2015 was quite a year for the supply chain industry. Constant market changes have placed an increased pressure for companies to evolve and adapt to potential threats, leading many to turn to the procurement and strategic sourcing functions (both internally and outsourced) to remain competitive. Shifting global landscapes have prompted companies to evaluate where they seat supply chain operations; food recalls have created a greater consumer demand for product transparency; a growing environmentally-cautious consumer base has created pressure for companies to make more ethical and sustainable business decisions; advances in technology and data analytics are prompting companies to evaluate all aspects of their supplier and agency relationships.
So, what does all this mean for procurement in 2016? We sat down with our executives at Source One and asked them to both reflect on recent trends and look into their crystal ball to see what lies ahead for supply management in the New Year.
In Part I, of this series we'll explore how Procurement is growing as a strategic arm for organizations, how data visibility remains an ongoing challenge, and how savings isn't the only metric procurement and sourcing departments are focused on anymore.
Increased Strategic Reliance on Procurement
More organizations are relying on Procurement to lend their subject matter expertise in business decision making - a trend that has been gaining ground recently, and will be a hot spot for Procurement pros in 2016 and the years to come. What may have begun as an opportunity for companies to reduce costs during times of lull, organizations are now leveraging Procurement proactively to guide company-wide investments
beyond direct materials, in even previously untouched categories such as Marketing, Human Resources, and Professional Services.
Why? The proof is in the competitively-priced pudding. Think back to all the media agency reviews that took place this past year. Major companies in industries ranging from consumer packaged goods to automotive have revisited their marketing spend with the goal of optimizing budgets - with Procurement at the helm. Lending subject matter expertise and market intelligence, Procurement departments review everything from agency fees, production costs, and payment terms and conditions. 2016 will be the year this trend kicks in to full force as more organizations realize the budget optimization potential of bringing in the support of Procurement into “untouchable” categories.
Challenges Stemming from a Lack of Spend Data Visibility
While companies are in the process of growing, right sizing, investing in different tools and technologies, or simply making purchases for an array of organizational needs, losing spend visibility is an all too common challenge – a challenge Source One’s executives know will continue into 2016 and further in the future. With a fresh start in the beginning of the year, Source One’s spend management experts recommend that companies resolve to take a deep dive into their spend. Conducting a spend analysis exercise will not only bring to light opportunities for cost saving initiatives, but also provide much needed insight for strategy readjustments.
Focusing on More than Savings
Procurement departments have long demonstrated their value based strictly on savings – but simply being measured on savings is selling procurement short. In fact, many best-in-class organizations actually de-emphasize savings, focusing procurement’s efforts on driving sustainability, managing supplier relationships, and mitigating supply chain risks – and measuring themselves accordingly. Source One’s executives’ anticipate 2016 being a year of shifting KPIs, as organizations large and small begin to catch on to the added value procurement brings to the table in impacting organization-wide strategies.
What else does the future have in store for spend management in 2016? Stay tuned for more predictions and reflections from our executives.