Key trend in strategic sourcing
- 1. KEY TRENDS OF STRATEGIC SOURCING
- 2. • Executive summary • Role of Analytics • Defining digital procurement • Digital Technologies and Capabilities • The digital imperative • Trends in procurement • Post COVID era • Conclusion
- 3. Executive summary The sourcing ecosystem across all organizations has grown significantly in recent years. More and more outsourcing projects have been initiated and realized, creating significant complexity alongside the requirement for agility and flexibility. In parallel, governance and regulatory costs in financial institutions have increased. In consequence, the sourcing operating models used in organizations are no longer fit for purpose.
- 4. Today, organizations face many diverse and ever- changing trends and moves in sourcing, which have a high impact on the sourcing operating model. Instead of implementing all actions, organizations need to focus and prioritize so that they can achieve effective transformations and benefits for their business To realize and maximize the potential benefits of the sourcing trends and moves available, the Deloitte “Sourcing Trend Management” approach provides proven methods and tools to target actions and provide the greatest benefit to organizations. Our approach leads organizations towards a more efficient, less complex and less cost- intensive sourcing operating model.
- 5. Key Trends in strategic sourcing Role of Analytics • Advanced analytics-enabled spend-intelligence solutions can offer deeper category insights to uncover opportunities in strategic sourcing of commodities—particularly for those with volatile pricing caused by the fluctuating cost of raw-material inputs. • Disparate data sources can be leveraged to better predict the commodity prices.
- 6. Defining digital procurement Digital procurement is the application of disruptive technologies that enable Strategic Sourcing (S2C) to become predictive, Transactional Procurement (P2P) to become automated, and Supplier Management (SM) to become proactive. • Categorize and manage spend in real time, leveraging machine learning • Predict demand with artificial intelligence • Know landed cost for any commodity for all alternate countries of origin • Predict future sources of supply • Act on timely alerts from all negotiated agreements (e.g., indexed pricing, penalties, renewals) through smart contracts
- 7. Digital Technologies and Capabilities The following digital solutions and capabilities have entered the maturing phase; CPOs that have not already embraced them for competitive advantage should expect them to quickly become table stakes: • Cognitive computing and artificial intelligence • Intelligent content extraction • Predictive and advanced analytics • Virtual reality and spatial analytics • Cyber tracking
- 8. • There is no end in sight to the growing pace of technological innovation fueling an expanding pipeline of digital procurement solutions. • Procurement leaders should expect a rapid pace of change and continued evolution of the procurement function. • Leaders that are able to adopt these solutions have the opportunity to execute on their main missions with radically greater insight and efficiency.
- 9. Trends in procurement • Procurement’s contribution to the overall organizational strategy will create competitive advantage Leading procurement functions will become part of an organization’s value stream and will be more influential in contributing to the overall business strategy, growth agenda, and competitive advantage,” EY says, adding that procurement leaders will be expanding their remit from a focus on cost leadership to enabling innovation, agility, and supply certainty • Procurement will be a smaller, more agile function that partners directly with business units More activity will take place in the organization’s “virtual center,” EY predicts, and with people who are geographically embedded within business units—thus meeting the need for increased collaboration
- 10. • “Touchless” procurement will gain in popularity over the next 24 months. Captured via IoT, procurement data will be used to support real-time tracking and monitoring of outcomes through continuous feedback loops across assets. “Asset-intensive industries will effectively link this data across the enterprise and connect to suppliers. • COVID will continue to create problem areas Of course, this all comes with the caveat that in some parts of the world, and the U.S. in particular, the COVID crisis is holding steady or even getting worse, and that will continue to have a major impact on procurement efforts around the globe, according to Spend Matters.
- 11. Post COVID era The COVID-19 pandemic has put an enormous strain on global supply chains, at times halting manufacturing while shutting down airports and seaports, interrupting delivery of raw materials and finished goods. At the pandemic’s onset, procurement departments switched to crisis- management mode to help companies alleviate disruptions, including sourcing personal protective gear for employees and helping smaller suppliers manage their cash flow. Our analysis suggests that procurement could gain the most by focusing its strategic initiatives in five key areas • strengthening supply-chain resilience • zero-basing the design of category value-creation strategies • investing in supplier partnerships and innovation • transforming to an agile operating model By proactively making these changes, procurement leaders can not only counter some of the worst effects of the crisis, but can also set themselves up to prosper in the future.
- 12. Conclusion Organizations must determine the right mix of resilience that they want to build into their products and revisit their supply chain strategy to ensure that resilience is embedded into research and development, product design, and planning. By focusing on building resilience comprehensively, and ensuring it is not seen as an afterthought, organizations can be better prepared for whatever the future brings