5 major procurement trends to watch for in 2023

2021 is soon going to be over. Though there's still enough time left for surprises to unfold, most of us would agree that this year has been more stable and less erratic than 2020.  Does that mean there's nothing new for procurement? No new challenges, changes, or trends? Well, if you ask us, we would say it's only a matter of perspective. 

Let's change our perspective and look at this year again. The new reality of 2021, unprecedented changes the year brought, and continuously evolving landscapes have added a lot of weight to procurement's ankles. As a result, the pressure to do more with less intensified for procurement. And from where we can see now, there appears to be a dramatic shift in the role of procurement and the value it can bring to the business. 

Unsurprisingly — and as it's said, no pain, no gain — this expectation shift brings with it a pretty bright future for procurement. Given we clean our lens and set the focus right on what technologies and strategies to scale. 

So, what happens to the absolute truth of procurement or the 'cost reduction' trend when we make this switch? Cost reduction has been, is, and will always be the key trend for procurement. And this fundamental metric will be the harbinger of the future of procurement, where things move fast and at scale to convert disruptions into competitive advantages. 

Based on what this new lens shows us, the following are the top 5 procurement trends for 2022:

1. Sustainability Will Sustain

This year, in the UN-led COP26 summit on climate change mitigation held in Glasgow, Scotland, leaders from across the world made bold commitments to fulfill their climate agendas for the next decade. 

Though these commitments are not legally binding for many countries, another reason that makes companies focus on ESG or environmental, social, and governance issues is the need to fulfill their customer's demand that prefers brands with ESG credentials over others.  

Everyone wants to make their contribution towards healing the world. And when it comes to businesses, they want to be seen as vanguards of environmental stewardship.  

Fast facts: On average, two-thirds of a company's environment, social, and governance footprint lies with its suppliers. 

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The figure above is high enough to make an impact. Hence, sustainable procurement is one solid way for businesses to assert their willingness and inclination to sustainable practices.

Moreover, sustainable procurement is imperative to businesses of all sizes and in every sector as besides future-proofing the organization, reducing risks, and improving financials, it also bestows greater flexibility to businesses.

2. The Cloud Advantage

The future is here for the procurement function, and if you believe experts, it's with the cloud. But if you are someone who only trusts numbers, take a look at this study by Gartner that says the cloud can save companies a significant amount of money — an overall average of 14%, in fact. 

Here is another report from Deloitte Global 2021 Chief Procurement Officer survey that says, "Investments in advanced digital solutions are a key enabler for success."

Staying ahead is critical, especially for procurement function that's still rapt with old methods and processes that desperately need enhancements. And to fulfill this need having a set vision to transform is the first step towards achieving digital transformation success.

Previously, many procurement organizations lagged in the race to adopt cloud computing due to confusion around the financial, implementation, and usage aspects. But now, benefits like user-friendly application interfaces, greater cost agility, lower upfront investment, and increased retained cash are changing their stance.  

The advantage of cloud-based procurement isn't just confined to ease of use and comfort, the fact that it helps companies draw insights from discrete data sets tops all. 

With a plethora of fans and dozens of advantages on its side, we could not help but agree with Forbes that describes cloud computing as crucial to the future of our society, regardless of the industry you are working in. 

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3. Supplier Innovation and Collaboration

According to the Deloitte CPO Survey 2021, supplier collaboration and innovation is the single biggest focus for CPOs to unlock the most significant value in the coming years. 

The scope in this area is obvious and includes multiple opportunities around supplier information and performance management, risk and compliance, innovation, supplier relationship management or SRM, and so on. 

However, a digital capability gap makes it challenging for organizations to generate value. 

We agree Collaboration is difficult when you have hundreds or thousands of key suppliers but no tools, strategy, or resources to manage them. 

Another Deloitte report aptly highlights the significance of collaboration:

"Collaboration can increase resilience both by helping organizations make decisions and communicate more effectively and by fostering a sense of trust. When the pandemic hit, many CXOs realized they needed to speed decision-making and improve communication within their organization."

Besides the importance of resilience, we have also witnessed competitive advantages getting eroded with the pandemic. Hence, there's increasing attention to utilizing the great innovation pool that lies within the supply base, and technology is the enabler or the tool for doing so. 

 4. The Reassurance of Secure Supplies and Low Risks

In the aftermath of covid, we have seen shipping crisis, raw material shortages, commodity and global trade risks, competitive threat, and brand risks, to name a few. 

Now, as we look into the future, the aftershock of these risks and complexities has propelled procurement to follow an innovative approach and become a true strategic partner. 

As a result, businesses are putting more attention to working closely with their strategic suppliers and partners and overhauling legacy processes, tools, and mindsets. 

5. Advanced Analytics to Up the Ante

Data and analytics are being understood as key for procurement functions. 

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As per the Deloitte Chief Procurement Officer Survey 2021, "High performers are 4-5 times more likely to have fully deployed advanced analytics/visualization, 10x more likely to have fully deployed RPA solutions, have fully deployed predictive analytics capabilities (12% vs. 0% for others), and are 18x more likely to have fully deployed AI/cognitive capabilities. The digital capabilities delivering the most value include diagnostic analytics & visualization, predictive, RPA, and artificial intelligence (AI). Analytics, while becoming more advanced, is still an area of focus for most CPOs."

We know the cross-functional role procurement play between an organization and the value offered by its supply chain. Unfortunately, on many occasions, the procurement function lacks quality data and analytics crucial to its success in this role. 

That's why most CPOs label lack of analytics and low data quality as the biggest roadblock to procurement efficiency. 

The way forward isn't just to use procurement analytics as a way to present data in beautiful, user-friendly dashboards but also to identify actionable insights that can drive the strategy forward and deliver value. 

To find out how you can stay competitive, increase profits and drive growth in 2022, get in touch with us to learn how Ignite Procurement can help you achieve all this and a lot more. 

Introduction

5 major procurement trends to watch for in 2023

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