A lot can be said about how procurement has evolved over the last decade, and it’s the time of year when every procurement blogger begins to speculate about the direction of our industry. Is this the year where procurement is finally recognized as strategic? Will new and improved spend analysis tools allow us to predict and pro-actively reduce spend? Is savings still going to be a metric for procurement in 2016? Might it get replaced with something new and improved, like the Cloud?
It’s very difficult to answer these broad questions, but as a boots on the ground consultant, I bear witness to the goals and objectives set by procurement teams across a large client base that spans a multitude of industries. I can tell you definitively what procurement groups are planning at a granular level. These new sourcing tactics will become commonplace in 2016, and set precedence in our field for years to come. For your consideration, attached are the top 5 procurement trends you can expect to see in 2016.
1. Procurement groups will exceed their savings targets by a wide margin - Procurement organizations, faced with diminishing returns and limits to what they can address at an organizational level, will begin to operate under a fiscal year that will be 24 months long. This transition will allow them to functionally reduce their corporate savings objectives by 50%.
2. The Big Data bubble will finally burst - Big Data in procurement will see its first slight decrease in size. We’re expecting to see this trend continue in following years until plateauing at Medium Data in 2019.
3. New currencies will be used to leverage the supply base –suppliers will continue to push back on customer requests for standard payment terms that range from 90-120 days. To address this issue, finance departments will look for new ways to screw their supply base. As such, Bitcoin transactions will begin to replace USD-based transactions for leading companies.
4. Next Level negotiation tactics will become more commonplace – With procurement teams increasingly being asked to do more with less, new negotiation tactics are being developed to streamline the sourcing process. A critical aspect for “next level” negotiations will be the increasing reliance on suppliers to provide experts to negotiate their own contracts on behalf of customers – saving them time AND money.
5. Indirect spend will decrease – Frustrated with the time, complexity and subject matter expertise required to effectively address indirect spend, more companies will experiment with converting indirect spend into direct spend. Not surprisingly, this conversion will also mean that direct spend will increase this year.
Based on these trends, it is clear that 2016 will be the year procurement finally realizes its full potential, shifting, wholeheartedly, from tactical to strategic. For procurement leaders looking for ways to elevate their brand within the next year, the question should not be if these trends will occur, but how fast can they be implemented. One thing is for certain, 2016 will be an exciting year for all of us!