intelligence on trading partner
qualifications and performance, market
intelligence, and other services — for
example, payment mechanisms, logistics
visibility and execution, tax data, and
so forth — that will make it easy to
engage, forge trading relationships, and
collaborate with suppliers.
Procurement’s job, Roy Anderson
believes, will be to direct and observe
the flow of information and to take
meaning from it rather than being the
creator or conduit for information
moving between and among internal
personnel and suppliers.
And, while Anderson expects there
to always be a necessity for in-person
encounters, the real obstacle to more
virtual collaboration, he says, is that
“so many procurement professionals
still want to serve as barriers between
suppliers and internal customers. We
need to rip the barriers down. Our
objective should be to let people do
their own work with suppliers. Our
job will be to create the contractual
environments that enable them to
be effective and innovative in the
collaboration they undertake.”
Barbara Whittaker, former Executive
Director, Global Purchasing with
General Motors, offers a similar vision:
“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.
“We want to get to the point where
suppliers understand customers better
and more deeply so they can bring forth
solutions for all kinds of things that
improve the business. Today, this is a
long dance when it should be a sprint.
“Technology,” Whittaker continues,
“will make collaboration faster and
more secure. Information about
customer requirements will flow
from internal stakeholders directly to
suppliers and there will no longer be a
procurement professional filtering the
flow of information.”
39. 29
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.
Fixing and automating processes. All
that inward-looking, intense focus on
cutting costs is going to end. Replacing
it will be a new outwardly pointed
focus on driving growth and expansion
through exclusive and integrated
supplier relationships and innovation.
“Much of what procurement does
today is driven by spend management,
but I think, in 10 years, those disciplines
will be much more integrated into
the normal ways of doing business,”
remarks Larry Welch, former Vice
President of Indirect Procurement for
Hewlett-Packard.
“We have seen procurement adopt
an aggressive role in executing
massive cost reductions,” agrees Tim
Cummins, President Chief Executive
Officer, International Association for
Contract Commercial Management
(IACCM). “And, while this has been
seen as fundamental to business
competitiveness, we all know it is not
an endless opportunity.
“I think we are probably coming to the
end of the cost-reduction trend that has
been very much with us for the last 15
or 20 years.”
In lieu of that intense focus on reducing
costs, the procurement executive for a
major U.S. insurance company sees life
for procurement becoming much more
outwardly focused and collaborative.
“We will ask:
• hat are the core capabilities
W
suppliers have?
• hat are the core capabilities we need
W
in order to do our business well?
• ow can we align and link our
H
business strategies with suppliers’
business strategies? and
• ow can we drive to best-in-class
H
performance with the suppliers that
are best positioned to help us execute
our business strategies?
“In the shorter term, it will be all about
defining how this is going to work,” he
says. “When you look out 10 years, it is
going to be all about execution.”
And while, due to performance gaps,
the executive sees some hesitancy
to pursue deeply integrated supplier
relationships today, he believes it is
more important to identify suppliers
with the greatest potential for longterm alignment than it is to find perfect
performance in every aspect.
“In the end, you need supplier
relationships that are tied to your goals.
If you can find those, you will have little
difficulty working with them to close
performance gaps.”
40. 30
It’s complicated
As emerging economies place successful, fast-growing, and culturally different
companies onto the global playing field in the coming decade, the process of
selecting suppliers will become riskier, more complicated, and more fluid.
“I believe we are going to see a
significantly more diverse and
complicated business landscape emerge
in the coming decade,” observes
Tim Cummins, President Chief
Executive Officer of the International
Association for Contract Commercial
Management (IACCM).
“We are already beginning to see some
of that complexity as companies from
emerging economies — Mexico, India,
the Phillipines, for example — succeed
at moving into the global trading arena.
“These companies are not coming to
the global economy with the same
business models as Western companies,”
Cummins notes. “Their expertise, for
example, is quite often around building
brands in emerging markets. In a sense,
they are attacking the big Western
players from very different directions.
“Many of the emerging global players
are, in fact, conglomerates. And, while
that business model went out of fashion
some years ago in the West, it appears
to be giving newer global players some
very real advantages particularly in
areas like innovation and cost control.”
For procurement, Cummins suggests,
this will dramatically affect commercial
relationships with suppliers. “The
range of supplier choices is going to get
much broader, so we are going to have
to become a lot more sophisticated in
our supplier discovery and selection
processes. We will still look for
opportunities to lower costs, but I
believe we will become far more focused
on quality and innovation.
“We will also emphasize versatility,
agility and flexibility in our trading
relationships, dispensing with older
business models in which we sought to
guarantee supply or prices in return for
committed procurement timeframes or
spend volumes. For example, the whole
idea of long-term commodity supply
agreements has already disappeared
from global metals markets.”
Greater supply-market complexity and
less stability in trading relationships is
going to demand more creativity and
different thinking from procurement,
Cummins suggests. “Procurement will
need to rethink how it hedges and
manages volatility and risk. With some
suppliers, it is going to mean we go for
a greater degree of collaboration. And I
think—for some businesses—the trend
may lead them back to more vertical or
horizontal integration. We have seen it
happening already in areas like mining.
“As we become more sophisticated
in our supplier selection processes,”
Cummins adds, “we will get much
better at understanding the importance
of things like cultural fit between
organizations. Far too many sourcing
decisions have been made on a costonly basis without considering the
importance of cultural fit. The result
has been far too many important
relationships that fail.”
41. 31
Firms wake up to supply risk
Converging trends will make supply relationships even riskier in 2020 than they
are today. Project participants expect to see big increases in companies’ awareness
around supply risk and also an expansion in their perceptions of where risks lurk.
“We are going to see a big awakening
around supply risk in the coming
decade,” says former DuPont,
Chrysler and The Home Depot CPO
John Campi. “Today, when supply
management organizations are
challenged on risks in their supply
chains, they generally look at suppliers’
financial stability, which is only one
element and not a very significant one
compared to continuity of supply.
“What is more, many companies treat
all suppliers on equal footing, which is
unacceptable from a risk point of view.
Some suppliers are truly critical to the
continuity of your business, while most
are not. Those critical suppliers need to
be treated very differently.”
Dr. Heinz Schaeffer, Chief Procurement
Officer, Northern and Central Eastern
Europe for AXA agrees there will be
a big expansion in the kinds of risks
companies address in their supply
chains, considering, for example, such
things as suppliers’ sustainability, social
responsibility, physical and information
security practices, to name just a few.
A particular challenge, according
to Schaeffer, will be for supply
management to transition from generic
to more dedicated and customizable risk
management approaches, depending on
spend category, region of the world, and
so forth.
Meanwhile, KeyBank Chief
Procurement Officer Jean-Jacques
Beaussart suggests that, “Complexity
is a risk that most companies will be
addressing in 2020. They will need to
be agile and they will be looking to
transition away from very complex and
inconsistent processes to processes that
are simpler and more easily controlled.
“I do believe that in 10 years, or even
before that, we will have simplified
our processes for managing supplier
relationships and that simplicity
will enable us to have KPIs or metrics
that measure our success in very
efficient ways.”
42. 32
Join the conversation!
We urge all readers of this report to join the debate and to extend the discussion
with new ideas by joining the conversation at:
www.futureofprocurement.com