The future of procurement

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By Pedro Paulo, CEO of Gatewit.

What might the next 10 years hold for the procurement industry and the people working in it? Before looking forward to 2023, let's take a brief look back to see how the procurement industry has developed over time. Procurement began to rise in importance in the 1960s, where planning and stock management skills were required to ensure the right materials were getting to the right place at the right time.

The challenging economic environment of the Seventies saw a need for trading and negotiation skills, while the Eighties required a wider range of general management skills, with growing interest in procurement from the public sector.

The rapid advance in technology in the 1990s needed a more analytical skillset, and the advent of the internet in the 2000s meant that more data was available, with strategic sourcing, partnership working and CSR coming to the fore.

Over time, technology has had an impact on procurement, and the industry has moved away from a focus on physical supply to wider questions around value. Links have developed between procurement within and outside of an organisation, with both areas becoming integral to procurement's success. Most importantly, while the business world has become more complex and challenging, there is more information available than ever to help make sense of it.

Looking ahead at what might be required from procurement professionals in 2023, we should consider the likely environment in which they'll be operating.

The world economy may be more stable, but we don't know what state Europe will be in politically, and most established economies will be facing competition from manufacturers in the BRIC nations.

Some resources will become more scarce, valued or controversial, with access to rare minerals, for example, becoming a source of both opportunity and possible conflict.  As we see global shortages in some commodity areas, the buyer/supplier balance is likely to move toward favouring the supplier.

Governments may look to exercise power and raise revenues by more closely controlling how private sector companies operate, and there may also be more pressure to regulate private firms, for them to operate in what is perceived as a more responsible manner.

However, as the role of government is likely to come under greater scrutiny, there may be increased opportunities in the private sector, such as more outsourcing of services.

One thing we can confidently say though is that the pace of technology development isn't going to slow and neither will the opportunities for procurement personnel to use that technology for the benefit of the company.

It's possible, with transactional procurement activities being largely automated, and budget holders taking on some of the more strategic market or supplier management activities that – in a few limited areas - procurement might virtually disappear.

But, even as technology becomes more powerful, there'll be no reduction in the need for human judgement or inter-personal contact.

Whilst we'll see an increase in automation of supply chain activities, there'll still be critical commercial and judgemental issues that can't be left to machines alone.

And in other sectors such as public sector procurement, managing the dynamics of the internal stakeholders' relationship to suppliers and the external market will continue to be central for procurement.

So, while we don't see procurement disappearing, we do see a need for it to change.

The industry needs to move away from its prevailing focus on unit cost reduction, to playing a wider and more fundamental role in the business, managing the value gained from dealings with existing and potential suppliers.

To do this successfully, procurement personnel will need to develop a new skillset.

Firstly, they will require the ability to communicate both internally and externally, so they're able to deal with external markets and suppliers, as well as internal stakeholders, colleagues and budget holders.

And secondly, they'll need a balance of analytical and relationship skills, working in an analytical manner when appropriate, whilst demonstrating a high level of sensitivity.

Not all procurement roles will require the same balance of course, as junior analysts may not need to worry about relationships, and top execs won't need to be constantly concerned with analytical detail.

So, while the future may be rapidly changing, bringing fresh challenges and global issues, it can be addressed by better technology and, importantly, the developing personal skills and knowledge that procurement personnel will bring to their organisation.

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