VISION 2020: A View of Procurement in 2020

The spend management function will be very small by 2020. A strong central core ensures that all the right processes and tools, skills, relationships, templates, and performance metrics are in place across business lines and functions. As the functional level shrinks, there will be more supplier-facing positions in the strategic lines of business (SBUs). These professionals will develop  strategies that help the business organize, design and execute processes, outsource (or insource), assure supply, innovate, and manage costs.

Today’s focus on cost savings will be replaced by an emphasis on profitability, which can be achieved by cost savings or by revenue growth.

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. 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.If it’s not critical, it will go to third parties.

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,
  • Ordering based on minimum-maximum levels, and
  • Invoice, reconciliation and payment.

People are not going to need to know how to write purchase orders. They will need to be able to support supplier relationships that provide their companies with continuous strategic advantage in their niche markets. The business  will be automated to an extent that the information needed will always be available.

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.

We now 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 R&D, 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.

Procurement will add much more value in 2020 than it does today. Procurement will be involved in strategic planning for the enterprise and also in identifying, implementing, and delivering value through mergers and acquisitions. 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.

Information gets better, faster, more networked, more forward-looking…and available right when you need it.

Replacing the old price negotiation focus will be much greater emphasis on:

  • Supplier profiles,
  • Innovation from supplier bases, and
  • Critical suppliers will share both risks and rewards.

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.

Companies will dramatically increase their dependence on suppliers for products, services, manpower, expertise, and new ideas. Where end-to-end supplier solutions do not already exist, suppliers are expected to develop them. 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. 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 road maps across connected businesses and industries.

Smart Phones, tablets, embedded chips, and not-yet-imagined devices will create a massively mobile work environment for procurement and suppliers by 2020. 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.